Revenue Act of 1918 COMPLETE Text of the Bill as Reported Out of Conference Feb. 6, 1919. Adopted by the Senate and House of Representatives. Approved Feb. 24, 1919. Tlf? EgUITABLE Trust Company OF NEW YORK Cornell University Library The original of tiiis bool< is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030264661 Revenue Act of 1918 Complete text of the Revenue Act of 1918 including the Income Tax and War- Profits and Excess-Profits Taxes as reported out of Conference on February 6, 1919 . . . Cornell University Library HJ2379.A7 E64 1918 Revenue Act of 1918: olin 3 1924 030 264 661 T^^ Equitable Trust Company OF NEW YORK PRINTED BY The De ViNNE Press New York FOREWORD The Revenue Act of 1918 was re- ported out of Conference on February 6, 1919, as agreed upon by the joint Committee of the United States Sen- ate and House of Representatives. Its adoption in this form aw^aits the approval of the President of the United States, when it immediately becomes law. Should the President fail to sign the bill, it becomes a law in ten days after it is presented to him. This book is issued for the benefit of our customers in the hope that it may prove convenient for ready ref- erence in this form. The Equitable Trust Company OF New York. February, 191 9. CONTENTS REVENUE ACT OF 1918 Title I General Definitions Title II Income Tax 3 Part I, General Provisions .... 3 Part II, Individuals 11 Part III, Corporations 40 Part IV, Administrative Provisions Title III War-Profits and Excess-Profits Tax Part I, General Definitions Part II, Imposition of Tax Part III, Credits . . . Part IV, Net Income Part V, Invested Capital Part VI, Reorganizations Part VII, Miscellaneous . 55 67 67 67 71 74 75 81 83 Title IV Estate Tax 85 Title V Tax on Transportation and Other Facilities, and on Insurance 98 IV CONTENTS PAGE Title VI Tax on Beverages io6 Title VII Tax on Cigars, Tobacco, and Manufactures thereof 133 Title VIII Tax on Admissions and Dues 142 Title IX Excise Taxes (Consumption and Luxury Taxes) 146 Title X Special Taxes (Capital Stock and Occupa- tional Taxes) 155 Title XI Stamp Taxes 172 Title XII Tax on Employment of Child Labor . . .184 Title XIII General Administrative Provisions . . .189 Title XIV General Provisions 210 Index 217 V COMPLETE TEXT of the REVENUE ACT OF 191 8 REVENUE ACT OF 1918. 65 th Congress Senate Document No. 385 3rd Session (H. R. 12863) AN ACT To provide revenue, and for other purposes. Be it enacted by the Senate and House of Repre- sentatives of the United States of America in Con- gress assembled, Title I. — General Definitions. Section i. That when used in this Act — The term "person" includes partnerships and "Person- corporations, as well as individuals; The term "corporation" includes associations, joint-stock companies, and insurance companies; The term "domestic" when applied to a corpora- tion or partnership means created or organized in the United States; The term "foreign" when applied to a corpora- "Foreign" tion or partnership means created or organized out- side the United States; The term "United States" when used in a geo- graphical sense includes only the States, the Terri- tories of Alaska and Hawaii, and the District of Columbia; The term "Secretary" means the Secretary of the "Secretary" Treasury; "Corporation*' "Domestic" "United States" "Commissioner" "Collector" "Revenue Act of 1916" ''Revenue Act of 1917" "Taxpayer" "Government con- tract" REVENUE ACT OF 1918 The term "Commissioner" means the Commis- sioner of Internal Revenue ; The term "collector" means collector of internal revenue ; The term "Revenue Act of 1916" means the Act entitled "An Act to increase the revenue, and for other purposes," approved September 8, 1916; The term "Revenue Act of 1917" means the Act entitled "An Act to provide revenue to defray war expenses, and for other purposes," approved Octo- ber 3, 1917; The term "taxpayer" includes "Military or naval forces of the United States" any person, trust or estate subject to a tax imposed by this Act; The term "Government contract" means (a) a contract made with the United States, or with any department, bureau, officer, commission, board, or agency, under the United States and acting in its behalf, or with any agency controlled by any of the above if the contract is for the benefit of the United States, or (b) a subcontract made with a contractor performing such a contract if the products or ser- vices to be furnished under the subcontract are for the benefit of the United States. The term "Gov- ernment contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclu- sive" when applied to a contract of the kind referred to in clause (a) of this paragraph, includes all such contracts which, although entered into during such period, were originally not enforceable, but which have been or may become enforceable by reason of subsequent validation in pursuance of law; The term "military or naval forces of the United States" includes the Marine Corps, the Coast Guard, the Army Nurse Corps, Female, and the INCOME TAX-GENERAL PROVISIONS Navy Nurse Corps, Female, but this shall not be deemed to exclude other units otherwise included within such term ; The term "present war" means the war in which the United States is now engaged against the Ger- man Government. For the purposes of this Act the date of the ter- mination of the present war shall be fixed by proclamation of the President. "Present war" Date of termination of present war Title II.— Income Tax. Part I. — General Provisions. Sec. 200. That when used in this title — The term "taxable year" means the calendar year, or the fiscal year ending during such calen- dar year, upon the basis of which the net income is computed under section 212 or section 232. The term "fiscal year" means an accounting period of twelve months ending on the last day of any month other than December. The first taxable year, to be called the taxable year 19 18, shall be the calen- dar year 191 8 or any fiscal year ending during the calendar year 1918; The term "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person, trust or estate; The term "withholding agent" means any per- son required to deduct and withhold any tax under the provisions of section 221 or section 237; The term "personal service corporation" means a corporation whose income is to be ascribed pri- 3 Definitions "Taxable year" "Fiscal year'' "Fiduciary" "Withholding agent" "Personal Service Corporation" "Paid" "Paid or accrued" REVENUE ACT OF 1918 marily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corpora- tion and in which capital (whether invested or bor- rowed) is not a material income-producing factor; but does not include any foreign corporation, nor any corporation 50 per centum or more of whose gross income consists either ( i ) of gains, profits, or income derived from trading as a principal, or (2) of gains, profits, commissions, or other income, de- rived from a Government contract or contracts made between April 6, 1917, and November 11, 191 8, both dates inclusive; The term "paid," for the purposes of the deduc- tions and credits under this title, means "paid or accrued" or "paid or incurred," and the terms "paid or incurred" and "paid or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under section 212. "Dividend" defined Dividends. Sec. 201. (a) That the term "dividend" when used in this title (except in paragraph (10) of sub- division (a) of section 234) means (i) any dis- tribution made by a corporation, other than a per- sonal service corporation, to its shareholders or members, whether in cash or in other property or in stock of the corporation, out of its earnings or profits accumulated since February 28, 1913, or (2) any such distribution made by a personal ser- vice corporation out of its earnings or profits ac- cumulated since February 28, 1913, and prior to January i, 1918. INCOME TAX— GENERAL PROVISIONS (b) Any distribution shall be deemed to have Distributions been made from earnings or profits unless all earn- Ja^^ts*or''profiu ings and profits have first been distributed. Any distribution made in the year 191 8 or any year thereafter shall be deemed to have been made from earnings or profits accumulated since February 28, 1913, or, in the case of a personal service corpora- tion, from the most recently accumulated earnings or profits ; but any earnings or profits accumulated prior to March i, 1913, may be distributed in stock dividends or otherwise, exempt from the tax, after the earnings and profits accumulated since Febru- ary 28, 1913, have been distributed. (c) A dividend paid in stock of the corporation stocii dividend shall be considered income to the amount of the earnings or profits distributed. Amounts dis- tributed in the liquidation of a corporation shall be treated as payments in exchange for stock or shares, and any gain or profit realized thereby shall be taxed to the distributee as other gains or profits. (d) If any stock dividend (i) is received by a stock dividends to be 1 -r ■• -ivT 1 taxed under rates of taxpayer between January i and jNovember i, years when earned 1918, both dates inclusive, or (2) is during such period bona fide authorized or declared, and en- tered on the books of the corporation, and is received by a taxpayer after November i, 1918, and before the expiration of thirty days after the pas- sage of this act, then such dividend shall, in the manner provided in section 206, be taxed to the recipient at the rates prescribed by law for the years in which the corporation accumulated the earnings or profits from which such dividend was paid, but the dividend shall be deemed to have been paid from the most recently accumulated earnings or profits. s Distribution made during first 60 days of year Basis for determin- ing gain or loss Property acquired before March 1, 1913 Property acquired after March 1, 1913 Property exchanged for property Reorganizations and mergers REVENUE ACT OF 1918 (e) Any distribution made during the first sixty days of any taxable year shall be deemed to have been made from earnings or profits accumulated during preceding taxable years ; but any distribu- tion made during the remainder of the taxable year shall be deemed to have been made from earnings or profits accumulated between the close of the preceding taxable year and the date of distribution, to the extent of such earnings or profits, and if the books of the corporation do not show the amount of such earnings or profits, the earnings or profits for the accounting period within which the dis- tribution was made shall be deemed to have been accumulated ratably during such period. Sec. 202. (a) That for the purpose of ascertain- ing the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, the basis shall be — (i) In the case of property acquired before March i, 1913, the fair market price or value of such property as of that date ; and (2) In the case of property acquired on or after that date, the cost thereof ; or the inventory value, if the inventory is made in accordance with sec- tion 203. (b) When property is exchanged for other prop- erty, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any; but when in connection with the reorganization, merger, or consolidation of a corporation a person receives in place of stock or securities owned by him new stock or securities of no greater aggregate par or face value, no gain or loss shall be deemed to occur from the exchange, 6 INCOME TAX— GENERAL PROVISIONS and the new stock or securities received shall be treated as taking the place of the stock, securities, or property exchanged. When in the case of any such reorganization, merger or consolidation the aggregate par or face value of the new stock or securities received is in excess of the aggregate par or face value of the stock or securities exchanged, a like amount in par or face value of the new stock or securities received shall be treated as taking the place of the stock or securities exchanged, and the amount of the excess in par or face value shall be treated as a gain to the extent that the fair market value of the new stock or securities is greater than the cost (or if acquired prior to March i, 1913, the fair market value as of that date) of the stock or securities exchanged. Sec. 203. That whenever in the opinion of the inventories Commissioner the use of inventories is necessary in order clearly to determine the income of any tax- payer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as con- forming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. Sec. 204. (a) That as used in this section the Net losses term "net loss" refers only to net losses resulting from either ( i ) the operation of any business regu- larly carried on by the taxpayer, or (2) the bona fide sale by the taxpayer of plant, buildings, ma- chinery, equipment or other facilities, constructed, installed or acquired by the taxpayer on or after April 6, 1917, for the production of articles con- tributing to the prosecution of the present war; 7 REVENUE ACT OF 1918 When tax may be redetermined for a loss When losses may be apportioned to partners or beneficiaries Fiscal year with different rates and when so resulting means the excess of the de- ductions allowed by law (excluding in the case of corporations amounts allowed as a deduction under paragraph (6) of subdivision (a) of section 234) over the sum of the gross income plus any interest received free from taxation both under this title and under Title III. (b) If for any taxable year beginning after Oc- tober 31, 1918, and ending prior to January I, 1920, it appears upon the production of evidence satis- factory to the Commissioner that any taxpayer has sustained a net loss, the amount of such net loss shall under regulations prescribed by the Commis- sioner with the approval of the Secretary be de- ducted from the net income of the taxpayer for the preceding taxable year; and the taxes imposed by this title and by Title III for such preceding tax- able year shall be redetermined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermination shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. If such net loss is in excess of the net income for such preceding taxable year, the amount of such excess shall under regula- tions prescribed by the Commissioner with the ap- proval of the Secretary be allowed as a deduction in computing the net income for the succeeding taxable year. (c) The benefit of this section shall be allowed to the members of a partnership and the benefi- ciaries of an estate or trust under regulations pre- scribed by the Commissioner with the approval of the Secretary. Sec. 205. (a) That if a taxpayer makes return for a fiscal year beginning in 1917 and ending in INCOME TAX-GENERAL PROVISIONS 1918, his tax under this title for the first taxable year shall be the sum of : ( i ) the same proportion Adjustment jor of a tax for the entire period computed under fi«-> y-" ^^^-isis Title I of the Revenue Act of 1 916 as amended by the Revenue Act of 19 17 and under Title I of the Revenue Act of 1917, which the portion of such period falling within the calendar year 1917 is of the entire period, and (2) the same proportion of a tax for the entire period computed under this title at the rates for the calendar year 1918 which the portion of such period falling within the calen- dar year 1918 is of the entire period: Provided, That in the case of a personal service corporation the amount to be paid shall be only that specified in clause (i). Any amount heretofore or hereafter paid on account of the tax imposed for such fiscal year by Title I of the Revenue Act of 191 6 as amended by credit for tax the Revenue Act of 1917, and by Title I of the Revenue Act of 19 17, shall be credited towards the payment of the tax imposed for such fiscal year by this Act, and if the amount so paid exceeds the amount of such tax imposed by this Act, or, in the case of a personal service corporation, the amount credit or refund in . f, , . ^ /\i 1111 1*1 case of Personal specified in clause ( i ) , the excess shall be credited service corporation or refunded in accordance with the provisions of section 252. (b) If a taxpayer makes a return for a fiscal year Fiscal year 1918- beginning in 1918 and ending in 1919, the tax under this title for such fiscal year shall be the sum of : ( I ) the same proportion of a tax for the entire period computed under this title at the rates speci- fied for the calendar year 191 8 which the portion of such period falling within the calendar year 191 8 is of the entire period, and (2) the same pro- 9 already paid Partnership fiscal year and adjustment for partner's return Personal Service Corporation fiscal year 1917-1918 Parts of income sub- ject to rates for dif- ferent years REVENUE ACT OF 1918 portion of a tax for the entire period computed under this title at the rates specified for the calen- dar year 1919 which the portion of such period falling within the calendar year 1919 is of the entire period. (c) If a fiscal year of a partnership begins in 1917 and ends in 1918 or begins in 1918 and ends in 1919, then notwithstanding the provisions of sub- division (b) of section 218, (i) the rates for the calendar year during which such fiscal year begins shall apply to an amount of each partner's share of such partnership net income (determined under the law applicable to such year) equal to the pro- portion which the part of such fiscal year falling within such calendar year bears to the full fiscal year, and (2) the rates for the calendar year dur- ing which such fiscal year ends shall apply to an amount of each partner's share of such partnership net income (determined under the law applicable to such calendar year) equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year: Provided, That in the case of a personal service corporation with respect to a fiscal year beginning in 19 17 and ending in 1918, the amount specified in clause ( i ) shall not be subject to normal tax. Sec. 206. That whenever parts of a taxpayer's income are subject to rates for different calendar years, the part subject to the rates for the most re- cent calendar year shall be placed in the lower brackets of the rate schedule provided in this title, the part subject to the rates for the next preceding calendar year shall be placed in the next higher brackets of the rate schedule applicable to that year, and so on until the entire net income has been Normal tax INCOME TAX-INDIVIDUALS accounted for. In determining the income, any deductions, exemptions or credits of a kind not plainly and properly chargeable against the in- come taxable at rates for a preceding year shall first be applied against the income subject to rates for the most recent calendar year; but any balance thereof shall be applied against the income subject to the rates of the next preceding year or years until fully allowed. Part II. — Individuals. Sec. 2IO. That, in lieu of the taxes imposed by subdivision (a) of section i of the Revenue Act of 1916 and by section i of the Revenue Act of 19 17, there shall be levied, collected, and paid for each taxable year upon the net income of every indi- vidual a normal tax, at the following rates : (a) For the calendar year 191 8, 12 per centum of the amount of the net income in excess of the credits provided in section 216: Provided, That in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 6 per centum; (b) For each calendar year thereafter, 8 per Rate for year 1919 centum of the amount of the net income in excess of ^"^ "'"'^"«'- the credits provided in section 216: Provided,Thz.t in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 4 per centum. Sec. 211. (a) That, in lieu of the taxes imposed Additional or by subdivision (b) of section i of the Revenue Act *"■''"'" of 1 91 6 and by section 2 of the Revenue Act of 1917, but in addition to the normal tax imposed by section 210 of this Act, there shall be levied, col- Rate for year 191S REVENUE ACT OF 1918 lected, and paid for each taxable year upon the net income of every individual, a surtax equal to the sum of the following: Rales of surtax I pcr centum of the amount by which the net income exceeds $5,000 and does not exceed $6,000 ; 2 per centum of the amount by which the net income exceeds $6,000 and does not exceed $8,000; 3 per centum of the amount by which the net income exceeds $8,000 and does not exceed $10,000; 4 per centum of the amount by which the net in- come exceeds $10,000 and does not exceed $12,000; 5 per centum of the amount by which the net in- come exceeds $12,000 and does not exceed $14,000; 6 per centum of the amount by which the net in- come exceeds $14,000 and does not exceed $16,000; 7 per centum of the amount by which the net in- come exceeds $16,000 and does not exceed $18,000; 8 per centum of the amount by which the net in- come exceeds $18,000 and does not exceed $20,000; 9 per centum of the amount by which the net in- come exceeds $20,000 and does not exceed $22,000; 10 per centum of the amount by which the net in- come exceeds $22,000 and does not exceed $24,000; 1 1 per centum of the amount by which the net in- come exceeds $24,000 and does not exceed $26,000 ; 12 per centum of the amount by which the net in- come exceeds $26,000 and does not exceed $28,000; 13 per centum of the amount by which the net in- come exceeds $28,000 and does not exceed $30,000; INCOME TAX— INDIVIDUALS 14 per centum of the amount by which the net in- f"^t"Jd*" come exceeds $30,000 and does not exceed $32,000; 1 5 per centum of the amount by which the net in- come exceeds $32,000 and does not exceed $34,000; 16 per centum of the amount by which the net in- come exceeds $34,000 and does not exceed $36,000; 17 per centum of the amount by which the net in- come exceeds $36,000 and does not exceed $38,000; 18 per centum of the amount by which the net in- come exceeds $38,000 and does not exceed $40,000; 19 per centum of the amount by which the net in- come exceeds $40,000 and does not exceed $42,000 ; 20 per centum of the amount by which the net in- come exceeds $42,000 and does not exceed $44,000 ; 21 per centum of the amount by which the net in- come exceeds $44,000 and does not exceed $46,000 ; 22 per centum of the amount by which the net in- come exceeds $46,000 and does not exceed $48,000 ; 23 per centum of the amount by which the net in- come exceeds $48,000 and does not exceed $50,000 ; 24 per centum of the amount by which the net in- come exceeds $50,000 and does not exceed $52,000; 25 per centum of the amount by which the net in- come exceeds $52,000 and does not exceed $54,000; 26 per centum of the amount by which the net in- come exceeds $54,000 and does not exceed $56,000; 27 per centum of the amount by which the net in- come exceeds $56,000 and does not exceed $58,000; 28 per centum of the amount by which the net in- come exceeds $58,000 and does not exceed $60,000; 13 REVENUE ACT OF 1918 font^ueT" ^9 P^'- centum of the amount by which the net in- come exceeds $60,000 and does not exceed $62,000 ; 30 per centum of the amount by which the net in- come exceeds $62,000 and does not exceed $64,000 ; 31 per centum of the amount by which the net in- come exceeds $64,000 and does not exceed $66,000 ; 32 per centum of the amount by which the net in- come exceeds $66,000 and does not exceed $68,000 ; 33 per centum of the amount by which the net in- come exceeds $68,000 and does not exceed $70,000 ; 34 per centum of the amount by which the net in- come exceeds $70,000 and does not exceed $72,000 ; 35 per centum of the amount by which the net in- come exceeds $72,000 and does not exceed $74,000 ; 36 per centum of the amount by which the net in- come exceeds $74,000 and does not exceed $76,000 ; 37 per centum of the amount by which the net in- come exceeds $76,000 and does not exceed $78,000 ; 38 per centum of the amount by which the net in- come exceeds $78,000 and does not exceed $80,000 ; 39 per centum of the amount by which the net in- come exceeds $80,000 and does not exceed $82,000; 40 per centum of the amount by which the net in- come exceeds $82,000 and does not exceed $84,000 ; 41 per centum of the amount by which the net in- come exceeds $84,000 and does not exceed $86,000; 42 per centum of the amount by which the net in- come exceeds $86,000 and does not exceed $88,000; 43 per centum of the amount by which the net in- come exceeds $88,000 and does not exceed $90,000; 14 INCOME TAX-INDIVIDUALS 44 per centum of the amount by which the net in- surtax rates come exceeds $90,000 and does not exceed $92,000 ; """""='' 45 per centum of the amount by which the net in- come exceeds $92,000 and does not exceed $94,000 ; 46 per centum of the amount by which the net in- come exceeds $94,000 and does not exceed $96,000; 47 per centum of the amount by which the net in- come exceeds $96,000 and does not exceed $98,000 ; 48 per centum of the amount by which the net income exceeds $98,000 and does not exceed $100,- 000; 52 per centum of the amount by which the net income exceeds $100,000 and does not exceed $ 1 50,000 ; 56 per centum of the amount by which the net income exceeds $150,000 and does not exceed $200,000 ; 60 per centum of the amount by which the net income exceeds $200,000 and does not exceed $300,000 ; 63 per centum of the amount by which the net income exceeds $300,000 and does not exceed $500,000 ; 64 per centum of the amount by which the net income exceeds $500,000 and does not exceed $1,000,000; 65 per centum of the amount by which the net income exceeds $1,000,000. (b) In the case of a bona fide sale of mines, oil when aumit to or gas wells, or any interest therein, where the ^XsV/ sTe ™ principal value of the property has been demon- strated by prospecting or exploration and discovery 15 on mines, oil or gas wells REVENUE ACT OF 1918 work done by the taxpayer, the portion of the tax imposed by this section attributable to such sale shall not exceed 20 per centum of the selling price of such property or interest. Net income defined Scc. 212. (a) That in thc case of an individual the term "net income" means the gross income as defined in section 213, less the deductions allowed by section 214. Basis of computation (b) Thc nct incomc shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regu- larly employed in keeping the books of such tax- payer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Commissioner does clearly reflect the income. If the taxpayer's annual ac- counting period is other than a fiscal year as defined in section 200 or if the taxpayer has no annual ac- counting period or does not keep books, the net income shall be computed on the basis of the calen- dar year. Change of account- If a taxpayer changes his accounting period from ins period fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commis- sioner, be computed on the basis of such new accounting period, subject to the provisions of section 226. Gross income defined Sec. 2 1 3. That for the purposcs of this title (except as otherwise provided in section 233) the term "gross income" — 16 INCOME TAX-INDIVIDUALS (a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service (including in the case of the President of the United States, the judges of the Supreme and inferior courts of the United States, and all other officers and employees, v^^hether elected or ap- pointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensation received as such), of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, com- merce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from inter- est, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. The amount of all such items shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under methods of accounting permitted under subdivision (b) of section 212, any such amounts are to be properly accounted for as of a different period ; but (b) Does not include the following items, which items exempt from shall be exempt from taxation under this title : [ttif"" "'"^" '"' ( 1 ) The proceeds of life insurance policies paid proceeds of me in- upon the death of the insured to individual bene- ^"■■="" ■""'"" ficiaries or to the estate of the insured; (2) The amount received by the insured as a Amount of premiums return of premium or premiums paid by him un- ^.l^eS we^^nnuHy der life insurance, endowment, or annuity con- -r endowment poucy tracts, either during the term or at the maturity of the term mentioned in the contract or upon sur- render of the contract; 17 GiftSr bequests, etc. Interest on govern- ment obligations Statement of hold- ings may be required United States obliga- tions issued after Sept. 1, 1917, gov- erned by Act authorizing issue REVENUE ACT OF 1918 (3) The value of property acquired by gift, be- quest, devise or descent (but the income from such property shall be included in gross income) ; (4) Interest upon (a) the obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia; or (b) securities issued under the provisions of the Federal Farm Loan Act of July 17, 1916; or (c) the obligations of the United States or its possessions ; or (d) bonds issued by the War Finance Corporation : Provided, That every person owning any of the obligations, securi- ties or bonds enumerated in clauses (a), (b), (c), and (d) shall, in the return required by this title, submit a statement showing the number and amount of such obligations, securities and bonds owned by him and the income received therefrom, in such form and with such information as the Commissioner may require. In the case of obliga- tions of the United States issued after September I, 1917, and in the case of bonds issued by the War Finance Corporation, the interest shall be exempt only if and to the extent provided in the respective Acts authorizing the issue thereof as amended and supplemented, and shall be excluded from gross income only if and to the extent it is wholly exempt from taxation to the taxpayer both under this title and under Title III; Income of foreign governments (5) The income of foreign governments re- ceived from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments, or from any other source within the United States; insurance Income from any INCOME TAX-INDIVIDUALS (6) Amounts received, through accident or Accident or health health insurance or under workmen's compensation acts, as compensation for personal injuries or sick- ness, plus the amount of any damages received w^hether by suit or agreement on account of such injuries or sickness ; (7) Income derived from any public utility or the exercise of any essential governmental function ?"'■"'= "'""'' *""■; J o ing to government of and accruing to any State, Territory, or the District any u. s. political j-/-^t 1- 1--111--- r subdivision or Columbia, or any political subdivision of a State or Territory, or income accruing to the gov- ernment of any possession of the United States, or any political subdivision thereof. Whenever any State, Territory, or the District i„„„, j,„„ p^yic of Columbia, or any political subdivision of a State ^Vth'^an""*^^"!? or Territory, prior to September 8, 1916, entered political subdivision in good faith into a contract with any person, the object and purpose of which is to acquire, con- struct, operate, or maintain a public utility, no tax shall be levied under the provisions of this title upon the income derived from the operation of such public utility, so far as the payment thereof will impose a loss or burden upon such State, Ter- ritory, District of Columbia, or political sub- division ; but this provision is not intended to con- fer upon such person any financial gain or exemp- tion or to relieve such person from the payment of ^ a tax as provided for in this title upon the part or portion of such income to which such person is entitled under such contract; (8) So much of the amount received during the $3,500 saWy for ac present war by a person in the military or naval A^y^^'Naty"' ^' forces of the United States as salary or compensa- ^'"^-"pt^'i tion in any form from the United States for active services in such forces, as does not exceed $3,500. 19 Gross income of non- resident alien individuals REVENUE ACT OF 1918 (c) In the case of non-resident alien individuals, gross income includes only the gross income from sources within the United States, including interest on bonds, notes, or other interest-bearing obliga- tions of residents, corporate or otherwise, dividends from resident corporations, and including all amounts received (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States. Business expenses Interest paid on indebtedness Deductions Allowed. Sec. 214. (a) That in computing net income there shall be allowed as deductions : ( 1 ) All the ordinary and necessary expenses paid or incurred during the taxable year in carry- ing on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, and including rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity; (2) All interest paid or accrued within the tax- able year on indebtedness, except on indebtedness incurred or continued to purchase or carry obliga- tions or securities (other than obligations of the United States issued after September 24, 1917) , the interest upon which is wholly exempt from tax- ation under this title as income to the taxpayer, or, in the case of a nonresident alien individual, the proportion of such interest which the amount of his gross income from sources within the United 20 INCOME TAX-INDIVIDUALS States bears to the amount of his gross income from all sources within and without the United States; (3) Taxes paid or accrued within the taxable Taxe» year imposed (a) by the authority of the United States, except income, war profits and excess-profits taxes; or (b) by the authority of any of its posses- sions, except the amount of income, war profits and excess-profits taxes allowed as a credit under sec- tion 222; or (c) by the authority of any State or Territory, or any county, school district, munici- pality, or other taxing subdivision of any State or Territory, not including those assessed against local benefits of a kind tending to increase the value of the property assessed; or (d) in the case of a citi- zen or resident of the United States, by the author- ity of any foreign country, except the amount of income, war-profits and excess-profits taxes al- lowed as a credit under section 222; or (e) in the case of a nonresident alien individual, by the au- thority of any foreign country (except income, war-profits and excess-profits taxes, and taxes as- sessed against local benefits of a kind tending to increase the value of the property assessed), upon property or business; (4) Losses sustained during the taxable year and L^^ses ;„ business not compensated for by insurance or otherwise, if incurred in trade or business; (5) Losses sustained during the taxable year and L„„es not con- not compensated for by insurance or otherwise, if ""'^-^ ""'" ''"""''" incurred in any transaction entered into for profit, though not connected with the trade or business; but in the case of a nonresident alien individual only as to such transactions within the United States ; 21 Other losses Debts charged ofF Depreciation Amortization of war plant and equipment REVENUE ACT OF 1918 (6) Losses sustained during the taxable year of property not connected with the trade or business (but in the case of a nonresident alien individual only property within the United States) if arising from fires, storms, shipwreck, or other casualty, or from theft, and if not compensated for by insur- ance or otherwise ; (7) Debts ascertained to be worthless and charged ofif within the taxable year; (8) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or busi- ness, including a reasonable allowance for obso- lescence ; (9) In the case of buildings, machinery, equip- ment, or other facilities, constructed, erected, in- stalled, or acquired, on or after April 6, 1917, for the production of articles contributing to the prose- cution of the present war, and in the case of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war, there shall be allowed a reasonable deduction for the amorti- zation of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again including any amount otherwise allowed un- der this title or previous Acts of Congress as a deduction in computing net income. At any time within three years after the termination of the present war, the Commissioner may, and at the request of the taxpayer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evidence that the deduction originally allowed was incorrect, the taxes imposed by this title and by Title III for the year or years affected 22 INCOME TAX— INDIVIDUALS shall be redetermined; and the amount of tax due upon such redetermination, if any, shall be paid upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252; (10) In the case of mines, oil and gas wells. Depletion of mi„e,. other natural deposits, and timber, a reasonable "" «"^ e"* *="» allowance for depletion and for depreciation of improvements, according to the peculiar condi- tions in each case, based upon cost including cost of development not otherwise deducted: Provided, That in the case of such properties acquired prior to March i, 1913, the fair market value of the property (or the taxpayer's interest therein) on that date shall be taken in lieu of cost up to that date : Provided further, That in the case of mines, oil and gas wells, discovered by the taxpayer, on or after March i, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair market value of the property is materially dis- proportionate to the cost, the depletion allowance shall be based upon the fair market value of the property at the date of the discovery, or within 30 days thereafter ;- such reasonable allowance in all the above cases to be made under rules and regu- lations to be prescribed by the Commissioner with the approval of the Secretary. In the case of leases the deductions allowed by this paragraph shall be equitably apportioned between the lessor and lessee ; (11) Contributions or gifts made within the tax- contributions to able year to corporations organized and operated t!'oni'up'to°''fl%"o"f exclusively for religious, charitable, scientific, or educational purposes, or for the prevention of 23 net income REVENUE ACT OF 1918 cruelty to children or animals, no part of the net earnings of which inures to the benefit of any pri- vate stockholder or individual, or to the special fund for vocational rehabilitation authorized by section 7 of the Vocational Rehabilitation Act, to an amount not in excess of 15 per centum of the taxpayer's net income as computed without the benefit of this paragraph. Such contributions or gifts shall be allowable as deductions only if veri- fied under rules and regulations prescribed by the Commissioner, with the approval of the Secretary. In the case of a nonresident alien individual this deduction shall be allowed only as to contributions or gifts made to domestic corporations, or to such vocational rehabilitation fund; Claim for abate- ment for certain losses sustained in 1918 and 1919 (12) (a) At the time of filing return for the taxable year 191 8 a taxpayer may file a claim in abatement based on the fact that he has sustained a substantial loss (whether or not actually realized by sale or other disposition) resulting from any mate- rial reduction (not due to temporary fluctuation) of the value of the inventory for such taxable year, or from the actual payment after the close of such taxable year of rebates in pursuance of contracts entered into during such year upon sales made dur- ing such year. In such case payment of the amount of the tax covered by such claim shall not be re- quired until the claim is decided, but the taxpayer shall accompany his claim with a bond in double the amount of the tax covered by the claim, with sureties satisfactory to the Commissioner, condi- tioned for the payment of any part of such tax found to be due, with interest. If any part of such claim is disallowed then the remainder of the tax due shall on notice and demand by the collector be 24 INCOME TAX— INDIVIDUALS paid by the taxpayer with interest at the rate of I per centum per month from the time the tax would have been due had no such claim been filed. If it is shown to the satisfaction of the Commis- sioner that such substantial loss has been sustained, then in computing the tax imposed by this title the amount of such loss shall be deducted from the net income, (b) If no such claim is filed, but it is shown to the satisfaction of the Commissioner that during the taxable year 1919 the taxpayer has sus- tained a substantial loss of the character above de- scribed then the amount of such loss shall be de- ducted from the net income for the taxable year 191 8 and the tax imposed by this title for such year shall be redetermined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermination shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. (b) In the case of a nonresident alien individual the deductions allowed in paragraphs (i), (4), (7)) (8), (9), (10), (12), and clause (e) of para- graph (3), of subdivision (a) shall be allowed only if and to the extent that they are connected with income arising from a source within the United States; and the proper apportionment and allocation of the deductions with respect to sources of income within and without the United States shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary. Sec. 215. That in computing net income no de- „e„s not deductible duction shall in any case be allowed in respect of — Deductions allowed non-resident aliens (a) Personal, living, or family expenses; 25 Personal expenses Improvements Restoration of prop- erty when already allowed Premiums on life in- surance policies for benefit of any one interested in trade or business REVENUE ACT OF 1918 (b) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate; (c) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made ; or (d) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, when the tax- payer is directly or indirectly a beneficiary under such policy. Credits for normal tax Dividends Interest on United States and War Finance Corporation bonds $1,000 for single person $2,000 for head of family or married person Credits Allowed. Sec. 2 1 6. That for the purpose of the normal tax only there shall be allowed the following credits : (a) The amount received as dividends from a corporation which is taxable under this title upon its net income, and amounts received as dividends from a personal service corporation out of earnings or profits upon which income tax has been imposed by act of Congress ; (b) The amount received as interest upon obli- gations of the United States and bonds issued by the War Finance Corporation, which is included in gross income under section 213 ; (c) In the case of a single person, a personal ex- emption of $1,000, or in the case of the head of a family or a married person living with husband or wife, a personal exemption of $2,000. A husband and wife living together shall receive but one per- sonal exemption of $2,000 against their aggregate 26 INCOME TAX— INDIVIDUALS net income ; and in case they make separate returns, the personal exemption of $2,000 may be taken by either or divided between them; (d) $200 for each person (other than husband or wife) dependent upon and receiving his chief support from the taxpayer, if such dependent per- son is under eighteen years of age or is incapable of self-support because mentally or physically de- fective. (e) In the case of a nonresident alien individual who is a citizen or subject of a country which im- poses an income tax, the credits allowed in subdi- visions (c) and (d) shall be allowed only if such country allows a similar credit to citizens of the United States not residing in such country. $200 for each dependent, etc. Credits allowed non- resident aliens Nonresident Aliens — Allowance of Deductions and Credits. Sec. 217. That a nonresident alien individual shall receive the benefit of the deductions and credits allowed in this title only by filing or caus- ing to be filed with the collector a true and accu- rate return of his total income received from all sources corporate or otherwise in the United States, in the manner prescribed by this title, including therein all the information which the Commis- sioner may deem necessary for the calculation of such deductions and credits : Provided, That the benefit of the credits allowed in subdivisions (c) and (d) of section 216 may, in the discretion of the Commissioner, and except as otherwise provided in subdivision (e) of that section, be received by filing a claim therefor with the withholding agent. In case of failure to file a return, the collector shall 27 Non-resident alien shall file complete return in order to obtain credits Certain credits allowed in discretion of Commissioner by filing: claim Property of non- resident alien may be subject to dis- traint for tax due REVENUE ACT OF 1918 collect the tax on such income, and all property- belonging to such nonresident alien individual shall be liable to distraint for the tax. Partnerships Credits to partners Adjustment for partner of partner- ship fiscal year Partnerships and Personal Service Corporations. Sec. 2 1 8. (a) That individuals carrying on business in partnership shall be liable for income tax only in their individual capacity. There shall be included in computing the net income of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year, or, if his net income for such taxable year is computed upon the basis of a period dif- ferent from that upon the basis of which the net in- come of the partnership is computed, then his dis- tributive share of the net income of the partnership for any accounting period of the partnership end- ing within the fiscal or calendar year upon the basis of which the partner's net income is computed. The partner shall, for the purpose of the normal tax, be allowed as credits, in addition to the credits allowed to him under section 21 6, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the part- nership. (b) If a fiscal year of a partnership ends during a calendar year for which the rates of tax differ from those for the preceding calendar year, then (i) the rates for such preceding calendar year shall apply to an amount of each partner's share of such partnership net income equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year, and 28 INCOME TAX— INDIVIDUALS (2) the rates for the calendar year during which such fiscal year ends shall apply to the remainder. (c) In the case of an individual member of a Adjustment of partnership which makes return for a fiscal year easTof'Vartn"«hrp beginning in 1917 and ending in 1918, his propor- J|^|' y'" *^"- tionate share of any excess profits tax imposed upon the partnership under the Revenue Act of 1917 with respect to that part of such fiscal year falling in 1917, shall, for the purpose of determining the tax imposed by this title, be credited against that portion of the net income embraced in his personal return for the taxable year 191 8 to which the rates for 1917 apply. (d) The net income of the partnership shall be partnership net computed in the same manner and on the same ■"""•* basis as provided in section 212, except that the deduction provided in paragraph (11) of subdivi- sion (a) of section 214 shall not be allowed. (e) Personal service corporations shall not be subject to taxation under this title, but the indi- vidual stockholders thereof shall be taxed in the same manner as the members of partnerships. All ■ the provisions of this title relating to partnerships and the members thereof shall so far as practicable apply to personal service corporations and the stockholders thereof : Provided, That for the pur- pose of this subdivision amounts distributed by a personal service corporation during its taxable year shall be accounted for by the distributees ; and any portion of the net income remaining undistributed at the close of its taxable year shall be accounted for by the stockholders of such corporation at the close of its taxable year in proportion to their re- spective shares. 29 Personal Service Corporation similar to partnership Distributees to account for income REVENUE ACT OF 1918 Estates and trusts Fiduciary to make returns Estates and Trusts. Sec. 219. (a) That the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including — ( 1 ) Income received by estates of deceased per- sons during the period of administration or settle- ment of the estate ; (2) Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests ; (3) Income held for future distribution under the terms of the will or trust; and (4) Income which is to be distributed to the beneficiaries periodically, whether or not at regu- lar intervals, and the income collected by a guar- dian of an infant to be held or distributed as the court majr direct. (b) The fiduciary shall be responsible for mak- ing the return of income for the estate or trust for which he acts. The net income of the estate or trust shall be computed in the same manner and on the same basis as provided in section 212, except that there shall also be allowed as a deduction (in lieu of the deduction authorized by paragraph (11) of subdivision (a) of section 214) any part of the gross income which, pursuant to the terms of the will or deed creating the trust, is during the taxable year paid to or permanently set aside for the United States, any State, Territory, or any political subdivision thereof, or the District of Co- lumbia, or any corporation organized and operated exclusively for religious, charitable, scientific or 30 INCOME TAX-INDIVIDUALS educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any pri- vate stockholder or individual ; and in cases under paragraph (4) of subdivision (a) of this section the fiduciary shall include in the return a statement of each beneficiary's distributive share of such net income, whether or not distributed before the close of the taxable year for which the return is made. (c) In cases under paragraph (i), (2), or (3) w^,„ ^^^,^^ of subdivision (a) the tax shall be imposed upon ^^^^ ^^^ '=" the net income of the estate or trust and shall be paid by the fiduciary, except that in determining the net income of the estate of any deceased person during the period of administration or settlement there may be deducted the amount of any income properly paid or credited to any legatee, heir or other beneficiary. In such cases the estate or trust shall, for the purpose of the normal tax, be allowed "'*** ^ *"*'' the same credits as are allowed to single persons under section 216. (d) In cases under paragraph (4) of sub divis- Basis of computa- ion (a), and in the case of any income of an estate fiducurrdoes^^t" during the period of administration or settlement ""^^ ^^^ *" permitted by subdivision (c) to be deducted from the net income upon which tax is to be paid by the fiduciary, the tax shall not be paid by the fiduciary, but there shall be included in computing the net income of each beneficiary his distributive share, whether distributed or not, of the net income of the estate or trust for the taxable year, or, if his net in- come for such taxable year is computed upon the basis of a period different from that upon the basis of which the net income of the estate or trust is computed, then his distributive share of the net 31 Credits allowed to REVENUE ACT OF 1918 income of the estate or trust for any accounting period of such estate or trust ending within the fiscal or calendar year upon the basis of which such beneficiary's net income is computed. In such cases the beneficiary shall, for the purpose of the normal tax, be allowed as credits in addition to the credits allowed to him under section 216, his pro- portionate share of such amounts specified in sub- divisions (a) and (b) of section 216 as are received by the estate or trust. Corporation availed of to evade tax Profits taxable to stockholders Profits of Corporations Taxable to Stockholders. Sec. 220. That if any corporation, however cre- ated or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its stockholders or members through the me- dium of permitting its gains and profits to accumu- late instead of being divided or distributed, such corporation shall not be subject to the tax imposed by section 230, but the stockholders or members thereof shall be subject to taxation under this title in the same manner as provided in subdivision (e) of section 218 in the case of stockholders of a per- sonal service corporation, except that the tax im- posed by Title III shall be deducted from the net income of the corporation before the computation of the proportionate share of each stockholder or member. The fact that any corporation is a mere holding company, or that the gains and profits are permitted to accumulate beyond the reasonable needs of the business, shall be prima facie evidence of a purpose to escape the surtax; but the fact that the gains and profits are in any case permitted to accumulate and become surplus shall not be con- strued as evidence of a purpose to escape the tax in 32 INCOME TAX— INDIVIDUALS such case unless the Commissioner certifies that in his opinion such accumulation is unreasonable for the purposes of the business. When requested by the Commissioner, or any collector, every corpora- tion shall forward to him a correct statement of such gains and profits and the names and addresses of the individuals or shareholders who would be entitled to the same if divided or distributed, and of the amounts that would be payable to each. Payment of Tax at Source. Sec. 221. (a) That all individuals, corpora- t« withheld on in- tions and partnerships, in whatever capacity acting, ^^,''* non-resident including lessees or mortgagors of real or personal property, fiduciaries, employers, and all officers and employees of the United States, having the control, receipt, custody, disposal, or payment, of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, of any nonresident alien indi- vidual (other than income received as dividends from a corporation which is taxable under this title upon its net income) shall (except in the cases pro- vided for in subdivision (b) and except as other- wise provided in regulations prescribed by the Commissioner under section 217) deduct and with- hold from such annual or periodical gains, profits, and income a tax equal to 8 per centum thereof: Provided, That the Commissioner may authorize such tax to be deducted and withheld from the in- terest upon any securities the owners of which are not known to the withholding agent. (b) In any case where bonds, mortgages, or deeds of trust, or other similar obligations of a 33 REVENUE ACT OF 1918 corporation contain a contract or provision by Tax-free covenant wHicH thc obligoT agrccs to pay any portion of the 2%*withh'eid tax imposed by this title upon the obligee, or to reimburse the obligee for any portion of the tax, or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon or to retain therefrom under any law of the United States, the obligor shall deduct and withhold a tax equal to 2 per centum of the interest upon such bonds, mortgages, deeds of trust, or other obligations, whether such interest is payable annually or at shorter or longer periods and whether payable to a nonresident alien individual or to an individual citizen or resident of the United States or to a partnership: Provided, That the Commissioner may authorize such tax to be de- ducted and withheld in the case of interest upon any such bonds, mortgages, deeds of trust or other obligations, the owners of which are not known to the withholding agent. Such deduction and with- holding shall not be required in the case of a citi- zen or resident entitled to receive such interest, if he files with the withholding agent on or before February r, a signed notice in writing claiming the benefit of the credits provided in subdivisions (c) and (d) of section 216; nor in the case of a non- resident alien individual if so provided for in regu- lations prescribed by the Commissioner under sec- tion 217. Returns of tax with- (c) Evcry Individual, corporation, or partner- MUrch'i""" ship required to deduct and withhold any tax under this section shall make return thereof on or before March first of each year and shall on or before Tax due June 15th Juuc i^th pay thc tax to thc official of the United States Government authorized to receive it. Every 34 INCOME TAX-INDIVIDUALS such individual, corporation, or partnership is hereby made liable for such tax and is hereby in- demnified against the claims and demands of any individual, corporation, or partnership for the amount of any payments made in accordance with the provisions of this section. (d) Income upon which any tax is required to Recipient to be withheld at the source under this section shall iTn^wWcH^"*. be included in the return of the recipient of such ""•'■''•^ " «*""» income, but any amount of tax so withheld shall be credited against the amount of income tax as com- puted in such return. (e) If any tax required under this section to be u tax ia paid it shaii deducted and withheld is paid by the recipient of ""* •" «""='="'' the income, it shall not be recollected from the withholding agent; nor in cases in which the tax is so paid shall any penalty be imposed upon or col- lected from the recipient of the income or the with- holding agent for failure to return or pay the same, unless such failure was fraudulent and for the pur- pose of evading payment. Credit for Taxes. Sec. 222. (a) That the tax computed under credits to Part II of this title shall be credited with : individuals: ( 1 ) In the case of a citizen of the United States, citizens the amount of any income, war-profits and excess- profits taxes paid during the taxable year to any foreign country, upon income derived from sources therein, or to any possession of the United States; and (2) In the case of a resident of the United Residents States, the amount of any such taxes paid during 35 Alien residents Partner, beneficiary Adjustment of dif- ference between taxes paid and credits claimed REVENUE ACT OF 1918 the taxable year to any possession of the United States ; and (3) In the case of an alien resident of the United States who is a citizen or subject of a foreign coun- try, the amount of any such taxes paid during the taxable year to such country, upon income derived from sources therein, if such country, in imposing such taxes, allows a similar credit to citizens of the United States residing in such country; and (4) In the case of any such individual who is a member of a partnership or a beneficiary of an estate or trust, his proportionate share of such taxes of the partnership or the estate or trust paid during the taxable year to a foreign country or to any pos- session of the United States, as the case may be. (b) If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Commissioner who shall redetermine the amount of the tax due under Part II of this title for the year or years affected, and the amount of tax due upon such redetermination, if any, shall be paid by the taxpayer upon notice and demand by the collector, or the amount of tax over- paid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of sec- tion 252. In the case of such a tax accrued but not paid, the Commissioner as a condition precedent to the allowance of this credit may require the tax- payer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such penal sum as the Commissioner may require, con- ditioned for the payment by the taxpayer of any amount of tax found due upon any such redetermi- nation; and the bond herein prescribed shall con- 36 INCOME TAX— INDIVIDUALS tain such further conditions as the Commissioner may require. (c) These credits shall be allowed only if the satisfactory evidence taxpayer furnishes evidence satisfactory to the "'""''*• Commissioner showing the amount of income de- rived from sources within such foreign country or such possession of the United States, and all other information necessary for the computation of such credits. Individual Returns. Individual returns: Sec. 223. That every individual having a net $1,000 net income income for the taxable year of $1,000 or over if "'■ ""^'^ p*"™ single or if married and not living with husband or wife, or of $2,000 or over if married and living $2,000 net income with husband or wife, shall make under oath a '■"" ■""■'"=•' •"="°" return stating specifically the items of his gross in- come and the deductions and credits allowed by this title. If a husband and wife living together have an aggregate net income of $2,000 or over, each shall make such a return unless the income of each is included in a single joint return. If the taxpayer is unable to make his own return, when agent siiaii the return shall be made by a duly authorized "^ ' '^^'""' agent or by the guardian or other person charged with the care of the person or property of such tax- payer. Sec. 224. That every partnership shall make a Partnership returns return for each taxable year, stating specifically the items of its gross income and the deductions al- lowed by this title, and shall include in the return the names and addresses of the individuals who would be entitled to share in the net income if dis- tributed and the amount of the distributive share 37 Fiduciary returns Fiduciaries subject to provisions for individuals Returns when ac- countinsT period changed REVENUE ACT OF 1918 of each individual. The return shall be sworn to by any one of the partners. Sec. 225. That every fiduciary (except receiv- ers appointed by authority of law in possession of part only of the property of an individual) shall make under oath a return for the individual, estate or trust for which he acts ( i) if the net income of such individual is $1,000 or over if single or if married and not living with husband or wife, or $2,000 or over if married and living with husband or wife, or (2) if the net income of such estate or trust is $1,000 or over or if any beneficiary of such estate or trust is a nonresident alien, stating spe- cifically the items of the gross income and the de- ductions and credits allowed by this title. Under such regulations as the Commissioner with the ap- proval of the Secretary may prescribe, a return made by one of two or more joint fiduciaries and filed in the office of the collector of the district where such fiduciary resides shall be a sufficient compliance with the above requirement. The fiduciary shall make oath that he has sufficient knowledge of the afifairs of such individual, estate or trust to enable him to make the return, and that the same is, to the best of his knowledge and belief, true and correct. Fiduciaries required to make returns under this Act shall be subject to all the provisions of this Act which apply to individuals. Sec. 226. That if a taxpayer, with the approval of the Commissioner, changes the basis of com- puting net income from fiscal year to calendar year a separate return shall be made for the period be- tween the close of the last fiscal year for which return was made and the following December 31. 38 INCOME TAX— INDIVIDUALS If the change is from calendar year to fiscal year, a separate return shall be made for the period be- tween the close of the last calendar year for which return was made and the date designated as the close of. the fiscal year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. If a taxpayer mak- ing his first return for income tax keeps his ac- counts on the basis of a fiscal year he shall make a separate return for the period between the begin- ning of the calendar year in which such fiscal year ends and the end of such fiscal year. In all of the above cases the net income shall be credits computed on the basis of such period for which ^ppo^ioned separate return is made, and the tax shall be paid thereon at the rate for the calendar year in which such period is included; and the credits provided in subdivisions (c) and (d) of section 216 shall be reduced respectively to amounts which bear the same ratio to the full credits provided in such sub- divisions as the number of months in such period bears to twelve months. Sec. 227. (a) That returns shall be made on jime and pUce for or before the fifteenth day of the third month fol- «""'^ '**"™* lowing the close of the fiscal year, or, if the return is made on the basis of the calendar year, then the return shall be made on or before the fifteenth day of March. The Commissioner may grant a reason- able extension of time for filing returns whenever in his judgment good cause exists and shall keep a record of every such extension and the reason therefor. Except in the case of taxpayers who are 39 Citizens or residents Non-resident aliens Understatement in returns REVENUE ACT OF 1918 abroad, no such extension shall be for more than six months. (b) Returns shall be made to the collector for the district in which is located the legal residence or principal place of business of the person making the return, or, if he has no legal residence or princi- pal place of business in the United States, then to the collector at Baltimore, Maryland. Sec. 228. That if the collector or deputy col- lector has reason to believe that the amount of any income returned is understated, he shall give due notice to the taxpayer making the return to show cause why the amount of the return should not be increased, and upon proof of the amount under- stated, may increase the same accordingly. Such taxpayer may furnish sworn testimony to prove any relevant facts and if dissatisfied with the decision of the collector may appeal to the Commissioner for his decision, under such rules of procedure as may be prescribed by the Commissioner with the approval of the Secretary. Tax on corporations For year 1918, 129 For 1919 and there- after, 10% Part III. — Corporations. Sec. 230. (a) That, in lieu of the taxes im- posed by section lo of the Revenue Act of 1916, as amended by the Revenue Act of 1917, and by sec- tion 4 of the Revenue Act of 19 17, there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax at the following rates : (i) For the calendar year 1918, 12 per centum of the amount of the net income in excess of the credits provided in section 236; and (2) For each calendar year thereafter, 10 per centum of such excess amount. 40 INCOME TAX-CORPORATIONS (b) For the purposes of the Act approved Apportionment of tax March 21, 1 918, entitled "An Act to provide for °;;st*errdr"" the operation of transportation systems while un- ^^^"^^ """■°' der Federal control, for the just compensation of their owners and for other purposes," five-sixths of the tax imposed by paragraph ( i ) of subdivision (a) and four-fifths of the tax imposed by para- graph (2) of subdivision (a) shall be treated as levied by an Act in amendment of Title I of the Revenue Act of 1917. Conditional and Other Exemptions. Sec. 231. That the following organizations Exempt shall be exempt from taxation under this title— '"•sanitations ( 1 ) Labor, agricultural, or horticultural organi- Labor zations; (2) Mutual savings banks not having a capital Mutual stock represented by shares ; *^™=* ^^^^ (3) Fraternal beneficiary societies, orders, or Fraternal beneficiary associations, (a) operating under the lodge system *°"^*'*= or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and (b) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents; (4) Domestic building and loan associations and Domestic buiwing cooperative banks without capital stock organized cfations" "^°' and operated for mutual purposes and without profit; (5) Cemetery companies owned and operated cemetery companies exclusively for the benefit of their members ; (6) Corporations organized and operated ex- chantabie. educa. clusivelv for religious, charitable, scientific or edu- ''""a'- ^"^ «- *^ ^ J CD I 1 hgious organizations 41 Exempt organizations continued Business leagues Civic leagues Clubs for Recreation Farmers' and mutual insurance companies Fruit growers' and farmers' associations Corporations holding title only REVENUE ACT OF 1918 cational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stock- holder or individual ; (7) Business leagues, chambers of commerce, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private stockholder or individual; (8) Civic leagues or organizations not organ- ized for profit but operated exclusively for the pro- motion of social welfare ; (9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which in- ures to the benefit of any private stockholder or member ; ( 10) Farmers' or other mutual hail, cyclone, or fire insurance companies, mutual ditch or irriga- tion companies, mutual or cooperative telephone companies, or like organizations of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting expenses; (11) Farmers', fruit growers', or like associa- tions, organized and operated as sales agents for the purpose of marketing the products of members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produce furnished by them; (12) Corporations organized for the exclusive purpose of holding title to property, collecting in- come therefrom, and turning over the entire amount thereof, less expenses, to an organization 42 Exempt organizations continued Federal land banks, national farm-loan associations Personal service corporations Net income defined INCOME TAX— CORPORATIONS which itself is exempt from the tax imposed by this title ; ( 13) Federal land banks and national farm-loan associations as provided in section 26 of the Act approved July 17, 1916, entitled "An Act to pro- vide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create Government depositaries and financial agents for the United States, and for other pur- poses"; (14) Personal service corporations. Sec. 232. That in the case of a corporation sub- ject to the tax imposed by section 230 the term "net income" means the gross income as defined in sec- tion 233 less the deductions allowed by section 234, and the net income shall be computed on the same basis as is provided in subdivision (b) of section 212 or in section 226. Sec. 233. (a) That in the case of a corpora- Gross income de. tion subject to the tax imposed by section 230 the c"rporations term "gross income" means the gross income as defined in section 213, except that: ( 1 ) In the case of life insurance companies there Life shall not be included in gross income such portion of any actual premium received from any indi- vidual policyholder as is paid back or credited to or treated as an abatement of premium of such policyholder within the taxable year. (2) Mutual marine insurance companies shall Mutual include in gross income the gross premiums col- lected and received by them less amounts paid for reinsurance. 43 insurance com- panies marine in- surance companies REVENUE ACT OF 1918 Foreign corporations (b) III tHc casc of 3. forcign cofporation gross income includes only the gross income from sources within the United States, including the interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, dividends from resident corporations, and including all amounts received (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States. Deductions allowed corporations Business expense Interest on indebted- ness Deductions Allowed. Sec. 234. (a) That in computing the net in- come of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions : (r) All the ordinary and necessary expenses paid or incurred during the taxable year in carry- ing on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, and including rentals or other payments required to be made as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity; (2) All interest paid or accrued within the tax- able year on its indebtedness, except on indebted- ness incurred or continued to purchase or carry obligations or securities (other than obligations of the United States issued after September 24, 1917) the interest upon which is wholly exempt from tax- ation under this title as income to the taxpayer, or, in the case of a foreign corporation, the proportion of such interest which the amount of its gross in- come from sources within the United States bears to the amount of its gross income from all sources within and without the United States ; 44 INCOME TAX-CORPORATIONS (3) Taxes paid or accrued within the taxable year imposed (a) by the authority of the United States, except income, war-profits and excess-profits taxes; or (b) by the authority of any of its posses- ^^^^ ^.^ ^_. sions, except the amount of income, war-profits and a«™ed excess-profits taxes allowed as a credit under sec- tion 238; or (c) by the authority of any State or Territory, or any county, school district, munici- pality, or other taxing subdivision of any State or Territory, not including those assessed against local benefits of a kind tending to increase the value of the property assessed; or (d) in the case of a domestic corporation, by the authority of any foreign country, except the amount of income, war- profits and excess-profits taxes allowed as a credit under section 238; or (e) in the case of a foreign corporation, by the authority of any foreign coun- try (except income, war-profits and excess-profits taxes, and taxes assessed against local benefits of a kind tending to increase the value of the property assessed) , upon the property or business : Provided, That in the case of obligors specified in subdivision (b) of section 221 no deduction for the payment of the tax imposed by this title or any other tax paid pursuant to the contract or provision referred to in that subdivision, shall be allowed ; (4) Losses sustained during the taxable year L„,3es and not compensated for by insurance or other- wise; (5) Debts ascertained to be v/orthless and ^^^^^ ^^^^^^^ „„ charged ofif within the taxable year; f6) Amounts received as dividends from a cor- ^. .^ ^ \ ^ / , , Dividends poration which is taxable under this title upon its net income, and amounts received as dividends from a personal service corporation out of earn- 45 Depreciation Amortization of war plant or equipment Depletion of mines and oil or g&s wells REVENUE ACT OF 1918 ings or profits upon which income tax has been im- posed by Act of Congress ; (7) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or busi- ness, including a reasonable allowance for obso- lescence; (8) In the case of buildings, machinery, equip- ment, or other facilities, constructed, erected, in- stalled, or acquired, on or after April 6, 1917, for the production of articles contributing to the prose- cution of the present war, and in the case of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war, there shall be allowed a reasonable deduction for the amorti- zation of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again including any amount otherwise allowed un- der this title or previous acts of Congress as a de- duction in computing net income. At any time within three years after the termination of the present war the Commissioner may, and at the re- quest of the taxpayer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evidence that the deduction originally allowed was incorrect, the taxes imposed by this title and by Title III for the year or years affected shall be redetermined ; and the amount of tax due upon such redetermination, if any, shall be paid upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. (9) In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable al- 46 INCOME TAX-CORPORATIONS lowance for depletion and for depreciation of im- provements, according to the peculiar conditions in each case, based upon cost including cost of de- velopment not otherwise deducted: Provided, 1 hat m the case of such properties acquired prior to March i, 1913, the fair market value of the property (or the taxpayer's interest therein) on that date shall be taken in lieu of cost up to that date : Provided further, That in the case of mines, oil and gas wells, discovered by the tax- payer, on or after March r, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair market value of the property is ma- terially disproportionate to the cost, the depletion allowance shall be based upon the fair market value of the property at the date of the discovery, or within 30 days thereafter; such reasonable al- lowance in all the above cases to be made under rules and regulations to be prescribed by the Com- missioner with the approval of the Secretary. In the case of leases the deductions allowed by this paragraph shall be equitably apportioned between the lessor and lessee ; (10) In the case of insurance companies, in ad- insurance company's dition to the above: (a) The net addition required -;-- «'i-«'» -"^ by law to be made within the taxable year to reserve funds (including in the case of assessment insurance companies the actual deposit of sums with State or Territorial officers pursuant to law as additions to guarantee or reserve funds) and (b) the sums other than dividends paid within the tax- able year on policy and annuity contracts ; (11) In the case of corporations issuing policies Reserve permitted covering life, health, and accident insurance com- troriHerheaiTh w bined in one policy issued on the weekly premium «"'>*°* p°""" 47 Additional deductions allowed mutual marine insurance companies Mutual insurance companies, additional deductions Claim for abatement for loss may be filed with return for 1918 REVENUE ACT OF 1918 payment plan continuing for life and not subject to cancellation, in addition to the above, such por- tion of the net addition (not required by law) made within the taxable year to reserve funds as the Commissioner finds to be required for the pro- tection of the holders of such policies only; (12) In the case of mutual marine insurance companies, there shall be allowed, in addition to the deductions allowed in paragraphs ( i ) to ( 10) , inclusive, amounts repaid to policyholders on account of premiums previously paid by them, and interest paid upon such amounts between the ascer- tainment and the payment thereof ; (13) In the case of mutual insurance companies (other than mutual life or mutual marine insur- ance companies) requiring their members to make premium deposits to provide for losses and ex- penses, there shall be allowed, in addition to the deductions allowed in paragraphs (i) to (10), inclusive, (unless otherwise allowed under such paragraphs) the amount of premium deposits re- turned to their policyholders and the amount of premium deposits retained for the payment of losses, expenses, and reinsurance reserves; (14) (a) At the time of filing return for the taxable year 1918 a taxpayer may file a claim in abatement based on the fact that he has sustained a substantial loss (whether or not actually realized by sale or other disposition) resulting from any material reduction (not due to temporary fluctua- tion) of the value of the inventory for such taxable year, or from the actual payment after the close of such taxable year of rebates in pursuance of con- tracts entered into during such year upon sales made during such year. In such case payment of 48 INCOME TAX-CORPORATIONS the amount of the tax covered by such claim shall not be required until the claim is decided, but the taxpayer shall accompany his claim with a bond in double the amount of the tax covered by the claim, with sureties satisfactory to the Commissioner, con- ditioned for the payment of any part of such tax found to be due, with interest. If any part of such claim is disallowed then the remainder of the tax due shall on notice and demand by the collector be paid by the taxpayer with interest at the rate of i per centum per month from the time the tax would have been due had no such claim been filed. If it is shown to the satisfaction of the Commissioner that such substantial loss has been sustained, then in computing the taxes imposed by this title and by Title III the amount of such loss shall be de- ducted from the net income, (b) If no such claim Recomputation ot is filed, but it is shown to the satisfaction of the Commissioner that during the taxable year 1919 the taxpayer has sustained a substantial loss of the character above described then the amount of such loss shall be deducted from the net income for the taxable year 19 18 and the taxes imposed by this title and by Title III for such year shall be redeter- mined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermina- tion shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. (b) In the case of a foreign corporation the de- Foreign corporations, duction allowed in subdivision (a), except those deductions allowed allowed in paragraph (2) and in clauses (a), (b), and (c) of paragraph (3), shall be allowed only if and to the extent that they are connected with in- come arising from a source within the United States* and the proper apportionment and alloca- 49 1918 tax for loss sustained Items not deductible REVENUE ACT OF 1918 tion of the deductions with respect to sources of income within and without the United States shall be determined under rules and regulations pre- scribed by the Commissioner with the approval of the Secretary. Sec. 235. That in computing net income no de- duction shall in any case be allowed in respect of any of the items specified in section 215. Credits allowed corporations Interest on U. S, Bonds, etc. Excess profits taxes for taxable year $2,000 exempt for domestic corporation Credits Allowed. Sec. 236. That for the purpose only of the tax imposed by section 230 there shall be allowed the following credits : (a) The amount received as interest upon obliga- tions of the United States and bonds issued by the War Finance Corporation, which is included in gross income under section 233 ; (b) The amount of any taxes imposed by Title III for the same taxable year: Provided, That in the case of a corporation which makes return for a fiscal year beginning in 1917 and ending in 1918, in computing the tax as provided in subdivision (a) of section 205, the tax computed for the entire period under Title II of the Revenue Act of 1917 shall be credited against the net income computed for the entire period under Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917 and under Title I of the Revenue Act of 1917, and the tax computed for the entire period under Title III of this Act at the rates prescribed for the calendar year 191 8 shall be credited against the net income computed for the entire period under this title ; and (c) In the case of a domestic corporation, $2,000. 50 INCOME TAX-CORPORATIONS Payment of Tax at Source. oEC. 237. That in the case of foreign corpora- withholding of tax tions subject to taxation under this title not engaged "^r^Z^:, '"""" in trade or business within the United States and not having any office or place of business therein, there shall be deducted and withheld at the source in the same manner and upon the same items of income as is provided in section 221 a tax equal to 10 per centum thereof, and such tax shall be re- turned and paid in the same manner and subject to the same conditions as provided in that section: Provided, That in the case of interest described in subdivision (b) of that section the deduction and ' withholding shall be at the rate of 2 per centum. Sec. 238. (a) That (except as otherwise pro- Credit tor taxes vided in subdivision (b) ) in the case of a domestic corporation the total taxes imposed for the taxable year by this title and by Title III shall be credited with the amount of any income, war-profits and excess-profits taxes paid during the taxable year to any foreign country, upon income derived from sources therein, or to any possession of the United States. If accrued taxes when paid differ from the amounts claimed as credits by the corporation, or if any tax paid is refunded in whole or in part, the corporation shall at once notify the Commissioner who shall redetermine the amount of the taxes due under this title and under Title III for the year or years afifected, and the amount of tapces due upon such redetermination, if any, shall be paid by the corporation upon notice and demand by the col- lector, or the amount of taxes overpaid, if any, shall 51 Adjustment of dif- ference between taxes paid and credits claimed Satisfactory evidence to allow credit REVENUE ACT OF 1918 * be credited or refunded to the corporation in accordance with the provisions of section 252. . In the case of such a tax accrued but not paid, the Commissioner as a condition precedent to the allowance of this credit may require the corpora- tion to give a bond with sureties satisfactory to and to be approved by him in such penal sum as he may require, conditioned for the payment by the tax- payer of any amount of taxes found due upon any such redetermination; and the bond herein pre- scribed shall contain such further conditions as the Commissioner may require. (b) This credit shall be allowed only if the tax- •payer furnishes evidence satisfactory to the Com- missioner showing the amount of income derived from sources within such foreign country or such possession of the United States, as the case may be, and all other information necessary for the com- putation of such credit. (c) If a domestic corporation makes a return for a fiscal year beginning in 1917 and ending in 1918, only that proportion of this credit shall be allowed which the part of such period within the calendar year 191 8 bears to the entire period. Execution of return for corporations Returns for foreign corporations Corporation Returns. Sec. 239. That every corporation subject to tax- ation under this title and every personal service corporation shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title. The return shall be sworn to by the president, vice-president, or other principal officer and by the treasurer or assistant treasurer. If any foreign corporation has no office or place of business in the United States 52 Receivers, trustees in bankrui assignees INCOME TAX-CORPORATIONS but has an agent in the United States, the return shall be made by the agent. In cases where re- ceivers, trustees in bankruptcy, or assignees are operating the property or business of corporations, such receivers, trustees, or assignees shall make re- turns for such corporations in the same manner and form as corporations are required to make returns. Any tax due on the basis of such returns made by _„.„.„ „_ receivers, trustees, or assignees shall be collected in i",^^^e«''*'*'' the same manner as if collected from the corpora- tions of whose business or property they have cus- tody and control. Returns made under this section shall be subject to the provisions of sections 226 and 228. When return is made under section 226 the credit provided in subdivision (c) of section 236 shall be reduced to an amount which bears the same ratio to the full credit therein provided as the number of months in the period for which such return is made bears to twelve months. Sec. 240. (a) That corporations which are afEli- consolidated ated within the meaning of this section shall, under ^^'p^tfons"*"^'^^ regulations to be prescribed by the Commissioner with the approval of the Secretary, make a consoli- dated return of net income and invested capital for the purposes of this title and Title III, and the taxes thereunder shall be computed and deter- mined upon the basis of such return: Provided, That there shall be taken out of such consolidated net income and invested capital, the net income and invested capital of any such affiliated corporation organized after August i, 1914, and not successor to a then existing business, 50 per centum or more of whose gross income consists of gains, profits, commissions, or other income, derived from a gov- 53 REVENUE ACT OF 1918 ernment contract or contracts made between April 6, 1917, and November 11, 191 8, both dates inclu- sive. In such case the corporation so taken out shall be separately assessed on the basis of its own in- vested capital and net income and the remainder of such affiliated group shall be assessed on the basis of the remaining consolidated invested capital and net income. Apportionment of In auy casc in which a tax is assessed upon the cOTporatioM '* ' basis of a consolidated return, the total tax shall be computed in the first instance as a unit and shall then be assessed upon the respective, affiliated cor- porations in such proportions as may be agreed upon among them, or, in the absence of any such agreement, then on the basis of the net income properly assignable to each. There shall be allowed in computing the income tax only one specific credit of $2,000 (as provided in section 236) ; in computing the war-profits credit (as provided in section 311) only one specific exemption of $3,000; and in computing the excess-profits credit (as pro- vided in section 312) only one specific exemption of $3,000. Corporation, deemed (b) For thc purposc of this section two or more domestic corporations shall be deemed to be affili- ated ( I ) if one corporation owns directly or con- trols through closely affiliated interests or by a nominee or nominees substantially all the stock of the other or others, or (2) if substantially all the stock of two or more corporations is owned or con- trolled by the same interests. (c) For the purposes of section 238 a domestic foreign corporation coTporation whlch owns a maioritv of the voting owned by domestic , ^ ^ , -11111 corporation stock of 3. foreigu corporation shall be deemed to have paid the same proportion of any income, war- 54 to be affiliated Voting stock of INCOME TAX— ADMINISTRATIVE PROVISIONS profits and excess-profits taxes paid (but not in- cluding taxes accrued) by such foreign corpora- tion during the taxable year to any foreign country or to any possession of the United States upon in- come derived from sources without the United States, which the amount of any dividends (not de- ductible under section 234) received by such do- mestic corporation from such foreign corporation during the taxable year bears to the total taxable income of such foreign corporation upon or with respect to which such taxes were paid : Provided, That in no such case shall the amount of the credit for such taxes exceed the amount of such dividends (not deductible under section 234) received by such domestic corporation during the taxable year. Sec. 241. (a) That returns of corporations shall Time and puce for be made at the same time as is provided in sub- ^ '' ""^ division (a) of section 227. (b) Returns shall be made to the collector of the district in which is located the principal place of business or principal office or agency of the cor- poration, or, if it has no principal place of business or principal office or agency in the United States, then to the collector at Baltimore, Maryland. Part IV. — Administrative Provisions. Sec. 2 CO. (a) That except as otherwise pro- Payment of taxes in -^ , . , - . J _ ,1 installments vided m this section and sections 221 and 237 the tax shall be paid in four installments, each consist- ing of one-fourth of the total amount of the tax. The first installment shall be paid at the time fixed by law for filing the return, and the second install- ment shall be paid on the fifteenth day of the third month the third installment on the fifteenth day of the sixth month, and the fourth installment on the 55 Extension of time for filing- return Interest on amount of tax under extension Single payment of taxes Commissioner to examine returns REVENUE ACT OF 1918 fifteenth day of the ninth month, after the time fixed by law for filing the return. Where an exten- sion of time for filing a return is granted the time for payment of the first installment shall be post- poned until the date of the expiration of the period of the extension, but the time for payment of the other installments shall not be postponed unless the Commissioner so provides in granting the exten- sion. In any case in which the time for the pay- ment of any installment is at the request of the tax- payer thus postponed, there shall be added as part of such installment interest thereon at the rate of Yz of I per centum per month from the time it would have been due if no extension had been granted, until paid. If any installment is not paid when due, the whole amount of the tax unpaid shall become due and payable upon notice and demand by the collector. The tax may at the option of the taxpayer be paid in a single payment instead of in installments, in which case the total amount shall be paid on or before the time fixed by law for filing the return, or, where an extension of time for filing the return has been granted, on or before the expiration of the period of such extension. (b) As soon as practicable after the return is filed, the Commissioner shall examine it. If it then appears that the correct amount of the tax is greater or less than that shown in the return, the installments shall be recomputed. If the amount already paid exceeds that which should have been paid on the basis of the installments as recomputed, the excess so paid shall be credited against the sub- sequent installments; and if the amount already paid exceeds the correct amount of the tax, the ex- 56 INCOME TAX-ADMINISTRATIVE PROVISIONS cess shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. If the amount already paid is less than that which Adjustment for over should have been paid, the difference shall, to the " ""''" ■""""""' extent not covered by any credits then due to the taxpayer under section 252, be paid upon notice and demand by the collector. In such case if the return is made in good faith and the understatement of the amount in the return is not due to any fault of the taxpayer, there shall be no penalty because of such understatement. If the understatement is due Penalty for to negligence on the part of the taxpayer, but with- ^nSaument out intent to defraud, there shall be added as part of the tax 5 per centum of the total amount of the deficiency, plus interest at the rate of i per centum per month on the amount of the deficiency of each installment from the time the installment was due. If the understatement is false or fraudulent with Additional penalty intent to evade the tax, then, in lieu of the penalty stltemm" ™ provided by section 3176 of the Revised Statutes, as amended, for false or fraudulent returns will- fully made, but in addition to other penalties pro- vided by law for false or fraudulent returns, there shall be added as part of the tax 50 per centum of the amount of the deficiency. (c) If the return is made pursuant to section N„tice and demand 3176 of the Revised Statutes as amended, the amount of tax determined to be due under such return shall be paid upon notice and demand by the collector. (d) Except in the case of false or fraudulent E^ept in cases of returns with intent to evade the tax, the amount of ^:1"„;„% l[^"jf,"ttn tax due under any return shall be determined and •>« s years on Lti^ <-iv t >-■ . . . , . ^ assessment assessed by the Commissioner within nve years 57 Penalty for delay- after notice and demand Instructions on return form constitute notice and demand for payment of first installment $5 added to tax when warrant of distraint is necessary Commissioner may prevent departure to evade tax REVENUE ACT OF 1918 after the return was due or was made, and no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was due or was made. In the case of such false or fraudulent returns, the amount of tax due may be determined at any time after the return is filed, and the tax may be collected at any time after it becomes due. (e) If any tax remains unpaid after the date when it is due, and for ten days after notice and demand by the collector, then, except in case of estates of insane, deceased, or insolvent persons, there shall be added as part of the tax the sum of 5 per centum on the amount due but unpaid, plus interest at the rate of i per centum per month upon such amount from the time it became due: Pro- vided, That as to any such amount which is the subject of a bona fide claim for abatement such sum of 5 per centum shall not be added and the interest from the time the amount was due until the claim is decided shall be at the rate of i/^ of i per centum per month. In the case of the first installment provided for in subdivision (a) the instructions printed on the return shall be deemed sufficient notice of the date when the tax is due and sufficient demand, and the taxpayer's computation of the tax on the return shall be deemed sufficient notice of the aiiiount due. (f) In any case in which in order to enforce payment of a tax it is necessary for a collector to cause a warrant of distraint to be served, there shall also be added as part of the tax the sum of $5. (g) If the Commissioner finds that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal 58 INCOME TAX— ADMINISTRATIVE PROVISIONS himself or his property therein, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect the tax for the taxable year then last past or the taxable year then current unless such proceedings be brought without delay, the Commissioner shall declare the taxable period for such taxpayer terminated at the end of the calendar month then last past and shall cause notice of such finding and declaration to be given the taxpayer, together with a demand for immediate payment of the tax for the taxable period so declared terminated and of the tax for the preceding taxable year or so much of said tax as is unpaid, whether or not the time otherwise allowed by law for filing return and paying the tax has expired ; and such taxes shall thereupon become immediately due and payable. In any action or suit brought to enforce payment of taxes made due and payable by virtue of the provisions of this sub- division the finding of the Commissioner, made as herein provided, whether made after notice to the taxpayer or not, shall be for all purposes presump- tive evidence of the taxpayer's design. A taxpayer who is not in default in making any return or pay- ing income, war-profits, or excess-profits tax under any Act of Congress may furnish to the United States, under regulations to be prescribed by the Commissioner with the approval of the Secretary, security approved by the Commissioner that he will duly make the return next thereafter required to be filed and pay the tax next thereafter required to be paid. The Commissioner may approve and accept in like manner security for return and pay- ment of taxes made due and payable by virtue of the provisions of this subdivision, provided the tax- payer has paid in full all other income, war-profits, 59 REVENUE ACT OF 1918 or excess-profits taxes due from him under any Act of Congress. If security is approved and accepted pursuant to the provisions of this subdivision and such further or other security with respect to the tax or taxes covered thereby is given as the Com- missioner shall from time to time find necessary and require, payment of such taxes shall not be enforced by any proceedings under the provisions of this subdivision prior to the expiration of the time otherwise allowed for paying such respective taxes. Receipts for taxe. to Sec. a^i. That cvcry collector to whom any be given on request payment of any tax is made under the provisions of this title shall upon request give to the person making such payment a full written or printed receipt, stating the amount paid and the particular account for which such payment was made; and whenever any debtor pays taxes on account of pay- ments made or to be made by him to separate cred- itors the collector shall, if requested by such debtor, give a separate receipt for the tax paid on account of each creditor in such form that the debtor can conveniently produce such receipts separately to his several creditors in satisfaction of their respec- tive demands up to the amounts stated in the re- ceipts ; and such receipt shall be sufficient evidence in favor of such debtor to justify him in withhold- ing from his next payment to his creditor the amount therein stated ; but the creditor may, upon giving to his debtor a full written receipt acknowl- edging the payment to him of any sum actually paid and accepting the amount of tax paid as afore- said (specifying the same) as a further satisfaction of the debt to that amount, require the surrender to him of such collector's receipt. 60 INCOME TAX-ADMINISTRATIVE PROVISIONS Sec. 252. That if, upon examination of any re- Ref^^s of excess turn of income made pursuant to this Act, the Act payments of August 5, 1909, entitled "An Act to provide revenue, equalize duties, and encourage the indus- tries of the United States, and for other purposes," the Act of October 3, 1913, entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," the Revenue Act of 1916, as amended, or the Revenue Act of 1 917, it appears that an amount of income, war- profits or excess-profits tax has been paid in excess of that properly due, then, notwithstanding the provisions of section 3228 of the Revised Statutes, the amount of the excess shall be credited against any income, war-profits or excess-profits taxes, or installment thereof, then due from the taxpayer under any other return, and any balance of such excess shall be immediately refunded to the tax- payer: Provided, That no such credit or refund 5 yea, umitation shall be allowed or made after five years from the date when the return was due, unless before the expiration of such five years a claim therefor is filed by the taxpayer. Sec. 253. That any individual, corporation, or penalties partnership required under this title to pay or col- lect any tax, to make a return or to supply informa- tion, who fails to pay or collect such tax, to make such return, or to supply such information at the time or times required under this title, shall be liable to a penalty of not more than $1,000. Any individual, corporation, or partnership, or any officer or employee of any corporation or member or employee of a partnership, who willfully refuses to pay or collect such tax, to make such return, or to supply such information at the time or times 61 REVENUE ACT OF 1918 required under this title, or who willfully attempts in any manner to defeat or evade the tax imposed by this title, shall be guilty of a misdemeanor and shall be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prosecution. Returns of payments Sec. 2 ca. That everv corooratiou subject to the of dividends ^ . -"^j , 1 . . ,-^ , , tax imposed by this title and every personal service corporation shall, when required by the Commis- sioner, render a correct return duly verified under oath, of its payments of dividends, stating the name and address of each stockholder, the number of shares owned by him, and the amount of dividends paid to him. Returns by broilers Sec. 2 cc. That evcry iudivldual, corporation, or of information ...,.^. ., 1111 partnership doing business as a broker shall, when required by the Commissioner, render a correct return duly verified under oath, under such rules and regulations as the Commissioner, with the ap- proval of the Secretary, may prescribe, showing the names of customers for whom such individual, corporation, or partnership has transacted any business, with such details as to the profits, losses, or other information which the Commissioner may require, as to each of such customers, as will enable the Commissioner to determine whether all income tax due on profits or gains of such customers has been paid. Information at Source. Returns of Sec. 2c6. That all individuals, corporations, information of . , , . , . . . payments of $1,000 aud partnerships, in whatever capacity acting, in- cluding lessees or mortgagors of real or personal property, fiduciaries, and employers, making pay- ment to another individual, corporation, or part- 62 or more INCOME TAX-ADMINISTRATIVE PROVISIONS nership, of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emolu- ments, or other fixed, or determinable gains, profits, and income (other than payments described in sec- tions 254 and 255), of $1,000 or more in any tax- able year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such pay- ments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Com- missioner, under such regulations and in such form and manner and to such extent as may be prescribed by him with the approval of the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment. Such returns may be required, regardless of imereston amounts, (i) in the case of payments of interest ^biur°a«ons upon bonds, mortgages, deeds of trust, or other ■■egardiess of r 7 o o 7 7 amount similar obligations of corporations, and (2) in the case of collections of items (not payable in the United States) of interest upon the bonds of for- eign countries and interest upon the bonds of and dividends from foreign corporations by individ- uals, corporations, or partnerships, undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange. When necessary to make effective the provisions Name and address of this section the name and address of the recipient l{ "em.J^dL""'' of income shall be furnished upon demand of the individual, corporation, or partnership paying the income. 63 Returns to be public records Commissioner to make list of returns REVENUE ACT OF 1918 The provisions of this section shall apply to the calendar year 191 8 and each calendar year there- after, but shall not apply to the payment of interest on obligations of the United States. Sec. 257. That returns upon which the tax has been determined by the Commissioner shall consti- tute public records; but they shall be open to in- spection only upon order of the President and under rules and regulations prescribed by the Sec- retary and approved by the President: Provided, That the proper officers of any State imposing an income tax may, upon the request of the governor thereof, have access to the returns of any corpora- tion, or to an abstract thereof showing the name and income of the corporation, at such times and in such manner as the Secretary may prescribe: Pro- vided further, That all bona fide stockholders of record owning i per centum or more of the out- standing stock of any corporation shall, upon mak- ing request of the Commissioner, be allowed to examine the annual income returns of such corpora- tion and of its subsidiaries. Any stockholder who pursuant to the provisions of this section is allowed to examine the return of any corporation, and who makes known in any manner whatever not provided by law the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any such return, shall be guilty of a misdemeanor and be punished by a fine not exceeding $1,000, or by imprisonment not exceed- ing one year, or both. The Commissioner shall as soon as practicable in each year cause to be prepared and made available to public inspection in such manner as he may de- termine, in the office of the collector in each 64 INCOME TAX-ADMINISTRATIVE PROVISIONS internal-revenue district and in such other places as he may determine, lists containing the names and the post-office addresses of all individuals making income-tax returns in such district. Sec. 258. That the Commissioner, with the ap- publication of proval of the Secretary, shall prepare and publish =*=*"*'" annually statistics reasonably available with re- spect to the operation of the income, war-profits and excess-profits tax laws, including classifications of taxpayers and of income, the amounts allowed as deductions, exemptions, and credits, and any other facts deemed pertinent and valuable. Sec. 259. That all individuals, corporations, or coiuction of partnerships undertaking as a matter of business or {?y^f" requted for profit the collection of foreign payments of in- terest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner and shall be subject to such regula- tions enabling the Government to obtain the in- formation required under this title as the Commis- sioner, with the approval of the Secretary, shall prescribe; and whoever knowingly undertakes to collect such payments without having obtained a license therefor, or without complying with such regulations, shall be guilty of a misdemeanor and shall be fined not more than $5,000, or imprisoned for not more than one year, or both. Sec. 260. That any individual who is a citizen citizens of united of any possession of the United States (but not f^^'on tacome'™om otherwise a citizen of the United States) and who unTte" suite's" *""' is not a resident of the United States, shall be sub- ject to taxation under this title only as to income derived from sources within the United States, and in such case the tax shall be computed and paid in the same manner and subject to the same conditions 65 REVENUE ACT OF 1918 as in the case of other persons who are taxable only as to income derived from such sources. Porto Rico and Sec. 26r. That in Porto Rico and the Philip- Act of 1916 applies pinc Islands the income tax shall be levied, assessed, collected, and paid in accordance with the pro- visions of the Revenue Act of 191 6 as amended. Returns shall be made and taxes shall be paid under Title I of such Act in Porto Rico or the Philippine Islands, as the case may be, by (i) every individual who is a citizen or resident of Porto Rico or the Philippine Islands or derives income from sources therein, and (2) every cor- poration created or organized in Porto Rico or the Philippine Islands or deriving income from sources therein. An individual who is neither a citizen nor a resident of Porto Rico or the Philip- pine Islands but derives income from sources therein, shall be taxed in Porto Rico or the Philip- pine Islands as a nonresident alien individual, and a corporation created or organized outside Porto Rico or the Philippine Islands and deriving in- come from sources therein shall be taxed in Porto Rico or the Philippine Islands as a foreign cor- poration. For the purposes of section 216 and of paragraph (6) of subdivision (a) of section 234 a tax imposed in Porto Rico or the Philippine Islands upon the net income of a corporation shall not be deemed to be a tax under this title. Powers of Porto Thc Porto Rlcan or Philippine Legislature shall LLguiatuKs""""* have power by due enactment to amend, alter, modify, or repeal the income tax laws in force in Porto Rico or the Philippine Islands, respectively. 66 WAR-EXCESS-PROFITS TAX-IMPOSITION OF TAX Title III. — War-Profits and Excess- Profits Tax. Part I. — General Definitions. Sec. 300. That when used in this title the terms Definitions "taxable year," "fiscal year," "personal service cor- poration," "paid or accrued," and "dividends" shall have the same meaning as provided for the purposes of income tax in sections 200 and 201. The first taxable year for the purposes of this title shall be the same as the first taxable year for the purposes of the income tax under Title II. Part II. — Imposition of Tax. Sec. 301. (a) That in lieu of the tax imposed by Tax rates for isis Title II of the Revenue Act of 1917, but in addi- tion to the other taxes imposed by this Act, there shall be levied, collected, and paid for the taxable year 191 8 upon the net income of every corporation a tax equal to the sum of the following : First Bracket. 30 per centum of the amount of the net income in excess of the excess-profits credit (determined under section 312) and not in excess of 20 per centum of the invested capital ; Second Bracket. 65 per centum of the amount of the net income in excess of 20 per centum of the invested capital ; Third Bracket. The sum, if any, by which 80 per centum of the amount of the net income in excess of the war- 67 REVENUE ACT OF 1918 Tax rates for 1819 and thereafter profits credit (determined under section 311) ex- ceeds the amount of the tax computed under the first and second brackets. (b) For the taxable year 191 9 and each taxable year thereafter there shall be levied, collected, and paid upon the net income of every corporation (except corporations taxable under subdivision (c) of this section) a tax equal to the sum of the fol- lowing: First Bracket. 20 per centum of the amount of the net income in excess of the excess-profits credit (determined under section 312) and not in excess of 20 per centum of the invested capital ; Income from Srovemment contracts Basis of computation See also (2) Second Bracket. 40 per centum of the amount of the net income in excess of 20 per centum of the invested capital. (c) For the taxable year 1919 and each taxable year thereafter there shall be levied, collected, and paid upon the net income of every corporation which derives in such year a net income of more than $10,000 from any government contract or con- tracts made between April 6, 1917, and November II, 191 8, both dates inclusive, a tax equal to the sum of the following: (i) Such a portion of a tax computed at the rates specified in subdivision (a) as the part of the net income attributable to such government con- tract or contracts bears to the entire net income. In computing such tax the excess-profits credit and the war-profits credit applicable to the taxable year shall be used ; 68 WAR-EXCESS-PROFITS TAX— IMPOSITION OF TAX (2) Such a portion of a tax computed at the rates specified in subdivision (b) as the part of the net income not attributable to such government con- tract or contracts bears to the entire net income. For the purpose of determining the part of the net income attributable to such government con- tract or contracts, the proper apportionment and allocation of the deductions with respect to gross income derived from such government contract or contracts and from other sources, respectively, shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary. (d) In any case where the full amount of the excess-profits credit is not allowed under the first bracket of subdivision (a) or (b), by reason of the fact that such credit is in excess of 20 per centum of the invested capital, the part not so allowed shall be deducted from the amount in the second bracket. (e) For the purposes of the Act approved March 21, 191 8, entitled "An Act to provide for the operation of transportation systems while under Federal control, for the just compensation of their owners and for other purposes," the tax imposed by this title shall be treated as levied by an Act in amendment of Title II of the Revenue Act of 1917. Sec. 302. That the tax imposed by subdivision Limitation of (a) of section 301 shall in no case be more than 30 lZZ%ri^s\^^ per centum of the amount of the net income in excess of $3,000 and not in excess of $20,000, plus 80 per centum of the amount of the net income in excess of $20,000; the tax imposed by subdivision (b) of section 301 shall in no case be more than 20 per centum of the amount of the net income in excess of $3,000 and not in excess of $20,000, plus 69 REVENUE ACT OF 1918 40 per centum of the amount of the net income in excess of $20,000; and the above limitation shall apply to the taxes computed under subdivisions (a) and (b) of section 301, respectively, when used in subdivision (c) of that section. Nothing in this section shall be construed in such manner as to in- crease the tax imposed by section 301. Corporation with Sec. ^o^. That if part of the net income of a 30% income from ..,.,,,, , , . personal service corporatiou IS dcrivcd ( I ) from a trade or busmess (or a branch of a trade or business) in which the employment of capital is necessary, and (2) a part (constituting not less than 30 per centum of its total net income) is derived from a separate trade or business (or a distinctly separate branch of the trade or business) which if constituting the sole trade or business would bring it within the class of "personal service corporations," then (under regulations prescribed by the Commissioner with the approval of the Secretary) the tax upon the first part of such net income shall be separately com- puted (allowing in such computation only the same proportionate part of the credits authorized in sec- tions 311 and 312), and the tax upon the second part shall be the same percentage thereof as the tax so computed upon the first part is of such first part: Provided, That the tax upon such second part shall in no case be less than 20 per centum thereof, unless the tax upon the entire net income, if computed without benefit of this section, would constitute less than 20 per centum of such entire net income, in which event the tax shall be determined upon the entire net income, without reference to this section, as other taxes are determined under this title. The total tax computed under this section shall be sub- ject to the limitations provided in section 302. 70 WAR-EXCESS-PROFITS TAX-CREDITS Sec. 304. (a) That the corporations enumerated corporations in section 231 shall, to the extent that they are *"'"''* exempt from income tax under Title II, be exempt from taxation under this title. (b) Any corporation whose net income for the corporation with taxable year is less than $3,000 shall be exempt l"omJ'"lempt'' "^* from taxation under this title. (c) In the case of any corporation engaged Exemption of in the mining of gold, the portion of the net income m."tag '"'°'" ^°'"' derived from the mining of gold shall be exempt from the tax imposed by this title, and the tax on the remaining portion of the net income shall be the proportion of a tax computed without the bene- fit of this subdivision which such remaining por- tion of the net income bears to the entire net income. Sec. 305. That if a tax is computed under this Tax for less than title for a period of less than twelve months, the *^ """^ * specific exemption of $3,000, wherever referred to in this title, shall be reduced to an amount which is the same proportion of $3,000 as the number of months in the period is of twelve months. Part III. — Credits. Sec. 310. That as used in this title the term -Prewar period" "prewar period" means the calendar years 191 1, ^^'^"^^ 1912, and 1913, or, if a corporation was not in exis- tence during the whole of such period, then as many of such years during the whole of which the corporation was in existence. Sec. 311. (a) That the war-profits credit shall war-profits credit 71 f ^t r based on prewar consist of the sum oi : period Credit when no prewar income $3»000 exempt Credit when less than a year's prewar existence $3,000 exempt REVENUE ACT OF 1918 (i) A specific exemption of $3,000; and (2) An amount equal to the average net income of the corporation for the prewar period, plus or minus, as the case may be, 10 per centum of the difference between the average invested capital for the prewar period and the invested capital for the taxable year. If the tax is computed for a period of less than twelve months such amount shall be reduced to the same proportion thereof as the num- ber of months in the period is of twelve months. (b) If the corporation had no net income for the prewar period, or if the amount computed un- der paragraph (2) of subdivision (a) is less than 10 per centum of its invested capital for the taxable year, then the war-profits credit shall be the sum of : (i) A specific exemption of $3,000; and (2) An amount equal to 10 per centum of the invested capital for the taxable year. .(c) If the corporation was not in existence dur- ing the whole of at least one calendar year during the prewar period, then, except as provided in sub- division (d), the war-profits credit shall be the sum of : (i) A specific exemption of $3,000; and (2) An amount equal to the same percentage of the invested capital of the taxpayer for the taxable year as the average percentage of net income to in- vested capital, for the prewar period, of corpora- tions engaged in a trade or business of the same general class as that conducted by the taxpayer; but such amount shall in no case be less than 10 per centum of the invested capital of the taxpayer 72 WAR-EXCESS-PROFITS TAX-CREDITS for the taxable year. Such average percentage shall be determined by the Commissioner on the basis of data contained in returns made under Title II of the Revenue Act of 1917, and the average known as the median shall be used. If such average percentage has not been determined and published at least 30 days prior to the time v^^hen the return of the taxpayer is due, then for purposes of such return 10 per centum shall be used in lieu thereof ; but such average percentage when determined shall be used for the purposes of section 250 in de- termining the correct amount of the tax. (d) The war-profits credit shall be determined Basis of computation in the manner provided in subdivision (b) instead prewar™riod"by of in the manner provided in subdivision (c), in -°''>- corporation the case of any corporation which was not in ex- istence during the whole of at least one calendar year during the prewar period, if (i) a majority of its stock at any time during the taxable year is owned or controlled, directly or indirectly, by a corporation which was in existence during the whole of at least one calendar year during the pre- war period, or if (2) 50 per centum or more of its gross income (as computed under section 233 for income tax purposes) consists of gains, profits, commissions, or other income, derived from a gov- ernment contract or contracts made between April 6, 1917, and November 11, 19 18, both dates in- clusive. (e) A foreign corporation shall not be entitled Foreign corporation . /^ J • r ,+ no specific to a specific exemption of $3,000. exemption Sec. 312. That the excess-profits credit shall Excess-profits consist of a specific exemption of $3,000 plus an amount equal to 8 per centum of the invested capi- tal for the taxable year. 73 credit Foreign corporation Net income Prewar net income See also (2) Taxable year net income Prewar average income REVENUE ACT OF 1918 A foreign corporation shall not be entitled to the specific exemption of $3,000. Part IV. — Net Income. Sec. 320. (a) That for the purpose of this title the net income of a corporation shall be ascer- tained and returned — (i) For the calendar years 191 1 and 1912 upon the same basis and in the same manner as provided in section 38 of the Act entitled "An Act to pro- vide revenue, equalize duties, and encourage the industries of the United States, and for other purposes," approved August 5, 1909, except that taxes imposed by such section and paid by the cor- poration within the year shall be included; (2) For the calendar year 1913 upon the same basis and in the same manner as provided in Sec- tion II of the Act entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," approved October 3, 1913, except that taxes imposed by section 38 of such Act of August 5, 1909, and paid by the corporation within the year shall be included, and except that the amounts received by it as dividends upon the stock or from the net earnings of other corpora- tions subject to the tax imposed by Section II of such Act of October 3, 1913, shall be deducted; and (3) For the taxable year upon the same basis and in the same manner as provided for income tax purposes in Title II of this Act. (b) The average net income for the prewar period shall be determined by dividing the num- ber of years within that period during the whole 74 Definitions WAR-EXCESS-PROFITS TAX-INVESTED CAPITAL of which the corporation was in existence into the sum of the net income for such years, even though there may have been no net income for one or more of such years. Part V. — Invested Capital. Sec. 325. (a) That as used in this title — The term "intangible property" means patents, -intangible prop- copyrights, secret processes and formulae, good *"■*"" '***'"*'' will, trade-marks, trade-brands, franchises, and other like property; The term "tangible property" means stocks, "Tangible property- bonds, notes, and other evidences of indebtedness, bills and accounts receivable, leaseholds, and other property other than intangible property; The term "borrowed capital" means money or "Borrowed capital" other property borrowed, whether represented by ''=*^"^'* bonds, notes, open accounts, or otherwise; The term "inadmissible assets" means stocks, "inadmisBiWe bonds, and other obligations (other than obliga- ""**" tions of the United States), the dividends or inter- est from which is not included in computing net income, but where the income derived from such assets consists in part of gain or profit derived from the sale or other disposition thereof, or where all or part of the interest derived from such assets is in effect included in the net income because of the limitation on the deduction of interest under para- graph (2) of subdivision (a) of section 234, a cor- responding part of the capital invested in such assets shall not be deemed to be inadmissible assets ; The term "admissible assets" means all assets "Admissible other than inadmissible assets, valued in accord- ""**" 75 Stock without par value "Invested capital" defined REVENUE ACT OF 1918 ance with the provisions of subdivision (a) of sec- tion 326, section 330, and section 331. (b) For the purpose of this title, the par value of stock or shares shall, in the case of stock or shares issued at a nominal value or having no par value, be deemed to be the fair market value as of the date or dates of issue of such stock or shares. Sec. 326. (a) That as used in this title the term "invested capital" for any year means (except as provided in subdivisions (b) and (c) of this section) : (i) Actual cash bona fide paid in for stock or shares; (2) Actual cash value of tangible property, other than cash, bona fide paid in for stock or shares, at the time of such payment, but in no case to exceed the par value of the original stock or shares specifically issued therefor, unless the actual cash value of such tangible property at the time paid in is shown to the satisfaction of the Commis- sioner to have been clearly and substantially in excess of such par value, in which case such excess shall be treated as paid-in surplus: Provided, That the Commissioner shall keep a record of all cases in which tangible property is included in in- vested capital at a value in excess of the stock or shares issued therefor, containing the name and address of each taxpayer, the business in which en- gaged, the amount of invested capital and net income shown by the return, the value of the tangi- ble property at the time paid in, the par value of the stock or shares specifically issued therefor, and the amount included under this paragraph as paid- in surplus. The Commissioner shall furnish a copy 76 WAR-EXCESS-PROFITS TAX— INVESTED CAPITAL of such record and other detailed information with respect to such cases when required by resolution of either House of Congress, without regard to the restrictions contained in section 257; (3) Paid-in or earned surplus and undivided profits ; not including surplus and undivided profits earned during the year; (4) Intangible property bona fide paid in for stock or shares prior to March 3, 1917, in an amount not exceeding (a) the actual cash value of such property at the time paid in, (b) the par value of the stock or shares issued therefor, or (c) in the aggregate 25 per centum of the par value of the total stock or shares of the corporation outstanding on March 3, 19 17, whichever is lowest; (5) Intangible property bona fide paid in for stock or shares on or after March 3, 1917, in an amount not exceeding (a) the actual cash value of such property at the time paid in, (b) the par value of the stock or shares issued therefor, or (c) in the aggregate 25 per centum of the par value of the total stock or shares of the corporation out- standing at the beginning of the taxable year, whichever is lowest: Provided, That in no case shall the total amount included under paragraphs (4) and (5) exceed in the aggregate 25 per centum of the par value of the total stock or shares of the corporation outstanding at the beginning of the taxable year; but (b) As used in this title the term "invested capi- "invested capital" tal" does not include borrowed capital. ^°" ""' '""'"''= (c) There shall be deducted from invested capi- tal as above defined a percentage thereof equal to the percentage which the amount of inadmissible 77 Determination of tax as in section 328 REVENUE ACT OF 1918 assets is of the amount of admissible and inadmis- sible assets held during the taxable year. (d) The invested capital for any period shall be the average invested capital for such period, but in the case of a corporation making a return for a fractional part of a year, it shall (except for the purpose of paragraph (2) of subdivision (a) of section 311) be the same fractional part of such average invested capital. The average invested capital for the prewar period shall be determined by dividing the number of years within that period during the whole of which the corporation was in existence into the sum of the average invested capital for such years. Sec. 327. That in the following cases the tax shall be determined as provided in section 328: Unable to determine (a) Where the Commissioucr is unable to de- invested capital ^ ' ... termine the invested capital as provided in section 326; Foreign corporation (jj) Jq the casc of 3. forcign corporation ; (c) Where a mixed aggregate of tangible prop- erty and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfactorily to determine the respective values of the several classes of property at the time of payment, or to distinguish the classes of property paid in for stock and for bonds, respectively; (d) Where upon application by the Corpora- tion the Commissioner finds and so declares of record that the tax if determined without benefit of this section would, owing to abnormal condi- tions affecting the capital or income of the corpora- tion, work upon the corporation an exceptional 78 Values not determined Abnormal conditions WAR-EXCESS-PROFITS TAX-INVESTED CAPITAL hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the repre- sentative corporation specified in section 328. This subdivision shall not apply to any case (i) in which the tax (computed without benefit of this section) is high merely because the corporation earned within the taxable year a high rate of profits upon a normal invested capital nor (2) in which 50 per centum or more of the gross income of the corporation for the taxable year (computed under section 233 of Title II) consists of gains, profits, commissions, or other income, derived on a cost- plus basis from a government contract or contracts made between April 6, 1917, and November 11, 191 8, both dates inclusive. Sec. 328. (a) In the cases specified in section Basis tor computa- 327 the tax shall be the amount which bears the under se^ion 327"" same ratio to the net income of the taxpayer (in excess of the specific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income (in ex- cess of the specific exemption of $3,000) for such year. In the case of a foreign corporation the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representative corporations. In computing the tax under this section the Com- comparison with missioner shall compare the taxpayer only with eorporat'j'nr'^ representative corporations whose invested capital can be satisfactorily determined under section 326 and which are, as nearly as may be, similarly cir- cumstanced with respect to gross income, net in- come, profits per unit of business transacted and 79 REVENUE ACT OF 1918 Ratio of tax to net income Record to be kept by Commissioner capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances. (b) For the purposes of subdivision (a) the ratios between the average tax and the average net income of representative corporations shall be de- termined by the Commissioner in accordance with regulations prescribed by him with the approval of the Secretary. In cases in which the tax is to be computed under this section, if the tax as computed without the benefit of this section is less than 50 per centum of the net income of the taxpayer, the installments shall in the first instance be computed upon the basis of such tax; but if the tax so computed is 50 per centum or more of the net income, the install- ments shall in the first instance be computed upon the basis of a tax equal to 50 per centum of the net income. In any case, the actual ratio when ascer- tained shall be used in determining the correct amount of the tax. If the correct amount of the tax when determined exceeds 50 per centum of the net income, any excess of the correct installments over the amounts actually paid shall on notice and demand be paid together with interest at the rate of j4 oi 1 per centum per month on such excess from the time the installment was due. (c) The Commissioner shall keep a record of all cases in which the tax is determined in the man- ner prescribed in subdivision (a), containing the name and address of each taxpayer, the business in which engaged, the amount of invested capital and net income shown by the return, and the amount of invested capital as determined under such sub- 80 WAR-EXCESS-PROFITS TAX-REORGANIZATIONS division. The Commissioner shall furnish a copy of such record and other detailed information with respect to such cases when required by resolution of either House of Congress, without regard to the restrictions contained in section 257. Part VI. — Reorganizations. Sec. 330. That in the case of the organization, consolidation, or change of ownership after Janu- ary I, 191 1, of a trade or business now carried on by a corporation, the corporation shall for the pur- poses of this title be deemed to have been in ex- istence prior to that date, and the net income and invested capital of such predecessor trade or busi- ness for all or any part of the prewar period prior to the organization of the corporation now carry- ing on such trade or business shall be deemed to have been the net income and invested capital of such corporation. If such predecessor trade or business was carried on by a partnership or individual the net income for the prewar period shall, under regulations pre- scribed by the Commissioner with the approval of the Secretary, be ascertained and returned as nearly as may be upon the same basis and in the same manner as provided for corporations in Title II, including a reasonable deduction for salary or compensation to each partner or the individual for personal services actually rendered. In the case of the organization as a corporation before July r, 1919, of any trade or business in which capital is a material income-producing factor, and which was previously owned by a partnership or individual, the net income of such trade or business from January i, 1918, to the date of such reorgani- 81 Reorganizations after Jan. 1, 1911, corporations Partnerships or individuals previous owners of business Deductions for salaries When there may be an option as to basis of computation of tax REVENUE ACT OF 1918 zation may at the option of the individual or part- nership be taxed as the net income of a corporation is taxed under Titles II and III ; in which event the net income and invested capital of such trade or business shall be computed as if such corporation had been in existence on and after January i, 191 8, and the undistributed profits or earnings of such trade or business shall not be subject to the surtax imposed in section 211, but amounts distributed on or after January i, 1918, from the earnings of such trade or business shall be taxed to the recipients as dividends, and all the provisions of Titles II and III relating to corporations shall, so far as practi- cable, apply to such trade or business : Provided, That this paragraph shall not apply to any trade or business the net income of w^hich for the taxable year 191 8 was less than 20 per centum of its in- vested capital for such year: Provided further, That any taxpayer who takes advantage of this paragraph shall pay the tax imposed by section rooo of this Act and by the first subdivision of sec- tion 407 of the Revenue Act of 19 16, as if such tax- payer had been a corporation on and after January I, 1918, with a capital stock having no par value. Readjustment of If any assct of thc trade or business in existence «!,"tai"" "'"''"'"' both during the taxable year and any prewar year is included in the invested capital for the taxable year but is not included in the invested capital for such prewar year, or is valued on a different basis in computing the invested capital for the taxable year and such prewar year, respectively, then un- der rules and regulations to be prescribed by the Commissioner with the approval of the Secretary such readjustments shall be made as are necessary to place the computation of the invested capital for 82 WAR-EXCESS-PROFITS TAX-MISCELLANEOUS such prewar year on the basis employed in de- termining the invested capital for the taxable year. Sec. 331. In the case of the reorganization, h so % of ownership consolidation, or change of ownership of a trade sam^p'eKons* or business, or change of ownership of property, after March 3, 1917, if an interest or control in such trade or business or property of 50 per centum or more remains in the same persons, or any of them, then no asset transferred or received from the previous owner shall, for the purpose of determining invested capital, be allowed a greater value than would have been allowed under this title in computing the invested capital of such pre- vious owner if such asset had not been so trans- ferred or received: Provided, That if such pre- vious owner was not a corporation, then the value of any asset so transferred or received shall be taken at its cost of acquisition (at the date when acquired by such previous owner) with proper al- lowance for depreciation, impairment, betterment or development, but no addition to the original cost shall be made for any charge or expenditure deducted as expense or otherwise on or after March i, 1913, in computing the net income of such previous owner for purposes of taxation. Part VII. — Miscellaneous. Sec. 335. (a) That if a corporation (other Adjustments for than a personal service corporation) makes return ilis, corpora«oTis for a fiscal year beginning in 1917 and ending in 191 8, the tax for the first taxable year under this title shall be the sum of : ( i ) the same proportion of a tax for the entire period computed under Title II of the Revenue Act of 1917 which the portion of such period falling within the calendar year 83 REVENUE ACT OF 1918 1917 is of the entire period, and (2) the same pro- portion of a tax for the entire period computed un- der this title at the rates specified in subdivision (a) of section 301 which the portion of such period falling within the calendar year 191 8 is of the en- tire period. Credit or refund of Any amount heretofore or hereafter paid on ac- by c^orporiion couut of thc tax imposed for such fiscal year by Title II of the Revenue Act of 1917 shall be credited toward the payment of the tax imposed for such fiscal year by this title, and if the amount so paid exceeds the amount of the tax imposed by this title, the excess shall be credited or refunded to the corporation in accordance with the provis- ions of section 252. Fiscal year 1918-1919, corporations Partnership fiscal year 1917-1918 (b) If a corporation makes return for a fiscal year beginning in 191 8 and ending in 1919, the tax for such fiscal year under this title shall be the sum of : ( I ) the same proportion of a tax for the entire period computed under subdivision (a) of section 301 which the portion of such period falling within the calendar year 1918 is of the entire period, and (2) the same proportion of a tax for the entire period computed under subdivision (b) or (c) of section 301 which the portion of such period falling within the calendar year 1919 is of the entire period. (c) If a partnership or a personal service cor- poration makes return for a fiscal year beginning in 1 917 and ending in 191 8, it shall pay the same proportion of a tax for the entire period computed under Title II of the Revenue Act of 1917 which the portion of such period falling within the calen- dar year 1917 is of the entire period. 84 ESTATE TAX Any tax paid by a partnership or personal service corporation for any period beginning on or after January i, 1918, shall be immediately refunded to the partnership or corporation as a tax erroneously or illegally collected. Sec. 336. That every corporation, not exempt under section 304, shall make a return for the pur- poses of this title. Such returns shall be made, and the taxes imposed by this title shall be paid, at the same times and places, in the same manner, and subject to the same conditions, as is provided in the case of returns and payment of income tax by cor- porations for the purposes of Title II, and all the provisions of that title not inapplicable, including penalties, are hereby made applicable to the taxes imposed by this title. Sec. 337. That in the case of a bona fide sale of mines, oil or gas w^ells, or any interest therein, w^here the principal value of the property has been demonstrated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed by this title attributable to such sale shall not exceed 20 per centum of the selling price of such property or interest. Refund of tax paid by a partnership or personal service corporation Every corporation not exempt under section 304 to make a return Tax limited on profits from sale of certain mines, oil or gas wells Title IV. — Estate Tax. Sec. 400. That w^hen used in this title The term "executor" means the executor or ad- ministrator of the decedent, or, if there is no ex- ecutor or administrator, any person w^ho takes pos- session of any property of the decedent; and The term "collector" means the collector of in- ternal revenue of the district in w^hich was the domicile of the decedent at the time of his death, 85 Estate Tax Definitions "Executor*' "Collector" REVENUE ACT OF 1918 or, if there was no such domicile in the United States, then the collector of the district in which is situated the part of the gross estate of the dece- dent in the United States, or, if such part of the gross estate is situated in more than one district, then the collector of internal revenue of such dis- trict as may be designated by the Commissioner. Tax on net estate Sec. 401. That (in Heu of thc tax imposed by Title II of the Revenue Act of 1916, as amended, and in lieu of the tax imposed by Title IX of the Revenue Act of 1917) a tax equal to the sum of the following percentages of the value of the net estate (determined as provided in section 403) is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act, whether a resident or nonresident of the United States : Rates of tax I pcr ccutum of thc amount of the net estate not in excess of $50,000; 2 per centum of the amount by which the net es- tate exceeds $50,000 and does not exceed $150,000; 3 per centum of the amount by which the net es- tate exceeds $150,000 and does not exceed $250,000 ; 4 per centum of the amount by which the net es- tate exceeds $250,000 and does not exceed $450,000; 6 per centum of the amount by which the net es- tate exceeds $450,000 and does not exceed $750,000 ; 8 per centum of the amount by which the net estate exceeds $750,000 and does not exceed $1,000,000; 10 per centum of the amount by which the net estate exceeds $1,000,000 and does not exceed $1,500,000; 86 ESTATE TAX 12 per centum of the amount by which the net estate exceeds $1,500,000 and does not exceed $2,000,000 ; 14 per centum of the amount by which the net estate exceeds $2,000,000 and does not exceed $3,000,000; 16 per centum of the amount by which the net estate exceeds $3,000,000 and does not exceed $4,000,000 ; 18 per centum of the amount by which the net estate exceeds $4,000,000 and does not exceed $5,000,000; 20 per centum of the amount by which the net estate exceeds $5,000,000 and does not exceed $8,000,000; 22 per centum of the amount by which the net estate exceeds $8,000,000 and does not exceed $10,000,000; and 25 per centum of the amount by which the net estate exceeds $10,000,000. The taxes imposed by this Title or by Title II of Estate of decedent the Revenue Act of 191 6 (as amended by the Act 1" ^^^[^'^"pres™! entitled "An Act to provide increased revenue to *"• ™™p*«"J defray the expenses of the increased appropriations for the army and navy and the extensions of fortifi- cations, and for other purposes," approved March 3, 1 9 17) or by Title IX of the Revenue Act of 1917, shall not apply to the transfer of the net es- tate of any decedent who has died or may die while serving in the military or naval forces of the United States in the present war or from injuries received or disease contracted while in such serv- 87 REVENUE ACT OF 1918 ice, and any such tax collected upon such transfer shall be refunded to the executor. see?awb)' (c) ^^^' ^^^^ That thc valuc of the gross estate of (d), (e), and (f) thc dccedcut shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated (a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its adminis- tration and is subject to distribution as part of his estate ; (b) To the extent of any interest therein of the surviving spouse, existing at the time of the dece- dent's death as dower, courtesy, or by virtue of a statute creating an estate in lieu of dower or courtesy; (c) To the extent of any interest therein of which the decedent has at any time made a trans- fer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair con- sideration in money or money's worth. Any trans- fer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title ; 88 ESTATE TAX (d) To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the decedent; (e) To the extent of any property passing under a general power of appointment exercised by the decedent (i) by will, or (2) by deed executed in contemplation of, or intended to take effect in pos- session or enjoyment at or after, his death, except in case of a bona fide sale for a fair consideration in money or money's worth; and (f) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the ex- tent of the excess over $40,000 of the amount re- ceivable by all other beneficiaries as insurance un- der policies taken out by the decedent upon his own life. Sec. 403. That for the purpose of the tax the value of the net estate shall be determined Net estate (a) In the case of a resident, by deducting from Deductions the value of the gross estate ( I ) Such amounts for funeral expenses, admin- Expenses istration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, or from theft, when such losses are not compensated for by insurance or otherwise, and such amounts reasonably required and actually ex- pended for the support during the settlement of 89 REVENUE ACT OF 1918 the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes ; Property taxed f^,) An amouttt cqual to the valuc at thc tlmc of under estate tax \ ^ ^ of »9" the decedent's death of any property, real, per- sonal or mixed, which can be identified as having been received by the decedent as a share in the es- tate of any person who died within five years prior to the death of the decedent, or which can be identified as having been acquired by the decedent in exchange for property so received, if an estate tax under the Revenue Act of 1917 or under this Act was collected from such estate, and if such property is included in the decedent's gross estate; Gifts, bequests, etc., ( ^ ) Xhc amount of all bequests, legacies, de- to the United States . ^ -J ' r i tt • i o or any political vises, or gifts, to or for the use of the United States, subdivision or to a . - . . , , , , , . charitable organ- any State, temtory, any political subdivision thereof, or the District of Columbia, for ex- clusively public purposes, or to or for the use of any corporation organized and operated exclusively for religious, charitable, scientific, literary, or edu- cational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or indi- vidual, or to a trustee or trustees exclusively for such religious, charitable, scientific, literary, or educational purposes. This deduction shall be made in case of the estates of all decedents who have died since December 31, 1917; and 90 ESTATE TAX (4) An exemption of $50,000; $so,ooo exempt (b) In the case of a nonresident, by deducting Nonresident dece- f. iiri e \ • 1*1 dent's taxable estate from the value of that part of his gross estate which at the time of his death is situated in the United States ( 1 ) That proportion of the deductions specified in paragraph (i) of subdivision (a) of this section which the value of such part bears to the value of his entire gross estate, wherever situated, but in no case shall the amount so deducted exceed 10 per centum of the value of that part of his gross estate which at the time of his death is situated in the United States ; (2) An amount equal to the value at the time of the decedent's death of any property, real, per- sonal, or mixed, which can be identified as having been received by the decedent as a share in the es- tate of any person who died within five years prior to the death of the decedent, or which can be identified as having been acquired by the decedent in exchange for property so received, if an estate tax under the Revenue Act of 1917 or under this Act was collected from such estate, and if such property is included in that part of the decedent's gross estate which at the time of his death is situ- ated in the United States ; and (3) The amount of all bequests, legacies, de- vises, or gifts, to or for the use of the United States, any state, territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any domes- tic corporation organized and operated exclusively for religious, charitable, scientific, literary, or edu- 91 REVENUE ACT OF 1918 cational purposes, including the encouragement of art and the prevention of cruelty to children or ani- mals, no part of the net earnings of which inures to the benefit of any private stockholder or indi- vidual, or to a trustee or trustees exclusively for such religious, charitable, scientific, literary, or educational purposes within the United States. This deduction shall be made in case of the estates of all decedents who have died since December 31, 1917; and No deductions for nonresident unless executor files notice No deductions shall be allowed in the case of a nonresident unless the executor includes in the re- turn required to be filed under section 404 the value at the time of his death of that part of the gross estate of the nonresident not situated in the United States. Stock of domestic corporation and insurance of non- resident decedent Redetermination of tax paid for certain credits For the purpose of this title stock in a domestic corporation owned and held by a nonresident dece- dent, and the amount receivable as insurance upon the life of a nonresident decedent where the insurer is a domestic corporation, shall be deemed prop- erty within the United States, and any property of which the decedent has made a transfer or with respect to which he has created a trust, within the meaning of subdivision (c) of section 402, shall be deemed to be situated in the United States, if so situated either at the time of the transfer or the creation of the trust, or at the time of the decedent's death. In the case of any estate in respect to which the tax under existing law has been paid, if necessary to allow the benefit of the deduction under para- graph (3) of subdivision (a) or (b) the tax shall 92 ESTATE TAX be redetermined and any excess of tax paid shall be refunded to the executor. Sec. 404. That the executor, within sixty days Executor to give e. i*j!' i_ {_^ • ' ^ notice to collector after qualifying as such, or after coming into pos- within eo days session of any property of the decedent, whichever event first occurs, shall give written notice thereof to the collector. The executor shall also, at such times and in such manner as may be required by regulations made pursuant to law, file with the col- lector a return under oath in duplicate, setting forth (a) the value of the gross estate of the dece- dent at the time of his death, or, in case of a non- resident, of that part of his gross estate situated in the United States; (b) the deductions allowed un- der section 403 ; (c) the value of the net estate of the decedent as defined in section 403 ; and (d) the tax paid or payable thereon; or such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to establish the correct tax. Return shall be made in all cases where the gross Returns when estate estate at the death of the decedent exceeds $50,000, ^''""''' ^^°'°°'' and in the case of the estate of every nonresident any part of whose gross estate is situated in the United States. If the executor is unable to make a complete return as to any part of the gross estate of the decedent, he shall include in his return a de- scription of such part and the name of every person holding a legal or beneficial interest therein, and upon notice from the collector such person shall in like manner make a return as to such part of the gross estate. The Commissioner shall make all as- sessments of the tax under the authority of existing administrative special and general provisions of 93 When no return filed collector may assess the estate Commissioner may grsuit extension Executor to pay collector REVENUE ACT OF 1918 law relating to the assessment and collection of taxes. Sec. 405. That if no administration is granted upon the estate of a decedent, or if no return is filed as provided in section 404, or if a return con- tains a false or incorrect statement of a material fact, the collector or deputy collector shall make a return and the Commissioner shall assess the tax thereon. Sec. 406. That the tax shall be due one year after the decedent's death ; but in any case where the Commissioner finds that payment of the tax within one year after the decedent's death would impose undue hardship upon the estate, he may grant an extension of time for the payment of the tax for a period not to exceed three years from the due date. If the tax is not paid within one year and 180 days after the decedent's death, interest at the rate of 6 per centum per annum from the ex- piration of one year after the decedent's death shall be added as part of the tax. Sec. 407. That the executor shall pay the tax to the collector or deputy collector. If the amount of the tax can not be determined, the payment of a sum of money sufficient, in the opinion of the col- lector, to discharge the tax shall be deemed pay- ment in full of the tax, except as in this section otherwise provided. If the amount so paid exceeds the amount of the tax as finally determined, the Commissioner shall refund such excess to the ex- ecutor. If the amount of the tax as finally de- termined exceeds the amount so paid, the collector shall notify the executor of the amount of such ex- cess and demand payment thereof. If such excess 94 ESTATE TAX part of the tax is not paid within thirty days after Penalty for failure such notification, interest shall be added thereto at ° "^^ the rate of lo per centum per annum from the ex- piration of such thirty days' period until paid, and the amount of such excess shall be a lien upon the entire gross estate, except such part thereof as may have been sold to a bona fide purchaser for a fair consideration in money or money's worth. The collector shall grant to the person paying coiuctor to issue , 7 1- • -1 r 1 • 1 1 1 1 1 duplicate receipts the tax duplicate receipts, either of which shall be sufficient evidence of such payment, and shall en- title the executor to be credited and allowed the amount thereof by any court having jurisdiction to audit or settle his accounts. Sec. 408. That if the tax herein imposed is not collector shaii en- paid within 180 days after it is due, the collector iso^dfys'-Te'iay* shall, unless there is reasonable cause for further '"'*''°"* """ delay, proceed to collect the tax under the pro- visions of general law, or commence appropriate proceedings in any court of the United States, in the name of the United States, to subject the prop- erty of the decedent to be sold under the judgment or decree of the court. From the proceeds of such sale the amount of the tax, together with the costs and expenses of every description to be allowed by the court, shall be first paid and the balance shall be deposited according to the order of the court, to be paid under its direction to the person entitled thereto. If the tax or any part thereof is paid by, or col- Adjustments in lected out of that part of the estate passing to or in " ^''"°" ° ^^ the possession of, any person other than the ex- ecutor in his capacity as such, such person shall be entitled to reimbursement out of any part of the estate still undistributed or by a just and equitable 95 Beneficiary of insur- ance policy to bear share of tax REVENUE ACT OF 1918 contribution by the persons whose interest in the estate of the decedent would have been reduced if the tax had been paid before the distribution of the estate or whose interest is subject to equal or prior liability for the payment of taxes, debts, or other charges against the estate, it being the purpose and intent of this title that so far as is practicable and unless otherwise directed by the will of the dece- dent the tax shall be paid out of the estate before its distribution. If any part of the gross estate con- sists of proceeds of policies of insurance upon the life of the decedent receivable by a beneficiary other than the executor, the executor shall be en- titled to recover from such beneficiary such portion of the total tax paid as the proceeds, in excess of $40,000, of such policies bear to the net estate. If there is more than one such beneficiary the ex- ecutor shall be entitled to recover from such bene- ficiaries in the same ratio. Sec. 409. That unless the tax is sooner paid in full, it shall be a lien for ten years upon the gross estate of the decedent, except that such part of the gross estate as is used for the payment of charges against the estate and expenses of its administra- tion, allowed by any court having jurisdiction thereof, shall be divested of such lien. If the Com- missioner is satisfied that the tax liability of an es- tate has been fully discharged or provided for, he may, under regulations prescribed by him with the approval of the Secretary, issue his certificate re- leasing any or all property of such estate from the lien herein imposed. Transfers and trusts ^^ i^) ^hc dcccdcnt makcs z transfcr of, or cre- L" dealh"""'*""" ^^^^ ^ ^^^^^ ^^^^ respect to, any property in con- templation of or intended to take effect in posses- 96 Estate tax a lien for 10 years ESTATE TAX sion or enjoyment at or after his death (except in the case of a bona fide sale for a fair consideration in money or money's worth) or (b) if insurance passes under a contract executed by the decedent in favor of a specific beneficiary, and if in either case the tax in respect thereto is not paid when due, then the transferee, trustee, or beneficiary shall be personally liable for such tax, and such property, to the extent of the decedent's interest therein at the time of such transfer, or to the extent of such bene- ficiary's interest under such contract of insurance, shall be subject to a like lien equal to the amount of such tax. Any part of such property sold by such transferee or trustee to a bona fide purchaser for a fair consideration in money or money's worth shall be divested of the lien and a like lien shall then attach to all the property of such transferee or trustee, except any part sold to a bona fide pur- chaser for a fair consideration in money or money's worth. Sec. 410. That whoever knowingly makes any Penalty for false false statement in any notice or return required to ^'=*='"™* be filed under this title shall be liable to a penalty of not exceeding $5,000, or imprisonment not ex- ceeding one year, or both. Whoever fails to comply with any duty imposed other penalties upon him by section 404, or, having in his posses- sion or control any record, file, or paper, contain- ing or supposed to contain any information con- cerning the estate of the decedent, or, having in his possession or control any property comprised in the gross estate of the decedent, fails to exhibit the same upon request to the Commissioner or any col- lector or law officer of the United States, or his duly authorized deputy or agent, who desires to 97 REVENUE ACT OF 1918 examine the same in the performance of his duties under this title, shall be liable to a penalty of not exceeding $500, to be recovered, with costs of suit, in a civil action in the name of the United States. Tax on freight Tax on express Tax on transporta- tion of persons Title V. — ^Tax on Transportation and Other Facilities, and on Insurance. Sec. 500. That from and after April i, 1919, there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 500 of the Revenue Act of 19 17 — (a) A tax equivalent to 3 per centum of the amount paid for the transportation on or after such date, by rail or water or by any form of mechanical motor power when in competition with carriers by rail or water, of property by freight transported from one point in the United States to another; and a like tax on the amount paid for such transporta- tion within the United States of property trans- ported from a point without the United States to a point within the United States ; (b) A tax of I cent for each 20 cents or fraction thereof of the amount paid to any person for the transportation on or after such date, by rail or water or by any form of mechanical motor power when in competition with express by rail or water, of any package, parcel, or shipment, by express, transported from one point in the United States to another ; and a like tax on the amount paid for such transportation within the United States of prop- erty transported from a point without the United States to a point within the United States ; (c) A tax equivalent to 8 per centum of the amount paid for the transportation on or after such 98 TAX ON TRANSPORTATION, ETC. date of persons by rail or water, or by any form of mechanical motor power on a regular established line when in competition with carriers by rail or water, from one point in the United States to another or to any point in Canada or Mexico, where the ticket or order therefor is sold or issued in the United States, not including the amount paid for commutation or season tickets for trips less than thirty miles, or for transportation the fare for which does not exceed 42 cents : Provided, That Limit to tax in where such water transportation lines are in fo"?g^""°te*"'' competition between American ports with foreign t"'>sp»»-ta"o° water transportation lines from adjacent foreign ports, the tax imposed under this subdivision on amounts paid for water transportation between American ports shall not exceed the amount of the transportation tax to which such foreign water transportation lines are subjected by their Govern- ment corresponding to this tax; (d) A tax equivalent to 8 per centum of the Berths, parior car • 1 *• ^ 1 ^1 -x A . * seats, staterooms amount paid for seats, berths, and staterooms m parlor cars, sleeping cars, or on vessels, used on or after such date in connection with transportation upon which tax is imposed by subdivision (c) ; (e) A tax equivalent to 8 per centum of the pipe lines amount paid for the transportation on or after such date of oil by pipe line; (f) In the case of each telegraph, telephone. Telegraph, teie- 11 j'j'tl_ ^* phone, cable, radio cable, or radio, dispatch, message, or conversation, which originates on or after such date within the United States, and for the transmission of which the charge is more than 14 cents and not more than 50 cents, a tax of 5 cents ; and if the charge is more than 50 cents, a tax of 10 cents: Provided, That only one payment of such tax shall be required, not- 99 Leased wires Exemptions Who pays the tax Mileage books and tickets REVENUE ACT OF 1918 withstanding the lines or stations of one or more persons are used for the transmission of such dis- patch, message, or conversation; and (g) A tax equivalent to lo per centum of the amount paid after such date to any telegraph or telephone company for any leased wire or talking circuit special service furnished after such date. The subdivision shall not apply to the amount paid for so much of such service as is utilized ( i ) in the collection and dissemination of news through the public press, or (2) in the conduct, by a common carrier or telegraph or telephone company, of its business as such. (h) No tax shall be imposed under this section upon any payment received for services rendered to the United States or to any State or Territory or the District of Columbia. The right to exemption under this subdivision shall be evidenced in such manner as the Commissioner, with the approval of the Secretary, may by regulation prescribe. Sec. 501. (a) That the taxes imposed by section 500 shall be paid by the person paying for the ser- vices or facilities rendered. (b) If a mileage book used for transportation or accommodation was purchased before Novem- ber I, 1917, or if cash fare is paid, the tax imposed by section 500 shall be collected from the person presenting the mileage book, or paying the cash fare, by the conductor or other agent, when pre- sented for such transportation or accommodation, and the amount so collected shall be paid to the United States in such manner and at such times as the Commissioner, with the approval of the Secre- tary, may prescribe; if a ticket (other than a mile- services for hire TAX ON TRANSPORTATION, ETC. age book) was bought and partially used before November i, 1917, it shall not be taxed, but if bought but not so used before section 500 takes effect, it shall not be valid for passage until the tax has been paid and such payment evidenced on the ticket in such manner as the Commissioner, with the approval of the Secretary, may by regulation prescribe. (c) The taxes imposed by section 500 shall ap- Tax applies to aii ply to all services or facilities specified in such sec- tion when rendered for hire, whether or not the agency rendering them is a common carrier. In case a carrier (other than a pipe line) principally engaged in rendering transportation services or facilities for hire does not, because of its ownership of the goods transported, or for any other reason, receive the amount which as a carrier it would otherwise charge, such carrier shall pay a tax equivalent to the tax which would be imposed upon the transportation of such goods if the carrier re- ceived payment for such transportation, such tax, if it can not be computed from actual rates or tariffs of the carrier, to be computed on the basis of the rates or tariffs of other carriers for like ser- vices as determined by the Commissioner. In the case of any carrier (other than a pipe line) the principal business of which is to transport goods belonging to it on its own account and which only incidentally renders services for hire, the tax shall apply to such services or facilities only as are actu- ally rendered by it for hire. Nothing in this or the preceding section shall be construed as imposing a tax ( I ) upon the transportation of any commodity which is necessary for the use of the carrier in the conduct of its business as such and is intended to be lOI REVENUE ACT OF 1918 SO used or has been so used; or (2) upon the trans- portation of company material transported by one carrier, which constitutes a part of a railroad sys- tem, for another carrier which is also a part of the same system. Tax on free pipe lines for reasonable rates to be determined (d) The tax imposed by subdivision (e) of sec- tion 500 shall apply to all transportation of oil by pipe line. In case no charge for transportation is made, by reason of ownership of the commodity transported, or for any other reason, the person transporting by pipe line shall pay a tax equivalent to the tax which would be imposed if such person received payment for such transportation, and if the tax can not be computed from actual bona fide rates or tariffs, it shall be computed (i) on the basis of the rates or tariffs of other pipe lines for like services, as determined by the Commissioner, or (2) if no such rates or tariffs exist, on the basis of a reasonable charge for such transportation, as determined by the Commissioner. Person receiving payment to collect tax Sec. 502. That each person receiving any pay- ments referred to in section 500 shall collect the amount of the tax, if any, imposed by such section from the person making such payments, and shall make monthly returns under oath, in duplicate, and pay the taxes so collected and the taxes imposed upon it under subdivision (c) or (d) of section 501 to the collector of the district in which the princi- pal office or place of business is located. Tax need not be listed separately on bill No carrier collecting the taxes imposed by sub- division (a) or (b) of section 500 shall be required to list the amount of such tax separately in any bill of lading, freight or express receipt, or other simi- TAX ON INSURANCE lar document, if the total amount of the transporta- tion charge and the tax is stated therein. Any person making a refund of any payment credit for refund upon which tax is collected under this section may repay therewith the amount of the tax collected on such payment; and the amount so repaid may be credited against amounts included in any subse- quent monthly return. The returns required under this section shall Returns contain such information, and be made at such times and in such manner, as the Commissioner, with the approval of the Secretary, may by regu- lation prescribe. The tax shall, without assessment by the Com- Penalties missioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of I per centum for each full month, from the time when the tax became due. Insurance. insurance Sec. 503. That from and after April r, 1919, j^xes on there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 504 of the Revenue Act of 1917, the following taxes on the issuance of insurance policies, including, in the case of policies issued outside the United States (except those taxable under subdivision 15 of Schedule A of Title XI) , their delivery within the United States by any agent or broker, whether act- ios Life insurance rate of tax Policies less than $500 Group policies Combination life, health and accident policies Marine, inland, and fire insurance REVENUE ACT OF 1918 ing for the insurer or the insured; such taxes to be paid by the insurer, or by such agent or broker: (a) Life insurance: A tax equivalent to 8 cents on each $ioo or fractional part thereof of the amount for which any life is insured under any policy of insurance, or other instrument, by what- ever name the same is called : Provided, That on all policies for life insurance only by which a life is insured not in excess of $500, issued on the indus- trial or weekly or monthly payment plan of insur- ance, the tax shall be 40 per centum of the amount of the first weekly premium or 20 per centum of the amount of the first monthly premium, as the case may be : Provided further, That on policies of group life insurance, covering groups of not less than 25 lives in the employ of the same person, for the benefit of persons other than the employer, the tax shall be equivalent to 4 cents on each $100 of the aggregate amount for which the group policy is issued and of any net increase in the amount of the insurance under such policy: And provided further. That on all policies covering life, health, and accident insurance combined in one policy by which a life is insured not in excess of $500, issued on the industrial, or weekly or monthly payment plan of insurance, the tax shall be 40 per centum of the amount of the first weekly premium or 20 per centum of the amount of the first monthly pre- mium, as the case may be ; (b) Marine, inland, and fire insurance: A tax equivalent to i cent on each dollar or fractional part thereof of the premium charged under each policy of insurance or other instrument by what- ever name the same is called whereby insurance is made or renewed upon property of any description 104 TAX ON INSURANCE (including rents or profits), whether against peril by sea or inland waters, or by fire or lightning, or other peril; (c) Casualty insurance: A tax equivalent to i casualty insurance cent on each dollar or fractional part thereof of the premium charged under each policy of insurance or obligation of the nature of indemnity for loss, damage, or liability (except bonds and policies taxable under subdivision 2 of Schedule A of Title XI) issued or executed or renewed by any person transacting the business of employer's liability, workmen's compensation, accident, health, tor- nado, plate glass, steam boiler, elevator, burglary, automatic sprinkler, automobile, or other branch of insurance (except life insurance, and insurance described and taxed in the preceding subdivision) : Provided, That in case of policies of insurance issued on the industrial or weekly or monthly pay- ment plan the tax shall be 40 per centum of the amount of the first weekly premium or 20 per centum of the amount of the first monthly pre- mium, as the case may be; (d) Policies issued by any corporation enumer- Exempt poncie. ated in section 231, and policies of reinsurance, shall be exempt from the taxes imposed by this section. Sec. 504. That every person issuing policies of Returns insurance upon the issuance of which a tax is im- posed by section 503 shall make monthly returns under oath, in duplicate, and pay such tax to the collector of the district in which the principal office or place of business of such person is located. Such returns shall contain such information and be made at such times and in such manner as the Com- 105 Tax due Penalty REVENUE ACT OF 1918 missioner, with the approval of the Secretary, may by regulation prescribe. The tax shall, without assessment by the Com- missioner or notice from the collector, be due and payable to the collector at the time so fixed for fil- ing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of I per centum for each full month, from the time when the tax became due. Distilled spirits Distilled spirits under bond Title VI. — Tax on Beverages. Sec. 600. (a) That there shall be levied and collected on all distilled spirits now in bond or that have been or that may be hereafter produced in or imported into the United States, except such dis- tilled spirits as are subject to the tax provided in section 604, in lieu of the internal-revenue taxes now imposed thereon by I'aw, a tax of $2.20 (or, if withdrawn for beverage purposes or for use in the manufacture or production of any article used or intended for use as a beverage, a tax of $6.40) on each proof gallon, or wine gallon when below proof, and a proportionate tax at a like rate on all fractional parts of such proof or wine gallon, to be paid by the distiller or importer when with- drawn, and collected under the provisions of exist- ing law; (b) That the tax imposed by subdivision (a) on distilled spirits intended for beverage purposes shall not be due or payable on such spirits while stored in any distillery, bonded warehouse, or spe- cial or general bonded warehouse, and which, pur- suant to any Act of Congress or proclamation of the President of the United States, can not be law- 106 TAX ON BEVERAGES fully sold or removed from any such warehouse during the period of prohibition fixed by such Act or proclamation; and all warehousing bonds or transportation and warehousing bonds conditioned for the payment of tax on any such spirits so stored on the date such prohibition takes effect shall as to all such spirits actually so stored be canceled and discharged, provided the distiller of such spirits shall in lieu of such bonds and prior to their can- cellation execute a bond in a penal sum of not less than $10,000, with sureties satisfactory to the col- lector of the district, conditioned that the principal shall, during the period of such prohibition, safely keep or cause to be kept in good condition all such spirits and the warehouse in which the same are stored, and shall not remove or suffer to be removed from warehouse, contrary to law, any such spirits during the period of such prohibition; and the bond herein prescribed shall be in such further sum and shall contain such further conditions as the Commissioner, with the approval of the Secretary, may by regulations require. The distiller may, subject to the provisions of this section, be permit- ted to retain in any such bonded warehouse dis- tilled spirits on which, under the terms of any existing bond, the tax imposed thereon becomes due and payable prior to the date such prohibition takes effect: Provided, That on the removal of such pro- hibition the distiller shall, as to all spirits as to which the bonded period fixed by law has not ex- pired and which remain stored in warehouse, execute new and satisfactory bond in the form required by existing law, conditioned for the pay- ment of the tax on all such spirits; and all pro- visions of existing law relating to such bonded warehouses, or the storage of spirits therein, or to 107 REVENUE ACT OF 1918 the execution of new or additional bonds, so far as applicable, shall continue in force as to all distilled spirits rebonded under the provisions of this sec- tion. Allowance for leakage Imported distilled spirits, wines and liquors in bond Upon the withdrawal of distilled spirits from bonded warehouse, after the period of prohibition has ended, and under the conditions imposed by section 50 of an Act entitled "An Act to reduce taxation, to provide revenue for the support of the Government, and for other purposes," approved August 28, 1894, an allowance for loss by leakage or other unavoidable cause, not exceeding one proof gallon as to packages of a capacity of not less than 40 wine gallons, may be made in addition to that provided in said section 50, as amended; and a like additional allowance of one proof gallon as to each package withdrawn may be made for each period of four months, or fraction thereof, for such spirits as shall have remained in warehouse during the period of prohibition and after the expiration of the maximum leakage period fixed by that section. Under regulations prescribed by the Secretary, any imported distilled spirits, wines or other liquors which may be in any customs bonded ware- house under the customs laws on the date such pro- hibition takes effect shall be permitted to remain therein without payment of any taxes or duties thereon, beyond the three-year period provided in section 2971 of the Revised Statutes, during such period of prohibition; and may be exported at any time during such extended period. Any imported spirits, wines or other liquors as to which the three- year bonded period may expire after the passage of this Act and prior to the date such prohibition 108 TAX ON BEVERAGES takes effect may at the option of the owner remain in bond during such period of prohibition. (c) In lieu of the internal-revenue tax now im- Tax on perfumes posed thereon by law there shall be levied and col- lected upon all perfumes hereafter imported into the United States containing distilled spirits, a tax of $i.io per wine gallon, and a proportionate tax at a like rate on all fractional parts of such wine gallon. Such tax shall be collected by the collector of customs and deposited as internal-revenue col- lections, under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe. Sec. 6oi. That no distilled spirits produced importation of after October 3, 1917, shall be imported into the United States from any foreign country, or from the Virgin Islands (unless produced from products the growth of such islands, and not then into any State or Territory or District of the United States in which the manufacture or sale of intoxicating liquor is prohibited), or from Porto Rico, or the Philippine Islands. Under such rules, regulations, and bonds as the Secretary may prescribe, the pro- visions of this section shall not apply to distilled spirits imported for other than ( i ) beverage pur- poses or (2) use in the manufacture or production of any article used or intended for use as a bev- erage. Sec. 602. That at registered distilleries produ- cing alcohol, or other high-proof spirits, packages may be filled with such spirits reduced to not less than one hundred proof from the receiving cisterns and tax paid without being entered into bonded warehouse. Such spirits may be also transferred 109 Transfer of spirits at registered distilleries REVENUE ACT OF 1918 from the receiving cisterns at such distilleries, by means of pipe lines, direct to storage tanks in the bonded warehouse and may be warehoused in such storage tanks. Such spirits may be also transferred in tanks or tank cars to general bonded warehouses for storage therein, either in storage tanks in such warehouses or in the tanks in which they were transferred. Such spirits may also be transferred from receiving cisterns or warehouse storage tanks to barrels, drums, tanks, tank cars, or other ap- proved containers, and may be transported in such containers for exportation or other lawful pur- poses. The Commissioner, with the approval of the Secretary, is hereby empowered to prescribe all Stamps and general uccessary rcgulations relating to the drawing off, transferring, gauging, storing, and transporting of such spirits ; the records to be kept and returns to be made ; the size and kind of packages and tanks to be used ; the marking, branding, numbering, and stamping of such packages and tanks ; the kinds of stamps, if any, to be used; and the time and man- ner of paying the tax; the kind of bond and the penal sum of same. The tax prescribed by law must be paid before such spirits are removed from the distillery premises, or from general bonded warehouse in the case of spirits transferred thereto, except as otherwise provided by law. regulations Exemption from stamp regulations Under such regulations as the Commissioner, with the approval of the Secretary, may prescribe, distilled spirits may hereafter be drawn from re- ceiving cisterns and deposited in distillery ware- houses without having affixed to the packages con- taining the same, distillery warehouse stamps, and such packages, when so deposited in warehouse, may be vi^ithdrawn therefrom on the original gauge no TAX ON BEVERAGES where the same have remained in such warehouse for a period not exceeding thirty days from the date of deposit. Under such regulations as the Commissioner, provisions for with the approval of the Secretary, may prescribe, ^hyf Sco^hoi °* the manufacture, warehousing, withdrawal, and shipment, under the provisions of existing law of ethyl alcohol for other than (r) beverage pur- poses or (2) use in the manufacture or production of any article used or intended for use as a bever- age, and denatured alcohol, may be exempted from the provisions of section 3283 of the Revised Statutes. The Commissioner, with the approval of the AUohoi distiuers for SI < . 1**11 c munitions may be ecretary, may by regulations exempt distillers of exempted by Commissioner ethyl alcohol, for use in the production of muni tions of war, or for other non-beverage purposes, from so much of the provisions of sections 3264, 3285, or 3309 of the Revised Statutes, and Acts amendatory thereof, respecting the survey of dis- tilleries, the period of fermentation, the filling and emptying of fermenting tubs, and assessments, as, in his judgment, may be expedient: Provided, That the bond prescribed in section 3260 of the Revised Statutes shall, in the cases herein pro- vided, be in such sum and contain such further con- ditions as the Commissioner may require. Sec. 603. That under such regulations as the when denatured , * 1 1 1 c 1 o alcohol exempted Commissioner, with the approval of the Secretary, may prescribe, ethyl alcohol of not less than 180 degrees proof, produced at any central distilling and denaturing plant established under the pro- visions of subsection 2, paragraph N, of section IV of the Act entitled "An Act to reduce tariff duties REVENUE ACT OF 1918 and to provide revenue for the Government, and for other purposes," approved October 3, 191 3, may be removed from such plant to any central denaturing bonded warehouse for denaturation, or may, before or after denaturation, be removed from such plant or from such denaturing bonded w^are- house, free of tax, for use of the United States or for shipment to any nation while engaged against the German Government in the present war and the removal herein authorized may be made in such tank vessels, tank cars, drums, casks, or other containers as may be approved by the Commis- sioner. It shall be lawful, under regulations pre- scribed by the Commissioner, with the approval of the Secretary, for an allowance to be made for leakage or loss by unavoidable accident and with- out fault or negligence of the distiller, owner, car- rier, or his agents or employees, which may occur during the transportation of such spirits or while the same are lawfully stored on either of the prem- ises herein described. Floor tax on Sec. 604. That upon all distilled spirits pro- spirits duced in or imported into the United States upon which the internal-revenue tax now imposed by law has been paid, and which, on the day after the passage of this Act, are held by any person and intended for sale or for use in the manufacture or production of any article intended for sale, there shall be levied, assessed, collected, and paid a floor tax of $3.20 (if intended for sale for beverage pur- poses or for use in the manufacture or production of any article used or intended for use as a bev- erage) on each proof gallon, and a proportionate tax at a like rate on all fractional parts of such proof gallon. 112 TAX ON BEVERAGES Sec. 605. That in addition to the tax imposed Additional tax on by this Act on distilled spirits and wines, there rectified wTnT.' *" shall be levied, assessed, collected, and paid, in lieu of the tax imposed by section 304 of the Revenue Act of 1917, a tax of 30 cents on each proof gallon and a proportionate tax at a like rate on all frac- tional parts of such proof gallon on all distilled spirits or wines hereafter rectified, purified, or re- fined in such manner, and in all mixtures hereafter produced in such manner, that the person so recti- fying, purifying, refining, or mixing the same is a rectifier within the meaning of section 3244 of the Revised Statutes, as amended : Provided, That this tax shall not apply to gin produced by the redis- Exception tillation of a pure spirit over juniper berries and other aromatics. Upon all such articles heretofore produced, and Floor tax which on the day after the passage of this Act are held by any person and intended for sale, there shall be levied, assessed, collected, and paid a floor tax of 15 cents on each proof gallon, and a propor- tionate tax at a like rate on all fractional parts of each proof gallon; and all such distilled spirits so held and not contained in the distillers' original stamped packages, or in bottles or other containers bearing the distillers' original labels, shall for the purpose of this section be regarded as rectified spirits. When the process of rectification is completed Alteration of proof and the taxes prescribed by this section have been paid, it shall be unlawful for the rectifier or other dealer to reduce in proof or increase in volume such spirits or wine by the addition of water or other substance; nothing herein contained shall, however, prevent a rectifier from using again in 113 Exception Blended whiskies Regulations for manufacture Tzix payable Penalties REVENUE ACT OF 1918 the process of rectification spirits already rectified and upon which the taxes have theretofore been paid. The taxes imposed by this section shall not attach to cordials or liqueurs on which a tax is imposed and paid under section 6ii or 613, nor to the mix- ing and blending of wines, where such blending is for the sole purpose of perfecting such wines ac- cording to commercial standards, nor to blends made exclusively of two or more pure straight whiskies aged in wood for a period not less than four years and without the addition of coloring or flavoring matter or any other substance than pure water and if not reduced below ninety proof : Pro- vided, That such blended whiskies shall be exempt from tax under this section only when compounded under the immediate supervision of a revenue officer, in such tanks and under such conditions and supervision as the Commissioner, with the approval of the Secretary, may prescribe. All distilled spirits or wines taxable under this section shall be subject to uniform regulations con- cerning the use thereof in the manufacture, blend- ing, compounding, mixing, marking, branding, and sale of whisky and rectified spirits, and no dis- crimination whatsoever shall be made by reason of a difference in the character of the material from which same may have been produced. The business of a rectifier of spirits shall be car- ried on, and the tax on rectified spirits shall be paid, under such rules, regulations, and bonds as may be prescribed by the Commissioner, with the approval of the Secretary. Whoever violates any of the provisions of this section shall be deemed to be guilty of a misde- 114 TAX ON BEVERAGES meanor and, upon conviction, shall be fined not more than $i,ooo or imprisoned not more than two years, and shall, in addition, be liable to double the tax evaded, together with the tax, to be collected by assessment or on any bond given. Sec. 606. That hereafter collectors shall not when stamps furnish wholesale liquor dealer's stamps in lieu of and in exchange for stamps for rectified spirits unless the package covered by stamp for rectified spirits is to be broken into smaller packages. The Commissioner, with the approval of the certain stamps may Secretary, is authorized to discontinue the use of ^^ •»"<=™«""«d the following stamps whenever in his judgment the interests of the Government will be subserved thereby: Distillery warehouse, special bonded warehouse, special bonded rewarehouse, general bonded ware- house, general bonded retransfer, transfer brandy, export tobacco, export cigars, export oleomarga- rine, and export fermented-liquor stamps. Sec. 607. That the Commissioner, with the ap- Brewery and dis- proval of the Secretary, is hereby authorized to ''""'' "«"'"*'°"* require at distilleries, breweries, rectifying houses, and wherever else in his judgment such action may be deemed advisable, the installation of meters, tanks, pipes, or any other apparatus for the purpose of protecting the revenue, and such meters, tanks, and pipes and all necessary labor incident thereto shall be at the expense of the person on whose premises the installation is required. Any such person refusing or neglecting to install such ap- paratus when so required by the Commissioner shall not be permitted to conduct business on such premises. lis Tax on beer, ale, and fermented liquors REVENUE ACT OF 1918 Sec. 608. That there shall be levied and col- lected on all beer, lager beer, ale, porter, and other similar fermented liquor, containing one-half of one per centum, or more, of alcohol, brewed or manufactured and hereafter sold, or removed for consumption or sale, within the United States, by whatever name such liquors may be called, in lieu of the internal-revenue taxes now imposed thereon by law, a tax of $6.00 for every barrel containing not more than thirty-one gallons, and at a like rate for any other quantity or for the fractional parts of a barrel authorized and defined by law, to be collected under the provisions of existing law. Exception when less than one-half of 1% alcohol Removal from brewery to distillery Sec. 609. That from and after the passage of this Act taxable fermented liquors may be con- veyed without payment of tax from the brewery premises where produced to a contiguous indus- trial distillery of either class established under the Act entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," approved October 3, 1913, to be used as distilling material, and the residue from such dis- tillation, containing less than one-half of i per centum of alcohol by volume, which is to be used in making beverages, may be manipulated by cool- ing, flavoring, carbonating, settling, and filtering on the distillery premises or elsewhere. The removal of the taxable fermented liquor from the brewery to the distillery and the opera- tion of the distillery and removal of the residue therefrom shall be under the supervision of such officer or officers as the Commissioner shall deem proper, and the Commissioner, with the approval of the Secretary, is hereby authorized to make such 116 TAX ON BEVERAGES regulations from time to time as may be necessary to give force and efifect to this section and to safe- guard the revenue. Sec. 6ro. That natural wine within the mean- Natural wme» ing of this Act shall be deemed to be the product made from the normal alcoholic fermentation of the juice of sound, ripe grapes, without addition or abstraction, except such as may occur in the usual cellar treatment of clarifying and aging: Pro- vided, however, That the product made from the juice of sound, ripe grapes by complete fermenta- tion of the must under proper cellar treatment and corrected by the addition (under the supervision of a ganger or storekeeper-gauger in the capacity of ganger) of a solution of water and pure cane, beet, or dextrose sugar (containing, respectively, not less than 95 per centum of actual sugar, calcu- lated on a dry basis) to the must or to the wine, to correct natural deficiencies, when such addition shall not increase the volume of the resultant prod- uct more than 35 per centum, and the resultant product does not contain less than five parts per thousand of acid before fermentation and not more than 13 per centum of alcohol after complete fer- mentation, shall be deemed to be wine within the meaning of this Act, and may be labeled, trans- ported, and sold as "wine," qualified by the name of the locality where produced, and may be further qualified by the name of its own particular type or variety: And provided further. That wine as de- fined in this section may be sweetened with cane sugar or beet sugar or pure condensed grape must and fortified under the provisions of this Act, and wines so sweetened or fortified shall be considered sweet wine within the meaning of this Act. 117 Tax on still wines and vermuth Rates of tax Withdrawal for fortification REVENUE ACT OF 1918 Sec. 6ii. That upon all still wines, including vermuth, and all artificial or imitation wines or compounds sold as still wine, which are hereafter produced in or imported into the United States, or which on the day after the passage of this Act are on any winery premises or other bonded premises or in transit thereto or at any customhouse, there shall be levied, collected, and paid, in lieu of the internal- revenue taxes now imposed thereon by law, taxes at rates as follows, when sold, or re- moved for consumption or sale: On wines containing not more than 14 per centum of absolute alcohol, 16 cents per wine gal- lon, the per centum of alcohol taxable under this section to be reckoned by volume and not by weight; On wines containing more than 14 per centum and not exceeding 21 per centum of absolute alco- hol, 40 cents per wine gallon ; On wines containing more than 21 per centum and not exceeding 24 per centum of absolute alco- hol, $1 per wine gallon; All such wines containing more than 24 per centum of absolute alcohol by volume shall be classed as distilled spirits and shall pay tax accord- ingly. Sec. 612. That under such regulations and official supervision and upon the giving of such notices, entries, bonds, and other security as the Commissioner, with the approval of the Secretary, may prescribe, any producer of wines defined under the provisions of this title, may withdraw from any fruit distillery or special bonded ware- house grape brandy, or wine spirits, for the fortifi- 118 TAX ON BEVERAGES cation of such wines on the premises where actually made: Provided, That there shall be levied and assessed against the producer of such wines a tax Tax on grape (in lieu of the internal-revenue tax now imposed spiHti'"'""^ thereon by law) of 60 cents per proof gallon of grape brandy or wine spirits whenever withdrawn and hereafter so used by him in the fortification of such wines during the preceding month, which assessment shall be paid by him within ten months from the date of notice thereof: Provided further, That nothing contained in this section shall be con- strued as exempting any wines, cordials, liqueurs, or similar compounds from the payment of any tax provided for in this title. Sec. 613. That upon the following articles Tax on importation, which are hereafter produced in or imported into the United States, or which on the day after the passage of this Act are on any winery premises or other bonded premises or in transit thereto or at any customhouse, there shall be levied, collected, and paid taxes at rates as follows, when sold, or removed for consumption or sale: On each bottle or other container of champagne champagne or sparkling wine, 12 cents on each one-half pint or fraction thereof; On each bottle or other container of artificially carbonated wine carbonated wine, 6 cents on each one-half pint or fraction thereof ; On each bottle or other container of liqueurs, Lf^, cordials, or similar compounds, by whatever name sold or offered for sale, containing sweet wine for- tified with grape brandy, 6 cents on each one-half pint or fraction thereof. 119 [ueurs, cordials, etc. In lieu of other taxes REVENUE ACT OF 1918 The tax imposed by this section shall, in the case of any article upon which a corresponding internal-revenue tax is now imposed by law, be in lieu of such tax. Floor taxes applying to sections 611 and 613 Floor tax on sweet wines Payment of taxes by stamp Sec. 614. That upon all articles specified in sec- tion 611 or 613 upon which the internal-revenue tax now imposed by law has been paid and which are on the day after the passage of this Act held by any person and intended for sale, there shall be levied, collected, and paid a floor tax equal to the difference between the tax imposed by this Act and the tax so paid. Sec. 615. That upon all sweet wines held for sale by the producer thereof upon the day after the passage of this Act there shall be levied, assessed, collected, and paid a floor tax equivalent to 30 cents per proof gallon upon the grape brandy or wine spirits used in the fortification of such wine. Sec. 616. That the taxes imposed by section 61 1 or 613 shall be paid by stamp on removal of the wines from the customhouse, winery, or other bonded place of storage for consumption or sale, and every person hereafter producing, or having in his possession or under his control when this title takes effect, any wines subject to the tax imposed in section 611 or 613 shall file such notice, describ- ing the premises on which such wines are produced or stored ; shall execute a bond in such form ; shall make such inventories under oath; and shall, prior to sale or removal for consumption, affix to each cask or vessel containing such wine such marks, labels, or stamps as the Commissioner, with, the approval of the Secretary, may from time to time 120 TAX ON BEVERAGES prescribe; and the premises described in such no- tice shall, for the purpose of this Act, be regarded as bonded premises. But the provisions of this Exceptions allowed , , t rr~ ■ retail dealers section, except as to payment of tax and the afiixmg of the required stamps or labels, shall not apply to wines held by retail dealers, as defined in section 3244 of the Revised Statutes, nor, subject to regu- lations prescribed by the Commissioner, with the approval of the Secretary, shall the tax imposed by section 611 apply to wines produced for the family use of the duly registered producer thereof and not sold or otherwise removed from the place of manu- facture and not exceeding in any case two hundred gallons per year. Sec. 617. That sections 42, 43, and 45 of the Act Amendments to entitled "An Act to reduce the revenue and equal- ■'"'"""^ ize duties on imports, and for other purposes," approved October i, 1890, as amended by section 68 of the Act entitled "An Act to reduce taxation, to provide revenue for the Government, and for other purposes," approved August 27, 1894, ^^^ further amended to read as follows: "Sec. 42. That any producer of pure sweet Manufacture of wines may use in the preparation of such sweet wines, under such regulations and after the filing of such notices and bonds, together with the keep- ing of such records and the rendition of such re- ports as to materials and products as the Commis- sioner of Internal Revenue, with the approval of the Secretary of the Treasury, may prescribe, wine spirits produced by any duly authorized distiller, and the Commissioner of Internal Revenue, in determining the liability of any distiller of wine spirits to assessment under section 3309 of the Re- 121 sweet wmes REVENUE ACT OF 1918 vised Statutes, is authorized to allow such distiller credit in his computations for the wine spirits with- drawn to be used in fortifying sweet wines under this Act. Fortification, and "Sec. 43. That the wine spirits mentioned in "f'wi^es*'"" section 42 is the product resulting from the distil- lation of fermented grape juice, to which water may have been added prior to, during, or after fermentation, for the sole purpose of facilitating the fermentation and economical distillation thereof, and shall be held to include the product from grapes or their residues commonly known as grape brandy, and shall include commercial grape brandy which may have been colored with burnt sugar or caramel ; and the pure sweet wine which may be fortified with wine spirits under the pro- visions of this Act is fermented or partially fer- mented grape juice only, with the usual cellar treatment, and shall contain no other substance whatever introduced before, at the time of, or after fermentation, except as herein expressly provided: Provided, That the addition of pure boiled or con- densed grape must or pure crystallized cane or beet sugar, or pure dextrose sugar containing, respec- tively, not less than 95 per centum of actual sugar, calculated on a dry basis, or water, or any or all of them, to the pure grape juice before fermentation, or to the fermented product of such grape juice, or to both, prior to the fortification herein provided for, either for the purpose of perfecting sweet wines according to commercial standards or for mechanical purposes, shall not be excluded by the definition of pure sweet wine aforesaid : Provided, however, That the cane or beet sugar, or pure dex- trose sugar added for sweetening purposes shall 122 TAX ON BEVERAGES not be in excess of 1 1 per centum of the weight of the wine to be fortified: And provided further, That the addition of water herein authorized shall be under such regulations as the Commissioner of Internal Revenue, with the approval of the Secre- tary of the Treasury, may from time to time pre- scribe: Provided, however. That records kept in accordance with such regulations as to the per- centage of saccharine, acid, alcoholic, and added water content of the wine offered for fortification shall be open to inspection by any official of the Department of Agriculture thereto duly author- ized by the Secretary of Agriculture; but in no case shall such wines to which water has been added be eligible for fortification under the pro- visions of this Act, where the same, after fermen- tation and before fortification, have an alcoholic strength of less than 5 per centum of their volume. "Sec. 45. That under such regulations and withdrawal of wine /« . , . . . I . ^ I spirits from storage official supervision, and upon the execution of such entries and the giving of such bonds, bills of lading, and other security as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, any producer of pure sweet wines as defined by this Act may withdraw wine spirits from any special bonded warehouse in original packages or from any registered distillery in any quantity not less than eighty wine gallons, and may use so much of the same as may be re- quired by him under such regulations, and after the filing of such notices and bonds and the keep- ing of such records and the rendition of such reports as to materials and products and the dis- position of the same as the Commissioner of In- ternal Revenue, with the approval of the Secretary 123 1 REVENUE ACT OF 1918 of the Treasury, shall prescribe, in fortifying the pure sweet wines made by him, and for no other purpose, in accordance with the foregoing limita- tions and provisions; and the Commissioner of Internal Revenue, with the approval of the Secre- tary of the Treasury, is authorized whenever he shall deem it to be necessary for the prevention of violations of this law to prescribe that wine spirits withdrawn under this section shall not be used to fortify wines except at a certain distance prescribed by him from any distillery, rectifying house, winery, or other establishment used for producing or storing distilled spirits, or for making or storing wines other than wines which are so fortified, and that in the building in which such fortification of wines is practiced no wines or spirits other than those permitted by this regulation shall be stored in any room or part of the building in which forti- fication of wines is practiced. The use of wine spirits for the fortification of sweet wines under this Act shall be under the immediate supervision of an officer of internal revenue, who shall make returns describing the kinds and quantities of wine so fortified, and shall affix such stamps and seals to the packages containing such wines as may be pre- scribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury; and the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall provide by regulations the time within which wines so fortified with the wine spirits so withdrawn may be subject to inspection, and for final accounting for the use of such wine spirits and for rewarehous- ing or for payment of the tax on any portion of such wine spirits which remain not used in fortify- ing pure sweet wines." 124 TAX ON BEVERAGES Sec. 6 1 8. (a) That under such regulations and withdrawal of upon the execution of such notices, entries, bonds, ''°'"""'= *"*" and other security as the Commissioner, with the approval of the Secretary, may prescribe, domestic wines subject to the tax imposed by section 6i i may be removed from the winery where produced, free of tax, for storage on other bonded premises or from such premises to other bonded premises (but not more than one such additional removal shall be allowed) , or for exportation from the United States or for use as distilling material at any regularly registered distillery: Provided, however, That the distiller using any such wine as material shall, subject to the provisions of section 3309 of the Re- vised Statutes, as amended, be held to pay the tax on the product of such wines as will include both the alcoholic strength therein produced by fermen- tation and that obtained from the brandy or wine spirits added to such wines at the time of fortifi- cation. (b) Under regulations prescribed by the Com- Grape wine missioner with the approval of the Secretary, it p"**"'*'™ shall be lawful to produce grape wines on bonded winery premises by the usual method, and to trans- port and use the same, and like wines heretofore produced and now stored on bonded winery prem- ises, as distilling material for the production of nonbeverage spirits in the production of nonalco- holic wines, containing less than ^ of i per centum of alcohol by volume, in any fruit brandy or indus- trial distillery: Provided, That all alcoholic spirits so obtained at any industrial distillery shall be de- natured, and all spirits so obtained at any fruit distillery shall be removed and used only for non- beverage purposes or for denaturation. 125 to evade tax REVENUE ACT OF 1918 Collection of tax Sec. 6i(). That thc collcction of the tax on im- on^wmes, cor la s, ported Still wlncs, including vermuth, and spark- ling wines, including champagne, and on imported liqueurs, cordials, and similar compounds, may be made within the discretion of the Commissioner, with the approval of the Secretary, by assessment instead of by stamps. Penalty for attempt Sec. 620. That whoever evades or attempts to evade any tax imposed by sections 6ii to 615, both inclusive, or any requirement of sections 610 to 621, both inclusive, or regulation issued pursuant thereto, or whoever, otherwise than as provided in such sections, recovers or attempts to recover any spirits from domestic or imported wine, or who- ever rectifies, mixes, or compounds with distilled spirits any domestic wines, other than in the manu- facture of liqueurs, cordials, or similar compounds, shall, on conviction, be punished for each such offense by a fine of not exceeding $5,000, or im- prisonment for not more than five years, or both, and in addition thereto by a penalty of double the tax evaded, or attempted to be evaded, to be assessed and collected in the same manner as taxes are assessed and collected, and all wines, spirits, liqueurs, cordials, or similar compounds as to which such violation occurs shall be forfeited to the United States. But the provisions of this sec- tion and the provisions of section 3244 of the Re- vised Statutes, as amended, relating to rectification, or other internal-revenue laws of the United States, shall not be held to apply to or prohibit the mixing or blending of wines subject to tax under the pro- visions of sections 6ri to 615, both inclusive, with each other or with other wines for the sole purpose of perfecting such wines according to commercial 126 TAX ON BEVERAGES Standards: Provided, That nothing herein con- tained shall be construed as prohibiting the use of tax-paid grain or other ethyl alcohol in the for- tification of sweet wines as defined in section 6io of this Act and section 43 of the Act entitled "An Act to reduce the revenue and equalize duties on imports, and for other purposes," approved Octo- ber I, 1890, as amended by this Act. Sec. 621. That the Commissioner, by regula- Regulation, at tions to be approved by the Secretary, may require '*'=*•""''" the use at each fruit distillery of such spirit meters, and such locks and seals to be affixed to fermenters, tanks, or other vessels and to such pipe connections as may in his judgment be necessary or expedient, and is hereby authorized to assign to any such dis- tillery and to each winery where wines are to be fortified such number of gangers or storekeeper- gaugers in the capacity of gaugers as may be neces- sary for the proper supervision of the manufacture of brandy or the making or fortifying of wines subject to tax imposed by this section ; and the com- pensation of such officers shall not exceed $5 per diem while so assigned, together with their actual and necessary travelling expenses, and also a rea- sonable allowance for their board bills, to be fixed by the Commissioner, with the approval of the Secretary, but not to exceed $2.50 per diem for such board bills. Sec. 622. That the Commissioner, with the ap- Allowance for ios» proval of the Secretary, is hereby authorized to i"oragr "'""*'*' make such allowances for unavoidable loss of wines while on storage or during cellar treatment as in his judgment may be just and proper. Sec. 623. That the second paragraph of section Amendment of 3264 of the Revised Statutes, as amended by sec- 127 Revised Statutes REVENUE ACT OF 1918 tion 5 of the Act of March i, 1879, and as further amended by the Act of June 22, 1910, be amended so as to read as follows : "In all surveys forty-five gallons of mash or beer brewed or fermented from grain shall represent not less than one bushel of grain, and seven gallons of mash or beer brewed or fermented from mo- lasses shall represent not less than one gallon of molasses, except in distilleries operated on the sour-mash principle, in which distilleries sixty gal- lons of beer brewed or fermented from grain shall represent not less than one bushel of grain, and ex- cept that in distilleries where the filtration-aeration process is used, with the approval of the Commis- sioner of Internal Revenue ; that is, where the mash after it leaves the mash tub is passed through a filtering machine before it is run into the ferment- ing tub, and only the filtered liquor passes into the fermenting tub, there shall hereafter be no limita- tion upon the number of gallons of water which may be used in the process of mashing or filtration for fermentation; but the Commissioner of Inter- nal Revenue, with the approval of the Secretary of the Treasury, in order to protect the revenue, shall be authorized to prescribe by regulation, to be made by him, such character of survey as he may find suitable for distilleries using such filtration- aeration process. The provisions hereof relating to filtration-aeration process shall apply only to sweet-mash distilleries." Export of distilled Sec. 624. That undcr such regulations as the ""'"*" Commissioner, with the approval of the Secre- tary, may prescribe, alcohol or other distilled spirits of a proof strength of not less than one hundred and eighty degrees intended for export 128 TAX ON BEVERAGES free of tax may be drawn from receiving cisterns at any distillery, or from storage tanks in any dis- tillery warehouse, for transfer to tanks or tank cars for export from the United States, and all provisions of existing law relating to the exporta- tion of distilled spirits not inconsistent herewith shall apply to spirits removed for export under the provisions of this Act. Sec. 625. That section 3255 of the Revised Amendments of Statutes as amended by the Act of June 3, 1896, and as further amended by the Act of March 2, 191 1, be further amended so as to read as follows: "Sec. 3255. The Commissioner of Internal commissioner may Revenue, with the approval of the Secretary of autTiferier**'" the Treasury, may exempt distillers of brandy made exclusively from apples, peaches, grapes, pears, pineapples, oranges, apricots, berries, plums, pawpaws, persimmons, prunes, figs, or cherries from any provision of this title relating to the manufacture of spirits, except as to the tax thereon, when in his judgment it may seem expedient to do so : Provided, That where, in the manufacture of wine, artificial sweetening has been used the wine or the fruit pomace residuum may be used in the distillation of brandy, and such use shall not prevent the Commissioner of Internal Reve- nue, with the approval of the Secretary of the Treasury, from exempting such distiller from any provision of this title relating to the manufacture of spirits, except as to the tax thereon, when in his judgment it may seem expedient to do so: And provided further, That the distillers mentioned in this section may add to not less than five hundred gallons (or ten barrels) of grape cheese not more than five hundred gallons of a sugar solution 129 Exportation of gin Amendment of Revised Statutes Penalty for removal of liquor in violation of law REVENUE ACT OF 1918 made from cane, beet, starch, or corn sugar, 95 per centum pure, such solution to have a saccharine strength of not to exceed 10 per centum, and may ferment the resultant mixture on a winery or dis- tillery premises, and such fermented product shall be regarded as distilling material." Sec. 626. That distilled spirits known com- mercially as gin of not less than 80 per centum proof may at any time within eight years after entry in bond at any distillery be bottled in bond at such distillery for export without the payment of tax, under such rules and regulations as the Com- missioner, with the approval of the Secretary, may prescribe. Sec. 627. That section 3354 of the Revised Statutes as amended by the Act approved June 18, 1890, be, and is hereby, amended to read as fol- lows: "Sec. 3354. Every person who withdraws any fermented liquor from any hogshead, barrel, keg, or other vessel upon which the proper stamp has not been affixed for the purpose of bottling the same, or who carries on or attempts to carry on the business of bottling fermented liquor in any brew- ery or other place in which fermented liquor is made, or upon any premises having communica- tion with such brewery, or any warehouse, shall be liable to a fine of $500, and the property used in such bottling or business shall be liable to for- feiture : Provided, however, That this section shall not be construed to prevent the withdrawal and transfer of unfermented, partially fermented, or fermented liquors from any of the vats in any brewery by way of a pipe line or other conduit to another building or place for the sole purpose of 130 TAX ON BEVERAGES bottling the same, such pipe line or conduit to be constructed and operated in such manner and with such cisterns, vats, tanks, valves, cocks, faucets, and gauges, or other utensils or apparatus, either on the premises of the brewery or the bottling house, and with such changes of or additions thereto, and such locks, seals, or other fastenings, and under such rules and regulations as shall be from time to time prescribed by the Commissioner of Internal Revenue, subject to the approval of the Secretary of the Treasury, and all locks and seals prescribed shall be provided by the Commissioner of Internal Revenue at the expense of the United States : Pro- vided further, That the tax imposed in section 3339 stamp tax for of the Revised Statutes shall be paid on all f er- u^orty pf^w mented liquor removed from a brewery to a bot- tling house by means of a pipe or conduit, at the time of such removal, by the cancellation and de- facement, by the collector of the district or his deputy, in the presence of the brewer, of the num- ber of stamps denoting the tax on the fermented liquor thus removed. The stamps thus canceled and defaced shall be disposed of and accounted for in the manner directed by the Commissioner of Internal Revenue, with the approval of the Secre- tary of the Treasury. And any violation of the rules and regulations hereafter prescribed by the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury, in pursu- ance of these provisions, shall be subject to the penalties above provided by this section. Every owner, agent, or superintendent of any brewery or bottling house who removes, or connives at the removal of, any fermented liquor through a pipe line or conduit, without payment of the tax thereon, or who attempts in any manner to defraud the 131 REVENUE ACT OF 1918 Tax on soft drinks Mineral and table waters Returns and information revenue as above, shall forfeit all the liquors made by and for him, and all the vessels, utensils, and apparatus used in making the same." Sec. 628. That there shall be levied, assessed, collected, and paid in lieu of the taxes imposed by sections 313 and 315 of the Revenue Act of 19 17 — ( a ) Upon all beverages derived wholly or in part from cereals or substitutes therefor, and containing less than one-half of one per centum of alcohol, sold by the manufacturer, producer, or importer, in bottles or other closed containers, a tax equivalent to 15 per centum of the price for w^hich so sold; and upon all unfermented grape juice, ginger ale, root beer, sarsaparilla, pop, artificial mineral waters (carbonated or not carbonated), other car- bonated waters or beverages, and other soft drinks, sold by the manufacturer, producer, or importer, in bottles or other closed containers, a tax equiva- lent to 10 per centum of the price for which so sold; and (b) Upon all natural mineral waters or table waters, sold by the producer, bottler, or importer thereof, in bottles or other closed containers, at over 10 cents per gallon, a tax of 2 cents per gallon. Sec. 629. That each manufacturer, producer, bottler, or importer of any of the articles enumer- ated in section 628 shall make monthly returns under oath in duplicate and pay the taxes imposed in respect to such articles by such section to the collector for the district in which is located the principal place of business, containing such infor- mation necessary for the assessment of the tax, and at such times and in such manner as the Commis- sioner, with the approval of the Secretary, may by regulation prescribe. 132 TAX ON CIGARS AND CIGARETTES The tax shall, without assessment by the Com- Tax due missioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of penalty 5 per centum, together with interest at the rate of I per centum for each full month, from the time when the tax became due. Sec. 6'?o. That on and after May i, iQiQ, there Tax on sales at 1 .1 t 1 • 1 1 11 T 1 • I ice-cream parlors shall be levied, assessed, collected, and paid a tax and soda fountains of I cent for each lo cents or fraction thereof of the amount paid to any person conducting a soda fountain, ice-cream parlor, or other similar place of business, for drinks commonly known as soft drinks, compounded or mixed at such place of business, or for ice cream, ice-cream sodas, sundaes, or other similar articles of food or drink, when any of the above are sold on or after such date for consumption in or in proximity to such place of business. Such tax shall be paid by the purchaser to the vendor at the time of the sale and shall be collected, returned, and paid to the United States by such vendor in the same manner as provided in section 502. Title VII. — Tax on Cigars, Tobacco, and Manufactures Thereof. Sec. 700. (a) That upon cigars and cigarettes Tax on cigars manufactured in or imported into the United States, and hereafter sold by the manufacturer or importer, or removed for consumption or sale, there shall be levied, collected, and paid under the provisions of existing law, in lieu of the internal- revenue taxes now imposed thereon by law, the fol- 133 and cigarettes REVENUE ACT OF 1918 Cigars Cig^arettes When retail price governs lowing taxes, to be paid by the manufacturer or importer thereof — On cigars of all descriptions made of tobacco, or any substitute therefor, and weighing not more than three pounds per thousand, $1.50 per thousand; On cigars made of tobacco, or any substitute therefor, and weighing more than three pounds per thousand, if manufactured or imported to re- tail at not more than 5 cents each, $4 per thousand; If manufactured or imported to retail at more than 5 cents each and not more than 8 cents each, $6 per thousand; If manufactured or imported to retail at more than 8 cents each and not more than 15 cents each, $9 per thousand; If manufactured or imported to retail at more than 15 cents each and not more than 20 cents each, $12 per thousand; If manufactured or imported to retail at more than 20 cents each, $15 per thousand; On cigarettes made of tobacco, or any substitute therefor, and weighing not more than three pounds per thousand, $3 per thousand; Weighing more than three pounds per thousand, $7.20 per thousand. (b) Whenever in this section reference is made to cigars manufactured or imported to retail at not over a certain price each, then in determining the tax to be paid regard shall be had to the ordi- nary retail price of a single cigar. 134 TAX ON TOBACCO AND SNUFF (c) The Commissioner may, by regulation, re- Labeu and stamps quire the manufacturer or importer to affix to each box, pacliage, or container a conspicuous label in- dicating the clause of this section under which the cigars therein contained have been tax-paid, which must correspond with the tax-paid stamp on such box or container. (d) Every manufacturer of cigarettes (includ- stamps ing small cigars weighing not more than three pounds per thousand) shall put up all the ciga- rettes and such small cigars that he manufactures or has manufactured for him, and sells or removes for consumption or sale, in packages or parcels containing five, eight, ten, twelve, fifteen, sixteen, twenty, twenty-four, forty, fifty, eighty, or one hun- dred cigarettes each, and shall securely affix to each of such packages or parcels a suitable stamp denoting the tax thereon and shall properly cancel the same prior to such sale or removal for con- sumption or sale under such regulations as the Commissioner, with the approval of the Secretary, shall prescribe; and all cigarettes imported from a foreign country shall be packed, stamped, and the stamps canceled in a like manner, in addition to the import stamp indicating inspection of the custom house before they are withdrawn there- from. Sec. 701. (a) That upon all tobacco and snuff Tax on tobacco manufactured in or imported into the United ""^ ^"""^ States, and hereafter sold by the manufacturer or importer, or removed for consumption or sale, there shall be levied, collected, and paid, in lieu of the internal-revenue taxes now imposed thereon by law, a tax of 18 cents per pound, to be paid by the manufacturer or importer thereof. 13s REVENUE ACT OF 1918 (b) Section 3362 of the Revised Statutes, as amended, is hereby amended to read as follows : Regulations for "Sec. 3362. All manufactured tobacco shall be and'^Lnuff"''*"" P^t up and prepared by the manufacturer for sale, or removal for sale or consumption, in packages of the following description and in no other manner: "All smoking tobacco, snuff, fine-cut chewing to- bacco, all cut and granulated tobacco, all shorts, the refuse of fine-cut chewing, which has passed through a riddle of thirty-six meshes to the square inch, and all refuse scraps, clippings, cuttings, and sweepings of tobacco, and all other kinds of to- bacco not otherwise provided for, in packages con- taining one-eighth of an ounce, three-eighths of an ounce, and further packages with a difference be- tween each package and the one next smaller of one-eighth of an ounce up to and including two ounces, and further packages with a difference be- tween each package and the one next smaller of one-fourth of an ounce up to and including four ounces, and packages of five ounces, six ounces, seven ounces, eight ounces, ten ounces, twelve ounces, fourteen ounces, and sixteen ounces : Pro- vided, That snuflf may, at the option of the manu- facturer, be put up in bladders and in jars contain- ing not exceeding twenty pounds. "All cavendish, plug, and twist tobacco, in wooden packages not exceeding two hundred pounds net weight. "And every such wooden package shall have printed or marked thereon the manufacturer's name and place of manufacture, the registered number of the manufactory, and the gross weight, the tare, and the net weight of the tobacco in each 136 TAX ON TOBACCO AND SNUFF package: Provided, That these limitations and descriptions of packages shall not apply to tobacco and snuff transported in bond for exportation and actually exported: And provided further, That perique tobacco, snuff flour, fine-cut shorts, the refuse of fine-cut chewing tobacco, refuse scraps, clippings, cuttings, and sweepings of tobacco, may be sold in bulk as material, and without the pay- ment of tax, by one manufacturer directly to another manufacturer, or for export, under such restrictions, rules, and regulations as the Commis- sioner of Internal Revenue may prescribe: And provided further, That wood, metal, paper, or other materials may be used separately or in com- bination for packing tobacco, snuff, and cigars, un- der such regulations as. the Commissioner of In- ternal Revenue may establish." Sec. 702. That upon all the articles enumer- Floor tax ated in section 700 or 701, which were manu- factured or imported, and removed from factory or customhouse on or prior to the date of the pas- sage of this Act, and upon which the tax imposed by existing law has been paid, and which are, on the day after the passage of this Act, held by any person and intended for sale, there shall be levied, assessed, collected, and paid a floor tax equal to the difference between (a) the tax imposed by this Act upon such articles according to the class in which they are placed by this title, and (b) the tax im- posed upon such articles by existing law other than section 403 of the Revenue Act of 1917. Sec. 703. That there shall be levied, collected. Tax on cigarette and paid, in lieu of the taxes imposed by section ^^^"^ ^ 404 of the Revenue Act of 1917, upon cigarette paper made up into packages, books, sets, or tubes, 137 Bond for cigarette manufacturers Repeal of section 35 of Act of Aug. 5, 1909 Amendment of Revised Statutes Regulations for dealers in leaf tobacco REVENUE ACT OF 1918 made up in or imported into the United States and hereafter sold by the manufacturer or importer to any person (other than to a manufacturer of ciga- rettes for use by him in the manufacture of ciga- rettes) the following taxes, to be paid by the manu- facturer or importer: On each package, book, or set, containing more than twenty-five but not more than fifty papers, 3^ cent; containing more than fifty but not more than one hundred papers, i cent; containing more than one hundred papers, ^ cent for each fifty papers or fractional part thereof ; and upon tubes, i cent for each fifty tubes or fractional part thereof. Every manufacturer of cigarettes purchasing any cigarette paper made up into tubes (a) shall give bond in an amount and with sureties satis- factory to the Commissioner that he will use such tubes in the manufacture of cigarettes or pay thereon a tax equivalent to the tax imposed by this section, and (b) shall keep such records and render under oath such returns as the Commissioner finds necessary to show the disposition of all tubes pur- chased or imported by such manufacturer of cigarettes. Sec. 704. That section 35 of the Act entitled "An Act to provide revenue, equalize duties and encourage the industries of the United States, and for other purposes," approved August 5, 1909, be, and is hereby, repealed, to take effect April i, 1919. That section 3360 of the Revised Statutes be, and is hereby, amended to read as follows: "Sec. 3360. (a) Every dealer in leaf tobacco shall file with the collector of the district in which his business is carried on, a statement in duplicate, 138 TAX ON TOBACCO AND SNUFF subscribed under oath, setting forth the place, and if in a city, the street and number of the street, where his business is to be carried on, and the exact location of each place where leaf tobacco is held by him on storage, and, whenever he adds to or discontinues any of his leaf tobacco storage places, he shall give immediate notice to the collector of the district in which he is registered. "Every such dealer shall give a bond with surety. Bond required satisfactory to, and to be approved by, the collector of the district, in such penal sum as the collector may require, not less than $500; and a new bond may be required in the discretion of the collector or under instructions of the Commissioner. "Every such dealer shall be assigned a number Dealer to be by the collector of the district, which number shall appear in every inventory, invoice and report rendered by the dealer, who shall also obtain cer- tificates from the collector of the district setting forth the place where his business is carried on and the places designated by the dealer as the places of storage of his tobacco, which certificates shall be posted conspicuously within the dealer's registered place of business, and within each designated place of storage. "(b) Every dealer in leaf tobacco shall make peaier to make and deliver to the collector of the district a true inventory of the quantity of the different kinds of tobacco held or owned, and where stored by him, on the first day of January of each year, or at the time of commencing and at the time of concluding business, if before or after the first day of January, such inventory to be made under oath and rendered in such form as may be prescribed by the Commis- sioner. 139 inventory REVENUE ACT OF 1918 Dealer to render invoices and keep records Monthly report of dealers in leaf tobacco Sales regulated "Every dealer in leaf tobacco shall render such invoices and keep such records as shall be pre- scribed by the Commissioner, and shall enter therein, day by day, and upon the same day on which the circumstance, thing or act to be re- corded is done or occurs, an accurate account of the number of hogsheads, tierces, cases and bales, and quantity of leaf tobacco contained therein, pur- chased or received by him, on assignment, consign- ment, for storage, by transfer or otherwise, and of whom purchased or received, and the number of hogsheads, tierces, cases and bales, and the quantity of leaf tobacco contained therein, sold by him, with the name and residence in each instance of the per- son to whom sold, and if shipped, to whom shipped, and to what district; such records shall be kept at his place of business at all times and preserved for a period of two years, and the same shall be open at all hours for the inspection of any internal- revenue officer or agent. "Every dealer in leaf tobacco on or before the tenth day of each month, shall furnish to the col- lector of the district a true and complete report of all purchases, receipts, sales and shipments of leaf tobacco made by him during the month next pre- ceding, which report shall be verified and rendered in such form as the Commissioner, with the ap- proval of the Secretary, shall prescribe. "(c) Sales or shipments of leaf tobacco by a dealer in leaf tobacco shall be in quantities of not less than a hogshead, tierce, case, or bale, except loose leaf tobacco comprising the breaks on ware- house floors, and except to a duly registered manu- facturer of cigars for use in his own manufactory exclusively. 140 TAX ON TOBACCO AND SNUFF "Dealers in leaf tobacco shall make shipments of shipments of leaf tobacco only to other dealers in leaf tobacco, '"' *°''""° to registered manufacturers of tobacco, snuff, cigars or cigarettes, or for export. "(d) Upon all leaf tobacco sold, removed or Additional tax tor shipped by any dealer in leaf tobacco in violation of the provisions of subdivision (c), or in respect to which no report has been made by such dealer in accordance with the provisions of subdivision (b), there shall be levied, assessed, collected and paid a tax equal to the tax then in force upon manu- factured tobacco, such tax to be assessed and col- lected in the same manner as the tax on manu- factured tobacco. "(e) Every dealer in leaf tobacco " ( I ) who neglects or refuses to furnish the state- violations ment, to give bond, to keep books, to file inventory or to render the invoices, returns or reports re- quired by the Commissioner, or to notify the collector of the district of additions to his places of storage ; or "(2) who ships or delivers leaf tobacco, except as herein provided ; or "(3) who fraudulently omits to account for to- bacco purchased, received, sold, or shipped; shall be fined not less than $100 or more than $500, Penalties or imprisoned not more than one year, or both. "(f) For the purposes of this section a farmer or grower of tobacco shall not be regarded as a dealer in leaf tobacco in respect to the leaf tobacco produced by him." 141 REVENUE ACT OF 1918 Tax on admissions Tax on persons admitted free or at reduced rates and exceptions Tax on theater tickets, etc. Title VIII. — Tax on Admissions and Dues. Sec. 800. (a) That from and after April i, 1919, there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 700 of the Revenue Act of 19 17 — ( 1 ) A tax of I cent for each 10 cents or fraction thereof of the amount paid for admission to any place on or after such date, including admission by season ticket or subscription, to be paid by the person paying for such admission; (2) In the case of persons (except bona fide em- ployees, municipal officers on official business, per- sons in the military or naval forces of the United States when in uniform, and children under twelve years of age) admitted free or at reduced rates to any place at a time when and under circumstances under which an admission charge is made to other persons, a tax of i cent for each 10 cents or fraction thereof of the price so charged to such other per- sons for the same or similar accommodations, to be paid by the person so admitted ; (3) Upon tickets or cards of admission to the- aters, operas, and other places of amusement, sold at news stands, hotels, and places other than the ticket offices of such theaters, operas, or other places of amusement, at not to exceed 50 cents in excess of the sum of the established price therefor at such ticket offices plus the amount of any tax imposed under paragraph (i), a tax equivalent to 5 per centum of the amount of such excess ; and if sold for more than 50 cents in excess of the sum of such established price plus the amount of any tax imposed under paragraph (i), a tax equivalent to 142 TAX ON ADMISSIONS AND DUES 50 per centum of the whole amount of such excess, such taxes to be returned and paid, in the manner provided in section 903, by the person selling such tickets ; (4) A tax equivalent to 50 per centum of the Tax on excess price of tickets sold amount for which the proprietors, managers, or employees of any opera house, theater, or other place of amusement sell or dispose of tickets or cards of admission in excess of the regular or estab- lished price or charge therefor, such tax to be re- turned and paid, in the manner provided in section 903, by the person selling such tickets; (0 In the case of persons having the permanent Tax on boxes and " f 1 < f t opera seats use of boxes or seats m an opera house or any place of amusement or a lease for the use of such box or seat in such opera house or place of amusement (in lieu of the tax imposed by paragraph ( i ) ) , a tax equivalent to 10 per centum of the amount for which a similar box or seat is sold for each per- formance or exhibition at which the box or seat is used or reserved by or for the lessee or holder, such tax to be paid by the lessee or holder; and (6) A tax of iJ/2 cents for each 10 cents or frac- Tax on ad. tion thereof of the amount paid for admission to cab^etsfe'tc?"*' any public performance for profit at any roof gar- den, cabaret, or other similar entertainment, to which the charge for admission is wholly or in part included in the price paid for refreshment, service, or merchandise; the amount paid for such admis- sion to be deemed to be 20 per centum of the amount paid for refreshment, service, and mer- chandise; such tax to be paid by the person paying for such refreshment, service, or merchandise. 143 missions Exemptions from admission tax "Admission*' includes Price and name of vendor to be shown on admission tickets Taxes on dues REVENUE ACT OF 1918 (b) No tax shall be levied under this title in respect to any admissions all the proceeds of which inure exclusively to the benefit of religious, educational, or charitable institutions, societies, or organizations, societies for the prevention of cruelty to children or animals, or exclusively to the benefit of organizations conducted for the sole purpose of maintaining symphony orchestras and receiving substantial support from voluntary con- tributions, none of the profits of which are dis- tributed to members of such organizations, or ex- clusively to the benefit of persons in the military or naval forces of the United States, or admissions to agricultural fairs none of the profits of which are distributed to stockholders or members of the association conducting the same. (c) The term "admission" as used in this title includes seats and tables, reserved or otherwise, and other similar accommodations, and the charges made therefor. (d) The price (exclusive of the tax to be paid by the person paying for admission) at which every admission ticket or card is sold shall be conspicu- ously and indelibly printed, stamped, or written on the face or back thereof, together with the name of the vendor if sold other than at the ticket office of the theater, opera, or other place of amusement. Whoever sells an admission ticket or card on which the name of the vendor and price is not so printed, stamped, or written, or at a price in excess of the price so printed, stamped, or written thereon, is guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $ioo. Sec. 8oi. That from and after April i, 1919, there shall be levied, assessed, collected, and paid, 144 TAX ON ADMISSIONS AND DUES in lieu of the taxes imposed by section 701 of the Revenue Act of 1917, a tax equivalent to 10 per centum of any amount paid on or after such date, for any period after such date, (a) as dues or mem- bership fees (where the dues or fees of an active resident annual member are in excess of $10 per year) to any social, athletic, or sporting club or organization; or (b) as initiation fees to such a club or organization, if such fees amount to more than $10, or if the dues or membership fees (not including initiation fees) of an active resident an- nual member are in excess of $10 per year; such taxes to be paid by the person paying such dues or fees : Provided, That there shall be exempted from Exemptions the provisions of this section all amounts paid as dues or fees to a fraternal society, order, or asso- ciation, operating under the lodge system. In the case of life memberships a life member shall pay annually, at the time for the payment of dues by active resident annual members, a tax equivalent to the tax upon the amount paid by such a member, but shall pay no tax upon the amount paid for life membership. Sec. 802. That every person (a) receiving any collection and payments for such admission, dues, or fees shall adm™sions*and°dues collect the amount of the tax imposed by section 800 or 801 from the person making such payments, or (b) admitting any person free to any place for admission to which a charge is made, shall collect the amount of the tax imposed by section 800 from the person so admitted. Every club or organiza- tion having life members, shall collect from such members the amount of the tax imposed by section 801. In all the above cases returns and payments of the amount so collected shall be made at the 145 REVENUE ACT OF 1918 same time and in the same manner as provided in section 502. Tax on articles sold or leased: Automobile trucks and wagons Automobiles and motorcycles Automobile accessories Musical instruments Sporting and athletic goods Title IX. — Excise Taxes. Sec. 900. That there shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, producer, or im- porter, a tax equivalent to the following per- centages of the price for which so sold or leased — ( 1 ) Automobile trucks and automobile wagons, (including tires, inner tubes, parts, and accessories therefor, sold on or in connection therewith or with the sale thereof), 3 per centum; (2) Other automobiles and motorcycles, (in- cluding tires, inner tubes, parts, and accessories therefor, sold on or in connection therewith or with the sale thereof), except tractors, 5 per centum; (3) Tires, inner tubes, parts, or accessories, for any of the articles enumerated in subdivision (i), or (2) sold to any person other than a manufacturer or producer of any of the articles enumerated in subdivision (i) or (2), 5 per centum; (4) Pianos, organs (other than pipe organs), piano players, graphophones, phonographs, talk- ing machines, music boxes, and records used in connection with any musical instrument, piano player, graphophone, phonograph, or talking ma- chine, 5 per centum ; (5) Tennis rackets, nets, racket covers and presses, skates, snowshoes, skis, toboggans, canoe paddles and cushions, polo mallets, baseball bats, gloves, masks, protectors, shoes and uniforms, foot- ball helmets, harness and goals, basket-ball goals 146 EXCISE TAXES— ARTICLES SOLD OR LEASED and uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fish- ing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games (except playing cards and chil- dren's toys and games), and all similar articles commonly or commercially known as sporting goods, lo per centum; (6) Chewing gum or substitutes therefor, 3 per chewing sum centum ; (7) Cameras, weighing not more than 100 cameras pounds, 10 per centum; (8) Photographic films and plates, other than photographic piates moving-picture films, 5 per centum ; ™^ '^'°* (9) Candy, 5 per centum; candy (10) Firearms, shells, and cartridges, except Firearms, sheiu those sold for the use of the United States, any "" State, Territory, or possession of the United States, any political subdivision thereof, the District of Columbia, or any foreign country while engaged against the German Government in the present war, 10 per centum; (11) Hunting and bowie knives, 10 per centum ; Hunting knives (12) Dirk knives, daggers, sword canes, stilet- Daggers, dirks, etc. tos, and brass or metallic knuckles, 100 per centum ; (13) Portable electric fans, 5 per centum; EUctric fans (14) Thermos and thermostatic bottles, carafes. Thermos containers jugs, or other thermostatic containers, 5 per centum ; 147 Pipes, cigar and cigarette holders Automatic slot machines Liveries Hunting and riding garments Furs Boats Soaps Computation of tax Tax in lieu of tax of Act of 1917 REVENUE ACT OF 1918 (15) Cigar or cigarette holders and pipes, com- posed wholly or in part of meerschaum or amber, humidors, and smoking stands, 10 per centum; (16) Automatic slot-device vending machines, 5 per centum, and automatic slot-device w^eighing machines, 10 per centum; if the manufacturer, producer, or importer of any such machine oper- ates it for profit, he shall pay a tax in respect to each such machine put into operation equivalent to 5 per centum of its fair market value in the case of a vending machine, and 10 per centum of its fair market value in the case of a weighing machine; (17) Liveries and livery boots and hats, 10 per centum ; (18) Hunting and shooting garments and riding habits, 10 per centum; (19) Articles made of fur on the hide or pelt, or of which any such fur is the component material of chief value, 10 per centum; (20) Yachts and motor boats not designed for trade, fishing, or national defense; and pleasure boats and pleasure canoes if sold for more than $15, 10 per centum; and (21) Toilet soaps and toilet soap powders, 3 per centum. If any manufacturer, producer, or importer of any of the articles enumerated in this section cus- tomarily sells such articles both at wholesale and at retail, the tax in the case of any article sold by him at retail shall be computed on the price for which like articles are sold by him at wholesale. The taxes imposed by this section shall, in the case of any article in respect to which a correspond- 148 EXCISE TAXES-ARTICLES SOLD OR LEASED ing tax is imposed by section 600 of the Revenue Act of 1917, be in lieu of such tax. Sec. 901. That if any person manufactures, Taxes based on fair J . ■ , _ , . market value when produces or imports any article enumerated in sec- price is less tion 900, or leases or licenses for exhibition any positive motion-picture film containing a picture ready for projection, and, whether through any agreement, arrangement, or understanding, or otherwise, sells, leases or licenses such article at less than the fair market price obtainable therefor, either (a) in such manner as directly or indirectly to benefit such person or any person directly or indirectly interested in the business of such person, or (b) with intent to cause such benefit, the amount for which such article is sold, leased or licensed shall be taken to be the amount which would have been received from the sale, lease or license of such article if sold, leased or licensed at the fair market price. Sec. 902. That there shall be levied, assessed, Tax on sale ot ^ ' . . ' paintings and collected, and paid upon sculpture, paintings, sculpture statuary, art porcelains, and bronzes, sold by any person other than the artist, a tax equivalent to 10 per centum of the price for which so sold. This section shall not apply to the sale of any such arti- cle to an educational institution or public art museum. Sec. 903. That every person liable for any tax Returns imposed by section 900, 902, or 906, shall make monthly returns under oath in duplicate and pay the taxes imposed by such sections to the collector for the district in which is located the principal place of business. Such returns shall contain such information and be made at such times and in such 149 Tax due Penalty for delay Tax on excess prices Carpets and rugs Picture frames Trunks Valises, etc. Purses, handbags Portable lighting fixtures REVENUE ACT OF 1918 manner as the Commissioner, with the approval of the Secretary, may by regulations prescribe. The tax shall, without assessment by the Com- missioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of 5 per centum, together with interest at the rate of I per centum for each full month, from the time when the tax became due. Sec. 904. (a) That on and after May i, 1919, there shall be levied, assessed, collected, and paid a tax equivalent to 10 per centum of so much of the amount paid for any of the following articles as is in excess of the price hereinafter specified as to each such article, when such article is sold by or for a dealer or his estate on or after such date for consumption or use — (i) Carpets and rugs, including fiber, except imported and American rugs made principally of wool, on the amount in excess of $5 per square yard; (2) Picture frames, on the amount in excess of $10 each; (3) Trunks, on the amount in excess of $50 each; (4) Valises, traveling bags, suit cases, hat boxes used by travelers, and fitted toilet cases, on the amount in excess of $25 each ; (5) I'urses, pocketbooks, shopping and hand- bags, on the amount in excess of $7.50 each; (6) Portable lighting fixtures, including lamps of all kinds and lamp shades, on the amount in excess of $25 each; ISO EXCISE TAXES-TAX ON EXCESS PRICES PAID (7) Umbrellas, parasols, and sun shades, on the umbreiias, parasou amount in excess of $4 each ; (8) Fans, on the amount in excess of $1 each; Fans (9) House or smoking coats or jackets, and bath House coats, or lounging robes, on the amount in excess of $7.50 each; (10) Men's waistcoats, sold separately from waistcoats suits, on the amount in excess of $5 each ; (11) Women's and misses' hats, bonnets, and Hats (women's) hoods, on the amount in excess of $15 each; (12) Men's and boys' hats, on the amount in Hats (men's) excess of $5 each ; (13) Men's and boys' caps, on the amount in caps excess of $2 each ; (14) Men's, women's, misses', and boys' boots, shoes and sUppers shoes, pumps, and slippers, not including shoes or appliances made to order for any person having a crippled or deformed foot or ankle, on the amount . in excess of $10 per pair; (15) Men's and boys' neckties and neckwear, on Neckwear the amount in excess of $2 each ; (16) Men's and boys' silk stockings or hose, on sak stockings the amount in excess of $1 per pair; (mens) (17) Women's and misses' silk stockings or siik stockings , - . f. . , (women's) hose, on the amount m excess of $2 per pair; (18) Men's shirts, on the amount in excess of shirts (men's) $3 each; (19) Men's, women's, misses', and boys' pa- Nightdothes and jamas, night gowns, and underwear, on the amount in excess of $5 each ; and 151 Kimonofl, petti- coats» waists Exceptions When and by whom tax paid Tax on sale of jewelry Returns and payment of tax REVENUE ACT OF 1918 (20) Kimonos, petticoats, and waists, on the amount in excess of $15 each. (b) The tax imposed by this section shall not apply (i) to any article enumerated in paragraphs (2) to (8), both inclusive, of subdivision (a), if such article is made of or ornamented, mounted, or fitted with, precious metals or imitations thereof or ivory, or (2) to any article made of fur on the hide or pelt, or of which any such fur is the com- ponent material of chief value, or to (3) any article enumerated in subdivision (17) or (18) of section 900. (c) The taxes imposed by this section shall be paid by the purchaser to the vendor at the time of the sale and shall be collected, returned, and paid to the United States by such vendor in the same manner as provided in section 502. Sec. 905. That on and after April i, 1919, there shall be levied, assessed, collected, and paid (in lieu of the tax imposed by subdivision (e) of section 600 of the Revenue Act of 1917) upon all articles commonly or commercially known as jewelry, whether real or imitation ; pearls, precious and semi-precious stones, and imitations thereof; articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not including surgical instruments); watches; clocks; opera glasses; lorgnettes; marine glasses; field glasses ; and binoculars ; upon any of the above when sold by or for a dealer or his estate for con- sumption or use, a tax equivalent to 5 per centum of the price for which so sold. Every person selling any of the articles enumer- ated in this section shall make returns under oath 152 EXCISE TAXES-TAX ON EXCESS PRICES PAID in duplicate (monthly or quarterly as the Commis- sioner, with the approval of the Secretary, may prescribe) and pay the taxes imposed in respect to such articles by this section to the collector for the district in which is located the principal place of business. Such returns shall contain such in- formation and be jnade at such times and in such manner as the Commissioner, with the approval of the Secretary, may by regulations prescribe. The tax shall, without assessment by the Com- Tax due missioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the tax is not paid when due, there shall be added as part of the tax a penalty of penalty 5 per centum, together with interest at the rate of I per centum for each full month, from the time when the tax became due. Sec. 906. That on and after the ist day of May, Tax on motion- 191 9, any person engaged in the business of leasing •""*"'■" or licensing for exhibition positive motion-picture films containing pictures ready for projection shall pay monthly an excise tax in respect to carrying on such business equal to 5 per centum of the total rentals earned from each such lease or license dur- ing the preceding month. If a person owning such a film exhibits it for profit he shall pay a tax equivalent to 5 per centum of the fair rental or license value of such film at the time and place where and for the period during which exhibited. If any such person has, prior to December 6, 1918, made a bona fide contract with any person for the lease or licensing, after the tax imposed by this section takes effect, of such a film for exhibition for profit, and if such contract does not permit the adding of the whole of the tax imposed by this 153 Tax on toilet articles and proprietary medicines Perfumes, extracts* and other toilet goods Proprietary medicines REVENUE ACT OF 1918 section to the amount to be paid under such con- tract, then the lessee or licensee shall, in lieu of the lessor or licensor, pay so much of such tax as is not so permitted to be added to the contract price. The tax imposed by this section shall be in lieu of the tax imposed by subdivisions (c) and (d) of section 600 of the Revenue Acl; of 19 17. Sec. 907. (a) That on and after May i, 19 19, there shall be levied, assessed, collected and paid (in lieu of the taxes imposed by subdivisions (g) and (h) of section 600 of the Revenue Act of 1917) a tax of I cent for each 25 cents or fraction thereof of the amount paid for any of the following articles when sold by or for a dealer or his estate on or after such date for consumption or use: (i) Perfumes, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair dressings, hair restoratives, hair dyes, tooth and mouth washes, dentifrices, tooth pastes, aro- matic cachous, toilet powders (other than soap powders), or any similar substance, article, or preparation by whatsoever name known or dis- tinguished, any of the above which are used or applied or intended to be used or applied for toilet purposes; (2) Pills, tablets, powders, tinctures, troches or lozenges, sirups, medicinal cordials or bitters, anodynes, tonics, plasters, liniments, salves, oint- ments, pastes, drops, waters (except those taxed under section 628 of this Act), essences, spirits, oils, and other medicinal preparations, compounds, or compositions (not including serums and anti- toxins), upon the amount paid for any of the above as to which the manufacturer or producer claims to have any private formula, secret, or occult art for 154 SPECIAL TAXES-CAPITAL STOCK TAX making or preparing the same, or has or claims to have any exclusive right or title to the making or preparing the same, or which are prepared, ut- tered, vended, or exposed for sale under any letters patent, or trade-mark, or which (if prepared by any formula, published or unpublished) are held out or recommended to the public by the makers, vendors, or proprietors thereof as proprietary medicines or medicinal proprietary articles or preparations, or as remedies or specifics for any disease, diseases, or affection whatever afifecting the human or animal body: Provided, That the pro- Exceptions visions of this section shall not apply to the sale of vaccines and bacterines which are not advertised to the general lay public, nor to the sale by a phy- sician in personal attendance upon a patient of medicinal preparations not so advertised. (b) The taxes imposed by this section shall be Time and place of collected by whichever of the following methods '""""™* ° '"" the Commissioner may deem expedient: (i) by stamp affixed to such article by the vendor, the cost of which shall be reimbursed to the vendor by the purchaser; or (2) by payment to the vendor by the purchaser at the time of the sale, the taxes so col- lected being returned and paid to the United States by such vendor in the same manner as provided in section 502. Title X. — Special Taxes. Sec. iooo. (a) That on and after July i, 1918, capital stocit tax of ». /-.i i • Jl_i1 n ^ ij*-- domestic corporation m lieu of the tax imposed by the first subdivision of section 407 of the Revenue Act of 1916 — (i) Every domestic corporation shall pay an- nually a special excise tax with respect to carrying on or doing business, equivalent to $1 for each 155 Foreign corporation Exemptions allowed insurance companies Exemption to corporations REVENUE ACT OF 1918 $i,ooo of SO much of the fair average value of its capital stock for the preceding year ending June thirtieth as is in excess of $5,000. In estimating the value of capital stock the surplus and undi- vided profits shall be included; (2) Every foreign corporation shall pay an- nually a special excise tax with respect to carrying on or doing business in the United States, equiva- lent to $1 for each $1,000 of the average amount of capital employed in the transaction of its business in the United States during the preceding year ending June thirtieth. (b) In computing the tax in the case of insur- ance companies such deposits and reserve funds as they are required by law^ or contract to maintain or hold for the protection of or payment to or appor- tionment among policyholders shall not be in- cluded. (c) The taxes imposed by this section shall not apply in any year to any corporation w^hich was not engaged in business (or in the case of a foreign corporation not engaged in business in the United States) during the preceding year ending June 30, nor to any corporation enumerated in section 231. The taxes imposed by this section shall apply to mutual insurance companies, and in the case of every such domestic company the tax shall be equivalent to $1 for each $1,000 of the excess over $5,000 of the sum of its surplus or contingent re- serves maintained for the general use of the busi- ness and any reserves the net additions to which are included in net income under the provisions of Title II, as of the close of the preceding accounting period used by such company for purposes of mak- ing its income tax return : Provided, That in the 156 SPECIAL TAXES-OCCUPATIONAL TAX case of a foreign mutual insurance company the tax shall be equivalent to $i for each $i,ooo of the same proportion of the sum of such surplus and reserves, which the reserve fund upon business transacted within the United States is of the total reserve upon all business transacted, as of the close of the preceding accounting period used by such company for purposes of making its income tax return. (d) Section 257 shall apply to all returns filed Returns with the Commissioner for purposes of the tax im- posed by this section. Sec. iooi. That on and after January i, 1919, occupational taxes: there shall be levied, collected, and paid annually, the following special taxes — ( 1 ) Brokers shall pay $50. Every person whose Broker, business it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, coined money, bank notes, promissory notes, other securities, prod- uce or merchandise, for others, shall be regarded as a broker. If a broker is a member of a stock exchange, or if he is a member of any produce exchange, board of trade, or similar organization, where produce or merchandise is sold, he shall pay an additional amount as follows : If the average value, during the preceding year ending June 30, of a seat or membership in such exchange or or- ganization was $2,000 or more but not more than $5,000, $100; if such value was more than $5,000, $150. (2) Pawnbrokers shall pay $100. Every per- Pawnbrokers son whose business or occupation it is to take or receive, by way of pledge, pawn, or exchange, any goods, wares, or merchandise, or any kind of per- sonal property whatever, as security for the repay- 157 Customhouse brokers REVENUE ACT OF 1918 ment of money loaned thereon, shall be regarded as a pawnbroker. shipbrokers (3) Shlpbrokers shall pay $50. Every person whose business it is as a broker to negotiate freights and other business for the owners of vessels, or for the shippers or consignors or consignees of freight carried by vessels, shall be regarded as a ship- broker. (4) Customhouse brokers shall pay $50. Every person whose occupation it is, as the agent of oth- ers, to arrange entries and other customhouse papers, or transact business at any port of entry re- lating to the importation or exportation of goods, wares, or merchandise, shall be regarded as a cus- tomhouse broker. Owners of theaters { ^) Proprlctors of thcatcrs, muscums, and con- cert halls, where a charge for admission is made, having a seating capacity of not more than two hundred and fifty, shall pay $50; having a seating capacity of more than two hundred and fifty and not exceeding five hundred, shall pay $100; having a seating capacity exceeding five hundred and not exceeding eight hundred, shall pay $150; having a seating capacity of more than eight hundred, shall pay $200. Every edifice used for the purpose of dramatic or operatic or other representations, plays, or performances, for admission to which entrance money is received, not including halls or armories rented or used occasionally for concerts or theatrical representations, and not including edifices owned by religious, educational or chari- table institutions, societies or organizations where all the proceeds from admissions inure exclusively to the benefit of such institutions, societies or or- ganizations or exclusively to the benefit of persons 158 SPECIAL TAXES-OCCUPATIONAL TAX in the military or naval forces of the United States, shall be regarded as a theater : Provided, That in cities, towns, or villages of five thousand inhabi- tants or less the amount of such payment shall be one-half of that above stated : Provided further, That whenever any such edifice is under lease at the time the tax is due, the tax shall be paid by the lessee, unless otherwise stipulated between the par- ties to the lease. (6) The proprietor or proprietors of circuses circus owners shall pay $ioo. Every building, space, tent, or area, where feats of horsemanship or acrobatic sports or theatrical performances not otherwise provided for in this section are exhibited shall be regarded as a circus : Provided, That no special tax paid in one State, Territory, or the District of Columbia shall exempt exhibitions from the tax in another State, Territory, or the District of Colum- bia, and but one special tax shall be imposed for exhibitions within any one State, Territory, or District. (7) Proprietors or agents of all other public ex- Pubuc exhibition hibitions or shows for money not enumerated in °'™^" this section shall pay $15 : Provided, That a spe- cial tax paid in one State, Territory, or the District of Columbia shall not exempt exhibitions from the tax in another State, Territory, or the District of Columbia, and but one special tax shall be required for exhibitions within any one State, Territory, or the District of Columbia : Provided further, That Exceptions this paragraph shall not apply to Chautauquas, lecture lyceums, agricultural or industrial fairs, or exhibitions held under the auspices of religious or charitable associations: Provided further. That an aggregation of entertainments, known as a street 159 Bowling alley and billiard room owners Shooting gallery owners Riding academy owners Automobile renting Brewers, distillers, liquor dealers, and manufacturers of stills REVENUE ACT OF 1918 fair, shall not pay a larger tax than $ioo in any State, Territory, or in the District of Columbia. (8) Proprietors of bowling alleys and billiard rooms shall pay $io for each alley or table. Every building or place where bowls are thrown or where games of billiards or pool are played, except in private homes, shall be regarded as a bowling alley or a billiard room, respectively. (9) Proprietors of shooting galleries shall pay $20. Every building, space, tent, or area, where a charge is made for the discharge of firearms at any form of target shall be regarded as- a shooting gallery. (10) Proprietors of riding academies shall pay $100. Every building, space, tent, or area, where a charge is made for instruction in horsemanship or for facilities for the practice of horsemanship shall be regarded as a riding academy. (11) Persons carrying on the business of operat- ing or renting passenger automobiles for hire shall pay $10 for each such automobile having a seating capacity of more than two and not more than seven, and $20 for each such automobile having a seating capacity of more than seven. (12) Every person carrying on the business of a brewer, distiller, wholesale liquor dealer, retail liquor dealer, wholesale dealer in malt liquor, re- tail dealer in malt liquor, or manufacturer of stills, as defined in section 3244 as amended and section 3247 of the Revised Statutes, in any State, Terri- tory, or District of the United States contrary to the laws of such State, Territory, or District, or in any place therein in which carrying on such busi- ness is prohibited by local or municipal law, shall 160 Tax does not exempt from State requirements SPECIAL TAXES— TOBACCO MANUFACTURERS pay, in addition to all other taxes, special or other- wise, imposed by existing law or by this Act, $i,ooo. The payment of the tax imposed by this subdi- vision shall not be held to exempt any person from any penalty or punishment provided for by the laws of any State, Territory, or District for carry- ing on such business in such State, Territory, or District, or in any manner to authorize the com- mencement or continuance of such business con- trary to the laws of such State, Territory, or Dis- trict, or in places prohibited by local or municipal law. The taxes imposed by this section shall, in the Tax is m ueu of case of persons upon whom a corresponding tax is *'"'" °' ■*" °' ^^'^ imposed by section 407 of the Revenue Act of 191 6, be in lieu of such tax. Sec. 1002. That on and after January i, 1919, Tax on manutac- there shall be levied, collected, and paid annually, Xlll lUtlZl'ttes in lieu of the taxes imposed by section 408 of the Revenue Act of 1916, the following special taxes, the amount of such taxes to be computed on the basis of the sales for the preceding year ending June 30— Manufacturers of tobacco whose annual sales do not exceed fifty thousand pounds shall each pay $6 ; Manufacturers of tobacco whose annual sales exceed fifty thousand and do not exceed one hun- dred thousand pounds shall each pay $12; Manufacturers of tobacco whose annual sales exceed one hundred thousand and do not exceed two hundred thousand pounds shall each pay $24; Manufacturers of tobacco whose annual sales exceed two hundred thousand pounds shall each 161 Rates of tax on sales of tobacco Rates of tax on sales of cigars Rates of tax on sales of cigarettes Tax on each class of articles made Tax on yacht and boat users REVENUE ACT OF 1918 pay $24, and at the rate of 16 cents per thousand pounds, or fraction thereof, in respect to the excess over two hundred thousand pounds ; Manufacturers of cigars whose annual sales do not exceed fifty thousand cigars shall each pay $4; Manufacturers of cigars whose annual sales ex- ceed fifty thousand and do not exceed one hundred thousand cigars shall each pay $6; Manufacturers of cigars whose annual sales ex- ceed one hundred thousand and do not exceed two hundred thousand cigars shall each pay $12; Manufacturers of cigars whose annual sales ex- ceed two hundred thousand and do not exceed four hundred thousand cigars shall each pay $24; Manufacturers of cigars whose annual sales ex- ceed four hundred thousand cigars shall each pay $24, and at the rate of 10 cents per thousand cigars, or fraction thereof, in respect to the excess over four hundred thousand cigars ; Manufacturers of cigarettes, including small cigars weighing not more than three pounds per thousand, shall each pay at the rate of 6 cents for every ten thousand cigarettes, or fraction thereof. In arriving at the amount of special tax to be paid under this section, and in the levy and collec- tion of such tax, each person engaged in the manu- facture of more than one of the classes of articles specified in this section shall be considered and deemed a manufacturer of each class separately. Sec. 1003. That sixty days after the passage of this Act, and thereafter on July i in each year, and also at the time of the original purchase of a new boat by a user, if on any other date than July i, 162 SPECIAL TAXES-BOATS AND YACHTS there shall be levied, assessed, collected, and paid in lieu of the tax imposed by section 603 of the Revenue Act of 19 17, upon the use of yachts, plea- sure boats, power boats, and sailing boats, of over five net tons, and motor boats with fixed engines, not used exclusively for trade, fishing or national defense, or not built according to plans and speci- fications approved by the Navy Department, a spe- cial excise tax to be based on each yacht or boat, at rates as follows: Yachts, pleasure boats, power boats, motor boats with fixed engines, and sailing boats, of over five net tons, length not over fifty feet, $1 for each foot; length over fifty feet and not over one hundred feet, $2 for each foot; length over one hundred feet, $4 for each foot; motor boats of not over five net tons with fixed engines, $10. In determining the length of such yachts, plea- Rate based upon sure boats, power boats, motor boats with fixed en- gines, and sailing boats, the measurement of over- all length shall govern. In the case of a tax imposed at the time of the Apportionment of original purchase of a new boat on any other date '"' ^ ''"' ° ''"' than July i, and in the case of the tax taking effect sixty days after the passage of this Act, the amount to be paid shall be the same number of twelfths of the amount of the tax as the number of calendar months (including the month of sale, or the month in which is included the sixty-first day after the passage of this Act, as the case may be) remaining prior to the following July i. If the tax imposed by section 603 of the Revenue credit for tax Act of 1917, for the fiscal year ending June 30, fiscafyear'Lding 1919, has been paid in respect to the use of any J"°= ^o, 1919 boat, the amount so paid shall under such regula- tions as the Commissioner, with the approval of the 163 length overall When receipts for tax are to be posted Credit for tax paid under Act of 1916 Penalties REVENUE ACT OF 1918 Secretary, may prescribe, be credited upon the first tax due under this section in respect to the use of such boat, or be refunded to the person paying the first tax imposed by this section in respect to the use of such boat. Sec. 1004. That if the tax imposed by section 407 or 408 of the Revenue Act of 1916, for the fiscal year ending June 30, 191 9, has been paid by any person subject to the corresponding tax im- posed by this title, collectors may issue a receipt in lieu of special tax stamp for the amount by which the tax under this title is in excess of that paid or payable and evidenced by stamp under the Rev- enue Act of 1916. Such receipt shall be posted as in the case of the special tax stamp, as provided by law, and with it, within the place of business of the taxpayer. If the corresponding tax imposed by section 407 of the Revenue Act of 191 6 was not payable by stamp, the amount paid under such section for any period for which a tax is also imposed by this title may be credited against the tax imposed by this title. Sec. 1005. That any person who carries on any business or occupation for which a special tax is imposed by sections 1000, looi, or 1002, without having paid the special tax therein provided, shall, besides being liable for the payment of such special tax, be subject to a penalty of not more than $1,000 or to imprisonment for not more than one year, or both. Sec. 1006. That section i of the Act of Congress approved December 17, 1914, is hereby amended to read as follows : 164 SPECIAL TAXES— DEALINGS IN OPIUM, ETC. "Section i. That on or before July i of each year every person who imports, manufactures, pro- duces, compounds, sells, deals in, dispenses, or gives away opium or coca leaves, or any compound, manufacture, salt, derivative, or preparation thereof, shall register with the collector of internal revenue of the district his name or style, place of business and place or places where such business is to be carried on, and pay the special taxes herein- after provided; "Every person who on January i, 1919, is en- Tax due gaged in any of the activities above enumerated, or who between such date and the passage of this Act first engages in any of such activities, shall within 30 days after the passage of this Act make like registration, and shall pay the proportionate part of the tax for the period ending June 30, 1919 ; and "Every person who first engages in any of such activities after the passage of this Act shall imme- diately make like registration and pay the propor- tionate part of the tax for the period ending on the following June 30th ; "Importers, manufacturers, producers, or com- pounders, $24 per annum; wholesale dealers, $12 per annum; retail dealers, $6 per annum; physi- cians, dentists, veterinary surgeons, and other prac- titioners lawfully entitled to distribute, dispense, give away, or administer any of the aforesaid drugs to patients upon whom they in the course of their professional practice are in attendance, shall pay $3 per annum. "Every person who imports, manufactures, com- pounds, or otherwise produces for sale or distribu- tion any of the aforesaid drugs shall be deemed to be an importer, manufacturer, or producer. 165 Tax on manufacture and sale of opium, coca leaves and compounds Registration required Rates of tax Importer, manu- facturer, producer defined REVENUE ACT OF 1918 Wholesale dealer Retail dealer Must pay tax and register before dealing in "Person" defined "Every person who sells or offers for sale any of said drugs in the original stamped packages, as hereinafter provided, shall be deemed a wholesale dealer. "Every person who sells or dispenses from orig- inal stamped packages, as hereinafter provided, shall be deemed a retail dealer: Provided, That the office, or if none, the residence, of any person shall be considered for the purpose of this Act his place of business ; but no employee of any person who has registered and paid special tax as herein required, acting within the scope of his employ- ment, shall be required to register and pay special tax provided by this section: Provided further, That officials of the United States, Territorial, Dis- trict of Columbia, or insular possessions. State or municipal governments, who in the exercise of their official duties engage in any of the business herein described, shall not be required to register, nor pay special tax, nor stamp the aforesaid drugs as hereinafter prescribed, but their right to this exemption shall be evidenced in such manner as the Commissioner of Internal Revenue, with the ap- proval of the Secretary of the Treasury, may by regulations prescribe. "It shall be unlawful for any person required to register under the provisions of this Act to import, manufacture, produce, compound, sell, deal in, dispense, distribute, administer, or give away any of the aforesaid drugs without having registered and paid the special tax as imposed by this section. "That the word 'person' as used in this Act shall be construed to mean and include a partnership, association, company, or corporation, as well as a natural person; and all provisions of existing law i66 Stamp tax tity sold of coca leaves compounds on quan- opium» and SPECIAL TAXES-DEALINGS IN OPIUM, ETC. relating to special taxes, as far as necessary, are hereby extended and made applicable to this sec- tion. "That there shall be levied, assessed, collected, and paid upon opium, coca leaves, any compound, salt, derivative, or preparation thereof, produced m or imported into the United States, and sold, or removed for consumption or sale, an internal- revenue tax at the rate of i cent per ounce, and any Rate of tax fraction of an ounce in a package shall be taxed as an ounce, such tax to be paid by the importer, manufacturer, producer, or compounder thereof, and to be represented by appropriate stamps, to be provided by the Commissioner of Internal Rev- enue, w^ith the approval of the Secretary of the Treasury; and the stamps herein provided shall be so affixed to the bottle or other container as to se- curely seal the stopper, covering, or wrapper thereof. "The tax imposed by this section shall be in addi- Tax is in addition tion to any import duty imposed on the aforesaid *° ""''°"'* ^"*'' drugs. "It shall be unlawful for any person to purchase, sell, dispense, or distribute any of the aforesaid drugs except in the original stamped package or from the original stamped package; and the ab- sence of appropriate tax-paid stamps from any of the aforesaid drugs shall be prima facie evidence of a violation of this section by the person in whose possession same may be found; and the possession of any original stamped package containing any of the aforesaid drugs by any person who has not registered and paid special taxes as required by this section shall be prima facie evidence of liability to such special tax: Provided, That the provisions of 167 Regulation of traffic in opium, coca leaves, etc. REVENUE ACT OF 1918 this paragraph shall not apply to any person hav- ing in his or her possession any of the aforesaid drugs which have been obtained from a registered dealer in pursuance of a prescription, written for legitimate medical uses, issued by a physician, den- tist, veterinary surgeon, or other practitioner regis- tered under this Act; and where the bottle or other container in which such drug may be put up by the dealer upon said prescription bears the name and registry number of the druggist, serial number of prescription, name and address of the patient, and name, address, and registry number of the person writing said prescription; or to the dispensing, or administration, or giving away of any of the afore- said drugs to a patient by a registered physician, dentist, veterinary surgeon, or other practitioner in the course of his professional practice, and where said drugs are dispensed or administered to the pa- tient for legitimate medical purposes, and the record kept as required by this Act of the drugs so dispensed, administered, distributed, or given away. Laws relating to "And all the pTovisions of existing laws relating stamp, applicable {q f^g cngravlng, Issuance, sale, accountability, can- cellation, and destruction of tax-paid stamps pro- vided for in the internal-revenue laws are, in so far as necessary, hereby extended and made to apply to stamps provided by this section. Unstamped packages "That all unstampcd packages of the aforesaid subject to seizure (jfugs found in thc posscssion of any person, except as herein provided, shall be subject to seizure and forfeiture, and all the provisions of existing inter- nal-revenue laws relating to searches, seizures, and forfeitures of unstamped articles are hereby ex- tended to and made to apply to the articles taxed i68 SPECIAL TAXES— DEALINGS IN OPIUM, ETC. under this Act and the persons upon whom these taxes are imposed. "Importers, manufacturers, and wholesale deal- Returns and records ers shall keep such books and records and render such monthly returns in relation to the transactions in the aforesaid drugs as the Commissioner of In- ternal Revenue, with the approval of the Secretary of the Treasury, may by regulations require. "The Commissioner of Internal Revenue, with Regulations by the approval of the Secretary of the Treasury, shall Commissioner make all needful rules and regulations for carrying the provisions of this Act into effect." Sec. 1007. That Section 6 of such Act of De- cember 17, 1914, is hereby amended to read as fol- lows: "Sec. 6. That the provisions of this Act shall Regulations and not be construed to apply to the manufacture, sale, "^"""^^ required distribution, giving away, dispensing, or possession of preparations and remedies which do not contain more than two grains of opium, or more than one- fourth of a grain of morphine, or more than one- eighth of a grain of heroin, or more than one grain of codeine, or any salt or derivative of any of them in one fluid ounce, or, if a solid or semi-solid prepa- ration, in one avoirdupois ounce; or to liniments, ointments, or other preparations which are pre- pared for external use only, except liniments, oint- ments, and other preparations which contain co- caine or any of its salts or alpha or beta eucaine or any of their salts or any synthetic substitute for them : Provided^ That such remedies and prepa- rations are manufactured, sold, distributed, given away, dispensed, or possessed as medicines and not for the purpose of evading the intentions and pro- 169 REVENUE ACT OF 1918 visions of this Act: Provided further, That any manufacturer, producer, compounder, or vendor (including dispensing physicians) of the prepara- tions and remedies mentioned in this section shall keep a record of all sales, exchanges, or gifts of such preparations and remedies in such manner as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall direct. Such record shall be preserved for a period of two years in such a way as to be readily acces- sible to inspection by any officer, agent, or em- ployee of the Treasury Department duly author- ized for that purpose, and the State, Territorial, District, municipal, and insular officers named in section 5 of this Act, and every such person so pos- sessing or disposing of such preparations and reme- dies shall register as required in Section i of this Act and, if he is not paying a tax under this Act, he shall pay a special tax of one dollar for each year, or fractional part thereof, in which he is engaged in such occupation, to the collector of in- ternal revenue of the district in which he carries on such occupation as provided in this Act. The pro- visions of this Act as amended shall not apply to decocainized coca leaves or preparations made therefrom, or to other preparations of coca leaves which do not contain cocaine." Provision for ^EC. 1008. That all oplum, its salts, derivatives, drogV'sfized ^^^ compounds, and coca leaves, salts, derivatives, and compounds thereof, which may now be under seizure or which may hereafter be seized by the United States Government from any person or per- sons charged with any violation of the Act of Octo- ber I, 1890, as amended by the Acts of March 3, 1897, February 9, 1909, and January 17, 1914, or 170 SPECIAL TAXES— DEALINGS IN OPIUM, ETC. the Act of December 17, 1914, shall upon convic- tion of the person or persons from whom seized be confiscated by and forfeited to the United States ; and the Secretary is hereby authorized to deliver for medical or scientific purposes to any depart- ment, bureau, or other agency of the United States Government, upon proper application therefor under such regulation as may be prescribed by the Commissioner, with the approval of the Secretary, any of the drugs so seized, confiscated, and for- feited to the United States. The provisions of this section shall also apply to any of the aforesaid drugs seized or coming into the possession of the United States in the enforce- ment of any of the above-mentioned Acts where the owner or owners thereof are unknown. None of the aforesaid drugs coming into possession of the United States under the operation of said Acts, or the provisions of this section, shall be destroyed without certification by a committee appointed by the Commissioner, with the approval of the Secre- tary, that they are of no value for medical or scien- tific purposes. Sec. 1009. That the Act approved October 22, Assessment and 1914, entitled "An Act to increase the internal rev- ""^'=**°" "' '-'^ enue, and for other purposes," and the joint resolu- tion approved December 17, 191 5, entitled "Joint Administration resolution extending the provisions of the Act en- Acts"ryaLecr"°"^ titled 'An Act to increase the internal revenue, and for other purposes,' approved October twenty-sec- ond, nineteen hundred and fourteen, to December thirty-first, nineteen hundred and sixteen," are hereby repealed, except that the provisions of such Act shall remain in force for the assessment and collection of all special taxes imposed by sections 3 171 pro- REVENUE ACT OF 1918 and 4 thereof, or by such sections as extended by such joint resolution, for any year or part thereof ending prior to January i, 1917, and of all other taxes imposed by such Act, or by such Act as so extended, accrued prior to September 8, 1916, and for the imposition and collection of all penalties or forfeitures which have accrued or may accrue in relation to any of such taxes. Stamp tax on documents Exemptions from stamp tax Title XI. — Stamp Taxes. Sec. 1 100. That on and after April i, 1919, there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or cer- tificates of stock and of indebtedness, and other documents, instruments, matters, and things men- tioned and described in Schedule A of this title, or for or in respect of the vellum, parchment, or paper upon which such instruments, matters, or things, or any of them, are written or printed, by any person who makes, signs, issues, sells, removes, consigns, or ships the same, or for whose use or benefit the same are made, signed, issued, sold, re- moved, consigned, or shipped, the several taxes specified in such schedule. The taxes imposed by this section shall, in the case of any article upon which a corresponding stamp tax is now imposed by law, be in lieu of such tax. Sec. iioi. That there shall not be taxed under this title any bond, note, or other instrument, issued by the United States, or by any foreign Govern- ment, or by any State, Territory, or the District of Columbia, or local subdivision thereof, or mu- nicipal or other corporation exercising the taxing power; or any bond of indemnity required to be filed by any person to secure payment of any pen- 172 STAMP TAXES sion, allowance, allotment, relief, or insurance by the United States; or stocks and bonds issued by cooperative building and loan associations which are organized and operated exclusively for the benefit of their members and make loans only to their shareholders, or by mutual ditch or irrigating companies. Sec. II02. That whoever — (a) Makes, signs, issues, or accepts, or causes to Manner of violation be made, signed, issued, or accepted, any instru- ment, document, or paper of any kind or descrip- tion whatsoever without the full amount of tax thereon being duly paid; (b) Consigns or ships, or causes to be consigned or shipped, by parcel post any parcel, package, or article without the full amount of tax being duly paid; (c) Manufactures or imports and sells, or offers for sale, or causes to be manufactured or imported and sold, or offered for sale, any playing cards, package, or other article without the full amount of tax being duly paid; (d) Makes use of any adhesive stamp to denote any tax imposed by this title without canceling or obliterating such stamp as prescribed in section 1 104; Is guilty of a misdemeanor and upon conviction Penalty thereof shall pay a fine of not more than $100 for each offense. Sec. 1 103. That whoever — (a) Fraudulently cuts, tears, or removes from Fraudulent . , , . . . violations any vellum, parchment, paper, mstrument, writmg, package, or article, upon which any tax is imposed 173 Penalty REVENUE ACT OF 1918 by this title, any adhesive stamp or the impression of any stamp, die, plate, or other article provided, made, or used in pursuance of this title; (b) Fraudulently uses, joins, fixes, or places to, with, or upon any vellum, parchment, paper, in- strument, writing, package, or article, upon which any tax is imposed by this title, ( i ) any adhesive stamp, or the impression of any stamp, die, plate, or other article, which has been cut, torn, or re- moved from any other vellum, parchment, paper, instrument, writing, package, or article, upon which any tax is imposed by this title; or (2) any adhesive stamp or the impression of any stamp, die, plate, or other article of insufficient value; or (3) any forged or counterfeit stamp, or the impression of any forged or counterfeited stamp, die, plate, or other article; (c) Willfully removes, or alters the cancella- tion, or defacing marks of, or otherwise prepares, any adhesive stamp, with intent to use, or cause the same to be used, after it has been already used, or knowingly or willfully buys, sells, offers for sale, or gives away, any such washed or restored stamp to any person for use, or knowingly uses the, same; (d) Knowingly and without lawful excuse (the burden of proof of such excuse being on the ac- cused) has in possession any washed, restored, or altered stamp, which has been removed from any vellum, parchment, paper, instrument, writing, package, or article; Is guilty of a misdemeanor, and upon conviction shall be punished by a fine of not more than $1,000, or by imprisonment for not more than five years, or both, and any such reused, canceled, or counterfeit stamp and the vellum, parchment, document, pa- 174 STAMP TAXES per, package, or article upon which it is placed or impressed shall be forfeited to the United States. Sec. 1 104. That whenever an adhesive stamp is cancellation used for denoting any tax imposed by this title, °' '*^""" except as hereinafter provided, the person using or affixing the same shall write or stamp or cause to be written or stamped thereupon the initials of his or its name and the date upon which the same is attached or used, so that the same may not again be used : Provided, That the Commissioner may pre- scribe such other method for the cancellation of such stamps as he may deem expedient. Sec. 1 105. (a) That the Commissioner shall Distribution cause to be prepared and distributed for the pay- °' ***""'* ment of the taxes prescribed in this title suitable stamps denoting the tax on the document, articles, or thing to which the same may be affixed, and shall prescribe such method for the affixing of said stamps in substitution for or in addition to the method provided in this title, as he may deem expedient. (b) The Commissioner, with the approval of the Secretary, is authorized to procure any of the stamps provided for in this title by contract when- ever such stamps can not be speedily prepared by the Bureau of Engraving and Printing; but this authority shall expire on January i, 1920, except as to imprinted stamps furnished under contract, authorized by the Commissioner. (c) All internal-revenue laws relating to the assessment and collection of taxes are hereby ex- tended to and made a part of this title, so far as applicable, for the purpose of collecting stamp taxes omitted through mistake or fraud from any 175 REVENUE ACT OF 1918 instrument, document, paper, writing, parcel, pack- age, or article named herein. Post-offices to sell stamps Sec. I io6. That the Commissioner shall furnish to the Postmaster General without prepayment a suitable quantity of adhesive stamps to be distrib- uted to and kept on sale by the various postmasters in the United States. The Postmaster General may require each such postmaster to give additional or increased bond as postmaster for the value of the stamps so furnished, and each such postmaster shall deposit the receipts from the sale of such stamps to the credit of and render accounts to the Postmaster General at such times and in such form as he may by regulations prescribe. The Postmaster General shall at least once monthly transfer all collections from this source to the Treasury as internal-rev- enue collections. Collectors to furnish stamps to desig- nated U. S. agents Sec. 1 107. That the collectors of the several dis- tricts shall furnish without prepayment to any assistant treasurer or designated depositary of the United States located in their respective collection districts a suitable quantity of adhesive stamps for sale. In such cases the collector may require a bond, with sufficient sureties, to an amount equal to the value of the adhesive stamps so furnished, conditioned for the faithful return, whenever so required, of all quantities or amounts undisposed of, and for the payment monthly of all quantities or amounts sold or not remaining on hand. The Secretary may from time to time make such regu- lations as he may find necessary to insure the safe- keeping or prevent the illegal use of all such adhe- sive stamps. 176 STAMP TAXES Schedule A.— Stamp Taxes. I. Bonds of indebtedness: On all bonds, deben- tures, or certificates of indebtedness issued by any person, and all instruments, however termed, issued by any corporation with interest coupons or in registered form, known generally as corporate securities, on each $ioo of face value or fraction thereof, 5 cents : Provided, That every renewal of the foregoing shall be taxed as a new issue : Pro- vided further, That when a bond conditioned for the repayment or payment of money is given in a penal sum greater than the debt secured, the tax shall be based upon the amount secured. Stamp Tax- Schedule A Bonds, certificates of indebtedness 2. Bonds, indemnity and surety: On all bonds indemnity and executed for indemnifying any person who shall *""*'' ''""''^ have become bound or engaged as surety, and on all bonds executed for the due execution or per- formance of any contract, obligation or require- ment, or the duties of any office or position, and to account for money received by virtue thereof, and on all policies of guaranty and fidelity insurance, including policies guaranteeing titles to real estate and mortgage guarantee policies, and on all other bonds of any description, made, issued, or executed, not otherwise provided for in this schedule, except such as may be required in legal proceedings, 50 cents : Provided, That where a premium is charged Renewals for the issuance, execution, renewal or continuance of such bond the tax shall be i cent on each dollar or fractional part thereof of the premium charged : Provided further. That policies of reinsurance shall be exempt from the tax imposed by this sub- division. 177 Reinsurance policy exempt REVENUE ACT OF 1918 Capital stock issue 3. Capital stock, issue: On each original issue, whether on organization or reorganization, of cer- tificates of stock, or of profits, or of interest in prop- erty or accumulations, by any corporation, on each $100 of face value or fraction thereof, 5 cents: Provided, That where a certificate is issued with- out face value, the tax shall be 5 cents per share, unless the actual value is in excess of $100 per share, in which case the tax shall be 5 cents on each $100 of actual value or fraction thereof. Affixing of stamps Xhc staoips representing the tax imposed by this subdivision shall be attached to the stock books and not to the certificates issued. Capital stock, sale or transfer No tax on collateral not sold 4. Capital stock, sales or transfers: on all sales, or agreements to sell, or memoranda of sales or deliveries of, or transfers of legal title to shares or certificates of stock or of profits or of interest in property or accumulations in any corporation, or to rights to subscribe for or to receive such shares or certificates, whether made upon or shown by the books of the corporation, or by any assignment in blank, or by any delivery, or by any paper or agree- ment or memorandum or other evidence of transfer or sale, whether entitling the holder in any manner to the benefit of such stock, interest, or rights, or' not, on each $100 of face value or fraction thereof, 2 cents, and where such shares are without par or face value, the tax shall be 2 cents on the transfer or sale or agreement to sell on each share, unless the actual value thereof is in excess of $100 per share, in which case the tax shall be 2 cents on each $100 of actual value or fraction thereof : Provided, That it is not intended by this title to impose a tax upon an agreement evidencing a deposit of cer- 178 STAMP TAXES tificates as collateral security for money loaned thereon, which certificates are not actually sold, nor upon the delivery or transfer for such purpose of certificates so deposited: Provided further, That the tax shall not be imposed upon deliveries or transfers to a broker for sale, nor upon deliveries or transfers by a broker to a customer for whom and upon whose order he has purchased same, but such deliveries or transfers shall be accompanied by a certificate setting forth the facts: Provided further, That in case of sale where the evidence of transfer is shown only by the books of the corpora- tion the stamp shall be placed upon such books; and where the change of ownership is by transfer of the certificate the stamp shall be placed upon the certificate; and in cases of an agreement to sell or where the transfer is by delivery of the certificate assigned in blank there shall be made and delivered by the seller to the buyer a bill or memorandum of such sale, to which the stamp shall be affixed ; and every bill or memorandum of sale or agreement to sell before mentioned shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers. Any person liable to pay the tax as herein provided, or anyone who acts in the matter as agent or broker for such person, who makes any such sale, or who in pursu- ance of any such sale delivers any certificate or evi- dence of the sale of any stock, interest or right, or bill or memorandum thereof, as herein required, without having the proper stamps affixed thereto with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon con- viction thereof shall pay a fine of not exceeding $1,000, or be imprisoned not more than six months, or both. Transfer to broker for sale AffixinsT of stamps Penalty for violation 179 Produce -exchange sales Affixing of stamps Transfers to clearing house REVENUE ACT OF 1918 5. Produce, sales of, on exchange: Upon each sale, agreement of sale, or agreement to sell (not including so-called transferred or scratch sales), any products or merchandise at, or under the rules or usages of, any exchange, or board of trade, or other similar place, for future delivery, for each $100 in value of the merchandise covered by said sale or agreement of sale or agreement to sell, 2 cents, and for each additional $100 or fractional part thereof in excess of $100, 2 cents: Provided, That on every sale or agreement of sale or agree- ment to sell as aforesaid there shall be made and delivered by the seller to the buyer, a bill, memo- randum, agreement, or other evidence of such sale, agreement of sale, or agreement to sell, to which there shall be affixed a lawful stamp or stamps in value equal to the amount of the tax on such sale : Provided further, That sellers of commodities de- scribed herein, having paid the tax provided by this subdivision, may transfer such contracts to a clearing-house corporation or association, and such transfer shall not be deemed to be a sale, or agree- ment of sale, or an agreement to sell within the pro- visions of this Act, provided that such transfer shall not vest any beneficial interest in such clear- ing-house association but shall be made for the sole purpose of enabling such clearing-house associa- tion to adjust and balance the accounts of the mem- bers of such clearing-house association on their several contracts. Every such bill, memorandum, or other evidence of sale or agreement to sell shall show the date thereof, the name of the seller, the amount of the sale, and the matter or thing to which it refers; and any person liable to pay the tax as herein provided, or anyone who acts in the matter as agent or broker for such person, who 180 STAMP TAXES makes any such sale or agreement of sale, or agree- ment to sell, or who, in pursuance of any such sale, agreement of sale, or agreement to sell, delivers any such products or merchandise without a bill, mem- orandum, or other evidence thereof as herein re- quired, or who delivers such bill, memorandum, or other evidence of sale, or agreement to sell, without having the proper stamps afKxed thereto, with intent to evade the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon con- viction thereof shall pay a fine of not exceeding Penalty $i,ooo or be imprisoned not more than six months, or both. No bill, memorandum, agreement, or other evi- cash saus not dence of such sale, or agreement of sale, or agree- ''"'"^''* *° ^^ ment to sell, in case of cash sales of products or merchandise for immediate or prompt delivery which in good faith are actually intended to be delivered shall be subject to this tax. 6. Drafts or checks (payable otherwise than at Drafts, checks, sight or on demand) upon their acceptance or de- p'-'""'"'"-^ ""t" livery within the United States whichever is prior, promissory notes, except bank notes issued for cir- culation, and for each renewal of the same, for a sum not exceeding $ioo, 2 cents ; and for each addi- tional $100 or fractional part thereof, 2 cents. This subdivision shall not apply to a promissory Exception note secured by the pledge of bonds or obligations of the United States issued after April 24, 1917, or secured by the pledge of a promissory note which itself is secured by the pledge of such bonds or obligations : Provided, That in either case the par value of such bonds or obligations shall be not less than the amount of such note. 181 "l^ Conveyances, deeds, etc. Customhouse entries Withdrawal from customs Passage tickets Proxies REVENUE ACT OF 1918 7. Conveyances : Deed, instrument, or writing, whereby any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or pur- chasers, or any other person or persons, by his, her, or their direction, when the consideration or value of the interest or property conveyed, exclusive of the value of any lien or encumbrance remaining thereon at the time of sale, exceeds $100 and does not exceed $500, 50 cents ; and for each additional $500 or fractional part thereof, 50 cents. This sub- division shall not apply to any instrument or writ- ing given to secure a debt. 8. Entry of any goods, wares, or merchandise at any customhouse, either for consumption or ware- housing, not exceeding $100 in value, 25 cents; exceeding $100 and not exceeding $500 in value, 50 cents; exceeding $500 in value, $1. 9. Entry for the withdrawal of any goods or merchandise from customs bonded warehouse, 50 cents. 10. Passage ticket, one way or round trip, for each passenger, sold or issued in the United States for passage by any vessel to a port or place not in the United States, Canada, or Mexico, if costing not exceeding $30, $1 ; costing more than $30 and not exceeding $60, $3 ; costing more than $60, $5. This subdivision shall not apply to passage tickets costing $10 or less. I r. Proxy for voting at any election for ofHcers, or meeting for the transaction of business, of any corporation, except religious, educational, chari- table, fraternal, or literary societies, or public cemeteries, 10 cents. 182 STAMP TAXES 12. Power of attorney granting authority to do Power of attorney or perform some act for or in behalf of the grantor, which authority is not otherwise vested in the grantee, 25 cents. This subdivision shall not apply to any papers necessary to be used for the collection of claims from the United States or from any State for pensions, back pay, bounty, or for property lost in the military or naval service, or to powers of attorney required in bankruptcy cases. 13. Playing cards: Upon every pack of playing piaying cards cards containing not more than fifty-four cards, manufactured or imported, and sold, or removed for consumption or sale, a tax of 8 cents per pack. 14. Parcel-post packages : Upon every parcel or Parcei post package transported from one point in the United States to another by parcel post on which the post- age amounts to 25 cents or more, a tax of i cent for each 25 cents or fractional part thereof charged for such transportation, to be paid by the consignor. No such parcel or package shall be transported until a stamp or stamps representing the tax due shall have been affixed thereto. 15. On each policy of insurance, or certificate, insurance policies binder, covering, note, memorandum, cablegram, ""* '""''"* letter, or other instrument by whatever name called whereby insurance is made or renewed upon prop- erty within the United States (including rents and profits) against peril by sea or on inland waters or in transit on land (including transshipments and storage at termini or way points) or by fire, light- ning, tornado, wind-storm, bombardment, invasion, insurrection or riot, issued to or for or in the name of a domestic corporation or partnership or an in- dividual resident of the United States by any for- 183 Affixins of stamps and penalty REVENUE ACT OF 1918 eign corporation or partnership or any individual not a resident of the United States, when such policy or other instrument is not signed or counter- signed by an officer or agent of the insurer in a State, Territory, or district of the United States within which such insurer is authorized to do business, a tax of 3 cents on each dollar, or frac- tional part thereof of the premium charged : Pro- vided, That policies of re-insurance shall be ex- empt from the tax imposed by this subdivision. Any person to or for whom or in whose name any such policy or other instrument is issued, or any solicitor or broker acting for or on behalf of such person in the procurement of any such policy or other instrument, shall affix the proper stamps to such policy or other instrument, and for failure to affix such stamps with intent to evade the tax shall, in addition to other penalties provided therefor, pay a fine of double the amount of the tax. Tax on employer of child labor Title XII. — Tax on Employment of Child Labor. Sec. 1200. That every person (other than a bona fide boys' or girls' canning club organized by the Agricultural Department of a State and of the United States) operating (a) any mine or quarry situated in the United States in which children under the age of sixteen years have been employed or permitted to work during any portion of the taxable year; or (b) any mill, cannery, workshop, factory, or manufacturing establishment situated in the United States in which children under the age of fourteen years have been employed or permitted to work, orchildren between the ages of fourteen and sixteen have been employed or permitted to work 184 TAX ON EMPLOYMENT OF CHILD LABOR more than eight hours in any day or more than six days in any week, or after the hour of seven o'clock post meridian, or before the hour of six o'clock ante meridian, during any portion of the taxable year, shall pay for each taxable year, in addition to all other taxes imposed by law, an excise tax R^t^„jt„ equivalent to lo per centum of the entire net profits received or accrued for such year from the sale or disposition of the product of such mine, quarry, mill, cannery, workshop, factory, or manufactur- ing establishment. Sec. I20I. That in computing net profits un- computation of der the provisions of this title, for the purpose of "^* ''"**'' the tax there shall be allowed as deductions from the gross amount received or accrued for the taxa- ble year from the sale or disposition of such prod- ucts manufactured within the United States the following items : (a) The cost of raw materials entering into the Deductions production ; (b) Running expenses, including rentals, cost of repairs, and maintenance, heat, power, insurance, management, and a reasonable allowance for sal- aries or other compensations for personal services actually rendered, and for depreciation; (c) Interest paid within the taxable year on debts or loans contracted to meet the needs of the business and the proceeds of which have been actually used to meet such needs ; (d) Taxes of all kinds paid during the taxable year with respect to the business or property re- lating to the production ; and (e) Losses actually sustained within the taxable year in connection with the business of producing 185 Tax on sale of product of child labor when for less than fair market value Regulations and penalty for false statements REVENUE ACT OF 1918 such products, including losses from fire, flood, storm, or other casualties, and not compensated for by insurance or otherwise. Sec. 1 202. That if any such person during ally taxable year or part thereof, whether under any agreement, arrangement, or understanding or oth- erwise, sells or disposes of any product of such mine, quarry, mill, cannery, workshop, factory, or manufacturing establishment at less than the fair market price obtainable therefor either (a) in such manner as directly or indirectly to benefit such person or any person directly or indirectly inter- ested in the business of such person; or (b) with intent to cause such benefit; the gross amount re- ceived or accrued for such year or part thereof from the sale or disposition of such products shall be taken to be the amount which would have been received or accrued from the sale or disposition of such product if sold at the fair market price. Sec. 1203. (a) That no person subject to the provisions of this title shall be liable for the tax herein imposed if the only employment or permis- sion to work which but for this section would sub- ject him to the tax, has been of a child as to whom such person has in good faith procured at the time of employing such child or permitting him to work, and has since in good faith relied upon and kept on file a certificate, issued in such form, under such conditions and by such persons as may be pre- scribed by a board consisting of the Secretary, the Commissioner, and the Secretary of Labor, show- ing the child to be of such age as not to subject such person to the tax imposed by this title. Any per- son who knowingly makes a false statement or pre- sents false evidence in or in relation to any such 186 TAX ON EMPLOYMENT OF CHILD LABOR certificate or application therefor shall be pun- ished by a fine of not less than $ioo, nor more than $ 1,000, or by imprisonment for not more than three months, or by both such fine and imprison- ment, in the discretion of the court. In any State designated by such board an em- Employment ployment certificate or other similar paper as to the age of the child, issued under the laws of that State, and not inconsistent with the provisions of this title, shall have the same force and effect as a cer- tificate herein provided for. (b) The tax imposed by this title shall not be Mistake of fact imposed in the case of any person who proves to " *° ^" °' "'"" the satisfaction of the Secretary that the only em- ployment or permission to work which but for this section would subject him to the tax, has been of a child employed or permitted to work under a mis- take of fact as to the age of such child, and without intention to evade the tax. Sec. 1204. Thar on or before the first day of Returns by employer the third month following the close of each taxable °' "^^^ '*'""' year, a true and accurate return under oath shall be made by each person subject to the provisions of this title to the collector for the district in which such person has his principal office or place of business, in such form as the Commissioner, with the approval of the Secretary, shall prescribe, set- ting forth specifically the gross amount of income received or accrued during such year from the sale or disposition of the product of any mine, quarry, mill, cannery, workshop, factory, or manufactur- ing establishment, in which children have been employed subjecting him to the tax imposed by this title, and from the total thereof deducting the ag- gregate items of allowance authorized by this title, 187 REVENUE ACT OF 1918 Tax due Inspection authorized Penalty for obstruction "Teucable year" defined and such other particulars as to the gross receipts and items of allowance as the Commissioner, with the approval of the Secretary may require. Sec. 1205. That all such returns shall be trans- mitted forthwith by the collector to the Commis- sioner, who shall, as soon as practicable, assess the tax found due and notify the person making such return of the amount of tax for which such person is liable, and such person shall pay the tax to the collector on or before thirty days from the date of such notice. Sec. 1206. That for the purposes of this Act the Commissioner, or any other person duly au- thorized by him, shall have authority to enter and inspect at any time any mine, quarry, mill, can- nery, workshop, factory, or manufacturing estab- lishment. The Secretary of Labor, or any person duly authorized by him, shall, for the purpose of complying with a request of the Commissioner to make such an inspection, have like authority, and shall make report to the Commissioner of inspec- tions made under such authority in such form as may be prescribed by the Commissioner with the approval of the Secretary of the Treasury. Any person who refuses or obstructs entry or inspection authorized by this section shall be pun- ished by a fine of not more than $1,000, or by imprisonment for not more than one year, or both such fine and imprisonment. Sec. 1207. That as used in this title the term "taxable year" shall have the same meaning as provided for the purposes of income tax in section 200. The first taxable year for the purposes of this title shall be the period between sixty days after the passage of this Act and December 31, 1919, GENERAL ADMINISTRATIVE PROVISIONS both inclusive, or such portion of such period as is included within the fiscal year (as defined in sec- tion 200) of the taxpayer. Title XIII. — General Administrative Provisions. Sec. 1300. That hereafter the salary of the commissioner's Commissioner shall be $10,000 a year. The differ- '^^''^ ence between the amount appropriated under ex- isting law and the salary herein established shall, for the period between the passage of this Act and July I, 1919, be paid out of the appropriations for collecting internal revenue. Sec. 1 301. (a) That hereafter there may be Deputy employed in the Bureau of Internal Revenue, in commissioner lieu of the deputy commissioners whose salaries are now fixed by law, five deputy commissioners and an assistant to the Commissioner, who shall each receive a salary of $5,000 a year, payable monthly. The assistant to the Commissioner may be author- ized by the Commissioner to perform any duties which the deputy commissioners may perform un- der existing law. (b) The salaries of collectors may be readjusted collectors- saiarie. and increased under such regulations as may be prescribed by the Commissioner, subject to the approval of the Secretary, but no collector shall receive a salary in excess of $6,000 a year. (c) There is hereby appropriated, out of any Appropriation tor money in the Treasury not otherwise appropri- ated, for the fiscal year ending June 30, 1919, the sum of $7,500,000 for the expenses of assessing and collecting the internal-revenue taxes as pro- vided in this Act, including the employment of 189 collection of taxes REVENUE ACT OF 1918 necessary officers, attorneys, experts, agents, in- spectors, deputy collectors, clerks, janitors, and messengers, in the District of Columbia and the several collection districts, to be appointed as pro- vided by law, telegraph and telephone service, rental and repair of quarters, postage, and the pur- chase of such supplies, equipment, furniture, mechanical devices, printing, stationery, law books and books of reference, not to exceed $500 for street car fares in the District of Columbia, and such other articles as may be necessary for use in the District of Columbia and the several collection districts : Provided, That not more than $2,750,000 of the total amount appropriated by this section may be expended in the Bureau of Internal Rev- enue in the District of Columbia. "Advisory Tax (d) (i) Thcrc is hereby crcatcd a board to bc ^°"^" known as the "Advisory Tax Board," hereinafter called the Board, and to be composed of not to exceed six members to be appointed by the Com- missioner with the approval of the Secretary. The Board shall cease to exist at the expiration of two years after the passage of this Act, or at such earlier time as the Commissioner with the approval of the Secretary may designate. Appointment to and Vacaucics xxi thc mcmbcrship of the Board shall be filled in the same manner as an original appoint- ment. Any member shall be subject to removal by the Commissioner with the approval of the Secre- tary. The Commissioner with the approval of the Secretary shall designate the chairman of the Board. Each member shall receive an annual sal- ary of $9,000, payable monthly, together with actual necessary expenses when absent from the District of Columbia on official business. 190 removal from "Tax Board' GENERAL ADMINISTRATIVE PROVISIONS (2) The Commissioner may, and on the request Questions submitted of any taxpayer directly interested shall, submit to '" "^ the Board any question relating to the interpreta- tion or administration of the income, war-profits or excess-profits tax laws, and the Board shall re- port its findings and recommendations to the Com- missioner. (3) The Board shall have its office in the Bu- offices and salaries reau of Internal Revenue in the District of Colum- °* ^^ ^"^"^ bia. The expenses and salaries of members of the Board shall be audited, allowed, and paid out of appropriations for collecting internal revenue, in the same manner as expenses and salaries of em- ployees of the Bureau of Internal Revenue are audited, allowed, and paid. (4) The Board shall have the power to sum- Powers of mon witnesses, take testimony, administer oaths ^ and to require any person to produce books, papers, documents, or other data relating to any matter under investigation by the Board. Any member of the Board may sign subpoenas and members and employees of the Bureau of Internal Revenue designated to assist the Board, when authorized by the Board, may administer oaths, examine wit- nesses, take testimony and receive evidence. Sec. 1302. That all internal-revenue agents Leave of absence for and inspectors shall be granted leave of absence a^g^tV"" ""^ with pay, which shall not be cumulative, not to ex- ceed thirty days in any calendar year, under such regulations as the Commissioner, with the approval of the Secretary, may prescribe. Sec. 1303. (a) That there is hereby created a Legislative Legislative Drafting Service under the direction "'■•^'"-s service of two draftsmen, one of whom shall be appointed 191 Duties of Drafting Service Appropriation for Drafting: Service REVENUE ACT OF 1918 by the President of the Senate, and one by the Speaker of the House of Representatives, without reference to political affiliations and solely on the ground of fitness to perform the duties of the office. Each draftsman shall receive a salary of $5,000 a year, payable monthly. The draftsmen shall, sub- ject to the approval of the President of the Senate and the Speaker of the House of Representatives, employ and fix the compensation of such assistant draftsmen, clerks, and other employees, and pur- chase such furniture, office equipment, books, sta- tionery, and other supplies, as may be necessary for the proper performance of the duties of the service and as may be appropriated for by Con- gress. (b) The Drafting Service shall aid in drafting public bills and resolutions or amendments thereto on the request of any committee of either House of Congress, but the Library Committee of the Senate and the Library Committee of the House of Repre- sentatives, respectively, may determine the prefer- ence, if any, to be given to such requests of the committee of either House, respectively. The draftsmen shall, from time to time, prescribe rules and regulations for the conduct of the w^ork of the service for the committees of each House, subject to the approval of the Library Committee of each House, respectively. (c) For the remainder of the current fiscal year there is hereby appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $25,000, or so much thereof as may be necessary, for the purpose of defraying the expenses of the establishment and maintenance of the service, in- cluding the payment of salaries herein authorized. 192 GENERAL ADMINISTRATIVE PROVISIONS One-half of all appropriations for the service shall be disbursed by the Secretary of the Senate and one-half by the Clerk of the House of Representa- tives. Sec. 1304. That there shall be levied, collected, Tax on importations and paid in the United States, upon articles coming ''■°" ^"^^ uunds into the United States from the Virgin Islands, a tax equal to the internal-revenue tax imposed in the United States upon like articles of domestic manufacture; such articles shipped from such islands to the United States shall be exempt from the payment of any tax imposed by the internal- revenue laws of such islands: Provided, That there shall be levied, collected, and paid in such islands, upon articles imported from the United States, a tax equal to the internal-revenue tax im- posed in such islands upon like articles there manu- factured ; and such articles going into such islands from the United States shall be exempt from pay- ment of any tax imposed by the internal-revenue laws of the United States. Sec. 1305. That all administrative, special, or Extension and appii- stamp provisions of law, including the law relating """" "' '^™"='''^ '"'' to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this Act, and every person liable to any tax imposed by this Act, or for the collection thereof, shall keep such records and render, under oath, such statements and returns, and shall comply with such regula- tions as the Commissioner, with the approval of the Secretary, may from time to time prescribe. Whenever in the judgment of the Commissioner r^^^^^ ^^^ necessary he may require any person, by notice •>« compelled served upon him, to make a return or such state- 193 REVENUE ACT OF 1918 Powers of Commis- sioner to investigate Returns for floor taxes within 30 days after passage of Act General provision for collection of taxes ments as he deems sufficient to show whether or not such person is liable to tax. The Commissioner, for the purpose of ascertain- ing the correctness of any return or for the purpose of making a return where none has been made, is hereby authorized, by any revenue agent or in- spector designated by him for that purpose, to ex- amine any books, papers, records or memoranda bearing upon the matters required to be included in the return, and may require the attendance of the person rendering the return or of any officer or employee of such person, or the attendance of any other person having knowledge in the prem- ises, and may take his testimony with reference to the matter required by law to be included in such return, with power to administer oaths to such person or persons. Sec. 1306. That where floor taxes are imposed by this Act in respect to articles or commodities, in respect to which the tax imposed by existing law has been paid, the person required by this Act to pay the tax shall, within thirty days after its pas- sage, make return under oath in such form and under such regulations as the Commissioner, with the approval of the Secretary, shall prescribe. Payment of the tax shown to be due may be ex- tended to a date not exceeding seven months from the passage of this Act, upon the filing of a bond for payment in such form and amount and with such sureties as the Commissioner, with the ap- proval of the Secretary, may prescribe. Sec. 1307. That in all cases where the method of collecting the tax imposed by this Act is not specifically provided in this Act, the tax shall be collected in such manner as the Commissioner, 194 GENERAL ADMINISTRATIVE PROVISIONS with the approval of the Secretary, may prescribe. All administrative and penalty provisions of Title XI of this Act, in so far as applicable, shall apply to the collection of any tax which the Commis- sioner determines or prescribes shall be paid by stamp. Sec. 1308. (a) That any person required un- Additional penalties der Titles V, VI, VII, VIII, IX, X, or XII, to see (a), w, and (o pay, or to collect, account for and pay over any tax, or required by law or regulations made under authority thereof to make a return or supply any information for the purposes of the computation, assessment or collection of any such tax, who fails to pay, collect, or truly account for and pay over any such tax, make any such return or supply any such information at the time or times required by law or regulation shall in addition to other penal- ties provided by law be subject to a penalty of not more than $1,000. (b) Any person who willfully refuses to pay, collect, or truly account for and pay over any such tax, make such return or supply such information at the time or times required by law or regulation, or who willfully attempts in any manner to evade such tax shall be guilty of a misdemeanor and in addition to other penalties provided by law shall be fined not more than $10,000 or imprisoned for not more than one year, or both, together with the costs of prosecution. (c) Any person who willfully refuses to pay, collect, or truly account for and pay over any such tax shall in addition to other penalties provided by law be liable to a penalty of the amount of the tax evaded, or not paid, collected, or accounted for and paid over, to be assessed and collected in the same 195 REVENUE ACT OF 1918 "Person" includes officer or employee of a corporation Commissioner au- thorized to make regulations Overpayments, credits, refunds Sales on credit manner as taxes are assessed and collected: Pro- vided, however. That no penalty shall be assessed under this subdivision for any offense for which a penalty may be assessed under authority of section 3176 of the Revised Statutes, as amended, or of sec- tion 605 or 620 of this Act, or for any offense for which a penalty has been recovered under section 3256 of the Revised Statutes. (d) The term "person" as used in this section includes an officer or employee of a corporation or a member or employee of a partnership, who as such oiBcer, employee, or member is under a duty to perform the act in respect of which the viola- tion occurs. Sec. 1309. That the Commissioner, with the approval of the Secretary, is hereby authorized to make all needful rules and regulations for the en- forcement of the provisions of this Act. The Commissioner with such approval may by regulation provide that any return required by Titles V, VI, VII, VIII, IX or X to be under oath may, if the amount of the tax covered thereby is not in excess of $10, be signed or acknowledged be- fore two witnesses instead of under oath. Sec. 13 10. (a) That in the case of any over- payment or overcollection of any tax imposed by section 628 or 630 or by Title V, Title VIII, or Title IX, the person making such overpayment or overcollection may take credit therefor against taxes due upon any monthly return, and shall make refund of any excessive amount collected by him upon proper application by the person entitled thereto. (b) Wherever in this Act a tax is required to be paid by the purchaser to the vendor at the time of 196 GENERAL ADMINISTRATIVE PROVISIONS a sale, and such sale is made on credit, then, under regulations prescribed by the Commissioner, with the approval of the Secretary, the tax may, at the option of the vendor, be returned and paid by him to the United States as if paid to him by the pur- chaser at the time of the sale, and in such case the vendor shall have a right of action in any court of competent jurisdiction against the purchaser for the amount of the tax so returned and paid to the United States. (c) Under such rules and regulations as the Refunds to exporter _,.. -ii 1 I- 1 r\ °^ erroneous Commissioner with the approval of the Secretary collections may prescribe, the taxes imposed under the pro- visions of Titles VI, VII, or IX shall not apply in respect to articles sold or leased for export and in due course so exported. Under such rules and regulations the amount of any internal-revenue tax erroneously or illegally collected in respect to ex- ported articles may be refunded to the exporter of the article, instead of to the manufacturer, if the manufacturer waives any claim for the amount so to be refunded. Sec. 131 1. That where the rate of tax imposed by this Act, payable by stamps, is an increase over previously existing rates, stamps on hand in the collectors' offices and in the Bureau of Internal Revenue may continue to be used until the supply on hand is exhausted, but shall be sold and ac- counted for at the rates provided by this Act, and assessment shall be made against manufacturers and other taxpayers having such stamps on hand on the day this Act takes efifect for the difference be- tween the amount paid for such stamps and the tax due at the rates provided by this Act. 197 Stamps may be on hand used up REVENUE ACT OF 1918 Contracts made Sec. 1312. ( I ) That (a) if any person has prior to May 9, 1917 pj-'^j. ^q May 9, 1917, Hiadc a bona fide contract with a dealer for the sale or lease, after the tax takes effect, of any article in respect to which a tax is imposed under Title VI, VII, or IX, or under subdivision 13 of Schedule A of Title XI, or un- der this subdivision, and (b) if such contract does not permit the adding of the whole of such tax to the amount to be paid under such contract, then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of such tax as is not so per- mitted to be added to the contract price. If a con- tract of the character above described was made with any person other than a dealer, the tax col- lected under this Act shall be the tax in force on May 9, 1917. Contracts made prior (2) If ( a) any pcrsou has prioT to September 3, ste^subdfvii^n*" 19 1 8, made a bona fide contract with a dealer for the sale or lease, after the tax takes effect, of any article in respect to which a tax is imposed under Title VI, VII, or IX, or under subdivision 13 of Schedule A of Title XI, or under this subdivision, and in respect to which no corresponding tax was imposed by the Revenue Act of 1917, and (b) such contract does not permit the adding, to the amount to be paid under such contract, of the whole of the tax imposed by this Act, then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of the tax imposed by this Act, as is not so permitted to be added to the contract price. If a contract of the character above described was made with any person other than a dealer, no tax shall be collected under this Act. (3) If (a) any person has prior to September 3, 1918, made a bona fide contract with a dealer for <3) also GENERAL ADMINISTRATIVE PROVISIONS the sale or lease, after the tax takes effect, of any article in respect to which a tax is imposed under Title VI, VII, or IX, or under subdivision 13 of Schedule A of Title XI, or under this subdivision, and in respect to which a corresponding tax was imposed by the Revenue Act of 191 7, and (b) such contract does not permit the adding, to the amount to be paid under such contract, of the whole of the difference between such tax and corresponding tax imposed by the Revenue Act of 19 17, then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of such difference as is not so permitted to be added to the contract price. If a contract of the character above described was made with any person other than a dealer, the tax col- lected under this Act shall be the tax in force on September 3, 1918. (4) The taxes payable by the vendee or lessee when and by whom under this section shall be paid to the vendor or *^" *° ""* ^"^ lessor at the time the sale or lease is consummated, and collected, returned, and paid to the United States by such vendor or lessor in the same manner as provided in section 502. (5) The term "dealer" as used in this section "Dealer" defined includes a vendee who purchases any article with intent to use it in the manufacture or production of another article intended for sale. (6) This section shall not apply to any tax im- Exemption from posed by section 906. *""" "'""" Sec. 13 13. That in the payment of any tax un- Fraction of a cent der this Act not payable by stamp a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to i cent. 199 Payment of taxe^ Lost stamps may be replaced Refund of taxes illegrally collected REVENUE ACT OF 1918 Sec. 13 14. That collectors may receive, at par with an adjustment for accrued interest, certificates of indebtedness issued by the United States and un- certified checks in payment of income, war-profits and excess-profits taxes and any other taxes payable other than by stamp, during such time and under such regulations as the Commissioner, with the approval of the Secretary, shall prescribe; but if a check so received is not paid by the bank on which it is drawn the person by whom such check has been tendered shall remain liable for the payment of the tax and for all legal penalties and additions the same as if such check had not been tendered. Sec. 13 15. That section 3315 of the Revised Statutes, as amended, is hereby amended to read as follows : "Sec. 3315. The Commissioner of Internal Revenue may, under regulations prescribed by him with the approval of the Secretary of the Treasury, issue stamps for restamping packages of distilled spirits, tobacco, cigars, snuff, cigarettes, fermented liquors, and wines which have been duly stamped but from which the stamps have been lost or de- stroyed by unavoidable accident." Sec. 1316. (a) That section 3220 of the Re- vised Statutes is hereby amended to read as fol- lows: "Sec. 3220. The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasury, is authorized to remit, refund, and pay back all taxes erroneously or ille- gally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any 200 GENERAL ADMINISTRATIVE PROVISIONS manner wrongfully collected ; also to repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him in any court, for any internal revenue taxes collected by him, w^ith the cost and expenses of suit; also all damages and costs recovered against any assessor, assistant assessor, collector, deputy collector, agent, or inspector, in any suit brought against him by reason of anything done in the due performance of his official duty, and shall make report to Congress at the beginning of each regular session of Congress of all transactions under this section." (b) Section 3225 of the Revised Statutes of the United States is hereby amended to read as fol- low^s: "Sec. 3225. When a second assessment is made second assessments in case of any list, statement, or return, which in the opinion of the collector or deputy collector was false or fraudulent, or contained any understate- ment or undervaluation, such assessment shall not be remitted, nor shall taxes collected under such assessment be refunded, or paid back, or recovered by any suit, unless it is proved that such list, state- ment, or return was not willfully false or fraudu- lent and did not contain any willful understate- ment or undervaluation." (c) That the paragraph of section 3689 of the Amendment to Revised Statutes, as amended, reading as follows : "Refunding taxes illegally collected (internal After June 30, 1920. \ ^ £ J J U 1 J^- refund clause revenue) : 1 o refund and pay back duties er- repealed roneously or illegally assessed or collected under the internal-revenue laws" is repealed from and after June 30, 1 920 ; and the Secretary of the Treas- ury shall submit for the fiscal year 1921, and an- 201 Amendment to Revised Statutes Collector to file statement of willful violation with district attorney Collector and agents may administer oaths Collectors and ag'ents prohibited from disclosing certain matters REVENUE ACT OF 1918 nually thereafter, an estimate of appropriations to refund and pay back duties or taxes erroneously or illegally assessed or collected under the internal- revenue laws, and to pay judgments, including in- terest and costs, rendered for taxes or penalties erroneously or illegally assessed or collected under the internal-revenue laws. Sec. 13 17. That sections 3164, 3165, 3167, 3172, 3173, and 3176 of the Revised Statutes as amended are hereby amended to read as follows: "Sec. 3164. It shall be the duty of every col- lector of internal revenue having knowledge of any willful violation of any law of the United States relating to the revenue, within thirty days after coming into possession of such knowledge, to file with the district attorney of the district in which any fine, penalty, or forfeiture may be incurred, a statement of all the facts and circumstances of the case within his knowledge, together with the names of the witnesses, setting forth the provisions of law believed to be so violated on which reliance may be had for condemnation or conviction. "Sec. 3165, Every collector, deputy collector, internal-revenue agent, and internal-revenue offi- cer assigned to duty under an internal-revenue agent, is authorized to administer oaths and to take evidence touching any part of the administra- tion of the internal-revenue laws with which he is charged, or where such oaths and evidence are authorized by law or regulation authorized by law to be taken. "Sec. 3167. It shall be unlawful for any col- lector, deputy collector, agent, clerk, or other offi- cer or employee of the United States to divulge or 202 GENERAL ADMINISTRATIVE PROVISIONS to make known in any manner whatever not pro- vided by law to any person the operations, style of work, or apparatus of any manufacturer or pro- ducer visited by him in the discharge of his official duties, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return, or to per- mit any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as pro- vided by law; and it shall be unlawful for any per- son to print or publish in any manner whatever not provided by law any income return, or any part thereof or source of income, profits, losses, or ex- penditures appearing in any income return; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not penaity exceeding $i,ooo or by imprisonment not exceed- ing one year, or both, at the discretion of the court; and if the offender be an officer or employee of the United States he shall be dismissed from office or discharged from employment. "Sec. 3 172. Every collector shall, from time to collector to list time, cause his deputies to proceed through every '^^"^p"*''"* part of his district and inquire after and concern- ing all persons therein who are liable to pay any internal-revenue tax, and all persons owning or having the care and management of any objects liable to pay any tax, and to make a list of such persons and enumerate said objects. "Sec. 3 173. It shall be the duty of any person. Time and place for partnership, firm, association, or corporation, made *"'"*' ■•='>"•■'= liable to any duty, special tax, or other tax imposed by law, when not otherwise provided for, ( i ) in case of a special tax, on or before the thirty-first 203 REVENUE ACT OF 1918 day of July in each year, and (2) in other cases before the day on which the taxes accrue, to make a list or return, verified by oath, to the collector or a deputy collector of the district where located, of the articles or objects, including the quantity of goods, wares, and merchandise, made or sold and charged with a tax, the several rates and aggregate amount, according to the forms and regulations to be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, for which such person, partnership, firm, association, or corporation is liable: Pro- vided, That if any person liable to pay any duty or tax, or owning, possessing, or having the care or management of property, goods, wares, and mer- chandise, article or objects liable to pay any duty, tax, or license, shall fail to make and exhibit a list or return required by law, but shall consent to dis- close the particulars of any and all the property, goods, wares, and merchandise, articles, and ob- jects liable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid. Collector may thcn, and lu that case, it shall be the duty of the make return and collector or dcputy collcctor to make such list or examine witnesses -l j return, which, being distinctly read, consented to, and signed and verified by oath by the person so owning, possessing, or having the care and man- agement as aforesaid, may be received as the list of such person: Provided further, That in case no annual list or return has been rendered by such person to the collector or deputy collector as re- quired by law, and the person shall be absent from his or her residence or place of business at the time the collector or a deputy collector shall call for the annual list or return, it shall be the duty of such collector or deputy collector to leave at such place 204 GENERAL ADMINISTRATIVE PROVISIONS of residence or business, with some one of suitable age and discretion, if such be present, otherwise to deposit in the nearest post office, a note or memo- randum addressed to such person, requiring him or her to render to such collector or deputy col- lector the list or return required by law within ten days from the date of such note or memorandum, verified by oath. And if any person, on being notified or required as aforesaid, shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is required to deliver a monthly or other re- turn of objects subject to tax fails to do so at the time required, or delivers any return which, in the opinion of the collector, is erroneous, false, or fraudulent, or contains any undervaluation or un- derstatement, or refuses to allow any regularly authorized Government officer to examine the books of such person, firm, or corporation, it shall be lawful for the collector to summon such person, or any other person having possession, custody, or care of books of account containing entries relating to the business of such person or any other person he may deem proper, to appear before him and produce such books at a time and place named in the summons, and to give testimony or answer in- terrogatories, under oath, respecting any objects or income liable to tax or the returns thereof. The collector may summon any person residing or found within the State or Territory in which his district lies; and when the person intended to be summoned does not reside and can not be found within such State or Territory, he may enter any collector may collection district where such person may be found ^""fstrict"''* and there make the examination herein authorized. And to this end he may there exercise all the au- 205 REVENUE ACT OF 1918 Collector shall make return when none is filed Collector may grant extension Commissioner to assess all taxes except stamp taxes thority which he might lawfully exercise in the dis- trict for which he was commissioned : Provided, That 'person,' as used in this section, shall be con- strued to include any corporation, joint-stock company or association, or insurance company when such construction is necessary to carry out its provisions. "Sec. 3176. If any person, corporation, com- pany, or association fails to make and file a return or list at the time prescribed by law or by regula- tion made under authority of law, or makes, will- fully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowledge and from such information as he can obtain through testi- mony or otherwise. In any such case the Commis- sioner may, from his own knowledge and from such information as he can obtain through testi- mony or otherwise, make a return or amend any return made by a collector or deputy collector. Any return or list so made and subscribed by the Commissioner, or by a collector or deputy collector and approved by the Commissioner, shall be prima facie good and sufficient for all legal purposes. "If the failure to file a return or list is due to sickness or absence, the collector may allow such further time, not exceeding thirty days, for making and filing the return or list as he deems proper. "The Commissioner of Internal Revenue shall determine and assess all taxes, other than stamp taxes, as to which returns or lists are so made un- der the provisions of this section. In case of any failure to make and file a return or list within the time prescribed by law, or prescribed by the Com- 206 GENERAL ADMINISTRATIVE PROVISIONS missioner of Internal Revenue or the collector in pursuance of law, the Commissioner of Internal Revenue shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or list is will- Penalty tor wiiuui fully made, the Commissioner of Internal Revenue retu™, for traudu- shall add to the tax 50 per centum of its amount. '™* "*"" "The amount so added to any tax shall be col- lected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax." Sec. 13 18. That if any person is summoned jurisdiction of under this Act to appear, to testify, or to produce [[^"[ri^t mu*" books, papers or other data, the district court of the United States for the district in which such person resides shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or other data. The district courts of the United States at the Powers of instance of the United States are hereby invested '*'=*"'^* =""'■"' with such jurisdiction to make and issue, both in actions at law and suits in equity, writs and orders of injunction, and of ne exeat republica, orders appointing receivers, and such other orders and process, and to render such judgments and decrees, granting in proper cases both legal and equitable relief together, as may be necessary or appropriate for the enforcement of the provisions of this Act. The remedies hereby provided are in addition to 207 Penalty for false statement as to cost or price Liberty or other U. S. Bonds may be TT^^^^J substituted for *^111LCU "penal bond" REVENUE ACT OF 1918 and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such provisions. Sec. 13 19. That v^^hoever in connection with the sale or lease, or offer for sale or lease, of any article, or for the purpose of making such sale or lease, makes any statement, written or oral, (i) intended or calculated to lead any person to believe that any part of the price at which such article is sold or leased, or offered for sale or lease, consists of a tax imposed under the authority of the United States, or (2) ascribing a particular part of such price to a tax imposed under the authority of the United States, knowing that such statement is false or that the tax is not so great as the portion of such price ascribed to such tax, shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not more than $1,000 or by imprisonment not exceeding one year, or both. Sec. 1320. That wherever by the laws of the States or regulations made pursuant thereto, any person is required to furnish any recognizance, stipulation, bond, guarantee, or un- dertaking, hereinafter called "penal bond," with surety or sureties, such person may, in lieu of such surety or sureties, deposit as security with the official having authority to approve such penal bond. United States Liberty bonds or other bonds of the United States in a sum equal at their par value to the amount of such penal bond required to be furnished, together with an agreement au- thorizing such official to collect or sell such bonds so deposited in case of any default in the per- formance of any of the conditions or stipulations of such penal bond. The acceptance of such United 208 GENERAL ADMINISTRATIVE PROVISIONS States bonds in lieu of surety or sureties required by law shall have the same force and effect as indi- vidual or corporate sureties, or certified checks, bank drafts, post-office money orders, or cash, for the penalty or amount of such penal bond. The bonds deposited hereunder, and such other United States bonds as may be substituted therefor from time to time as such security, may be deposited with the Treasurer, or an Assistant Treasurer of the United States, a Government depository, Fed- eral Reserve bank, or member bank, which shall issue receipt therefor, describing such bonds so deposited. As soon as security for the performance of such penal bond is not longer necessary, such bonds so deposited shall be returned to the de- positor: Provided, That in case a person or per- sons supplying a contractor with labor or material as provided by the Act of Congress, approved February 24, 1905 (33 Stat., 811), entitled "An Act to amend an Act approved August thirteenth, eighteen hundred and ninety-four, entitled 'An Act for the protection of persons furnishing mate- rials and labor for the construction of public works,' " shall file with the obligee, at any time after a default in the performance of any contract subject to said Acts, the application and affidavit therein provided, the obligee shall not deliver to the obligor the deposited bonds nor any surplus proceeds thereof until the expiration of the time limited by said Acts for the institution of suit by such person or persons, and, in case suit shall be instituted within such time, shall hold said bonds or proceeds subject to the order of the court having jurisdiction thereof : Provided further, That noth- ing herein contained shall affect or impair the priority of the claim of the United States against 209 , REVENUE ACT OF 1918 the bonds deposited or any right or remedy granted by said Acts or by this section to the United States for default upon any obligation of said penal bond : Provided further, That all laws inconsistent with this section are hereby so modified as to conform to the provisions hereof: And provided further, That nothing contained herein shall affect the authority of courts over the security, where such bonds are taken as security in judicial proceedings, or the authority of any administrative officer of the United States to receive United States bonds for security in cases authorized by existing laws. The Secretary may prescribe rules and regulations necessary and proper for carrying this section into effect. Title XIV. — General Provisions. Laws repealed Sec. 1400. (a) That the followiug parts of in part ^^^^ ^^^ hcrcby repealed, subject to the limitations provided in subdivision (b) : ( 1 ) The following titles of the Revenue Act of 1916: Title I (called "Income Tax") ; Title II (called "Estate Tax") ; Title III (called "Munitions Manufacturers' Tax"), as amended; Title IV (called "Miscellaneous Taxes"). (2) The following parts of the Act entitled "An Act to provide increased revenue to defray the ex- penses of the increased appropriations for the Army and Navy and the extensions of fortifica- tions, and for other purposes," approved March 3, 1917: 210 GENERAL PROVISIONS Title III (called "Estate Tax") ; Section 402 (called "Returns of Dividends"). (3) The following titles of the Revenue Act of 1917: Title I (called "War Income Tax") ; Title II (called "War Excess-Profits Tax") ; Title III (called "War Tax on Beverages") ; Title IV (called "War Tax on Cigars, Tobacco, and Manufactures Thereof") ; Title V (called "War Tax on Facilities Fur- nished by Public Utilities, and Insurance") ; Title VI (called "War Excise Taxes") ; Title VII (called "War Tax on Admissions and Dues") ; Title VIII (called "War Stamp Taxes") ; Title IX (called "War Estate Tax") ; Title X (called "Administrative Provisions") ; Title XII (called "Income-Tax Amendments"). (b) Such parts of Acts shall remain in force for Laws retained for the assessment and collection of all taxes which assessment and collection of taxes have accrued thereunder, and for the imposition and collection of all penalties or forfeitures which have accrued and may accrue in relation to any such taxes, and except that the unexpended balance of any appropriation heretofore made and now available for the administration of any such part of an Act shall be available for the administration of this Act or the corresponding provision thereof : Provided, That, except as otherwise provided in First class postage rate after July 1, 1919, reduced Letters of soldiers and sailors in ser- vice in foreign countrx, free REVENUE ACT OF 1918 this Act, no taxes shall be collected under Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917, or Title I or II of the Reve- nue Act of 1 9 17, in respect to any period after December 31, 1917: Provided further, That the assessment and collection of all estate taxes and the imposition and collection of all penalties or for- feitures, which have accrued under Title II of the Revenue Act of 1916 as amended by the Act en- titled "An Act to provide increased revenue to defray the expenses of the increased appropria- tions for the Army and Navy and the extensions of fortifications, and for other purposes," approved March 3, 1917, or Title IX of the Revenue Act of 1 9 17, shall be according to the provisions of Title IV of this Act. In the case of any tax imposed by any part of an Act herein repealed, if there is a tax imposed by this Act in lieu thereof, the provision imposing such tax shall remain in force until the correspond- ing tax under this Act takes effect under the pro- visions of this Act. Title I of the Revenue Act of 1916 as amended by the Revenue Act of 191 7 shall remain in force for the assessment and collection of the income tax in Porto Rico and the Philippine Islands, except as may be otherwise provided by their respective legislatures. Sec. 1401. That section iioo of the Revenue Act of 1 9 17 is hereby repealed, to take effect on July I, 1919, and thereafter the rate of postage on all mail matter of the first class shall be the same as the rate in force on October 2, 1917: Provided, That letters written and mailed by soldiers, sailors, and marines assigned to duty in a foreign country 212 GENERAL PROVISIONS engaged in the present war may be mailed free of postage, subject to such rules and regulations as may be prescribed by the Postmaster General. Section 1107 of such Act is hereby repealed, to take effect July 11, 1919. Sec. 1402. That if any clause, sentence, para- validating clause graph, or part of this Act shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, im- pair, or invalidate the remainder of this Act, but shall be confined in its operation to the clause, sen- tence, paragraph, or part thereof directly involved in the controversy in which such judgment has been rendered. Sec. 1403. That the Revenue Act of 1916 is Nomenclature ot hereby amended by adding at the end thereof a p™s Revenue section to read as follows: "Sec. 903. That this Act may be cited as the 'Revenue Act of 1916.' " Sec. 1404. That the Revenue Act of 1917 is hereby amended by adding at the end thereof a section to read as follows : "Sec. 1303. That this Act may be cited as the 'Revenue Act of 191 7.' " Sec. 1405. That this Act may be cited as the TWa Act. "Revenue "Revenue Act of 1 9 1 8." A'* "' >«"" Sec. 1406. That all persons serving in the mili- Additional pay to tary or naval forces of the United States during 'XZl^dTr^Xntg the present war who have, since April 6, 1917, re- '""°" ^^'^ ""'" signed or been discharged under honorable condi- tions (or, in the case of reservists, been placed on inactive duty), or who at any time hereafter (but 213 REVENUE ACT OF 1918 not later than the termination of the current enlist- ment or term of service) in the case of the enlisted personnel and Female Nurses, or within one year after the termination of the present war in the case of officers, may resign or be discharged under hon- orable conditions (or, in the case of reservists, be placed on inactive duty), shall be paid, in addition to all other amounts due them in pursuance of law, $60 each. This amount shall not be paid (i) to any person who though appointed or inducted into the mili- tary or naval forces on or prior to November 11, 19 1 8, had not reported for duty at his station on or prior to such date; or (2) to any person who has already received one month's pay under the pro- visions of section 9 of the act entitled "An Act to authorize the President to increase temporarily the military establishment of the United States," ap- proved May 18, 1917; or (3) to any person who is entitled to retired pay; or (4) to the heirs or legal representatives of any person entitled to any payment under this section who has died or may die before receiving such payment. In the case of any person who subsequent to separation from the service as above specified has been appointed or inducted into the military or naval forces of the United States and has been or is again separated from the service as above specified, only one pay- ment of $60 shall be made. The above amount, in the case of separation from the service on or prior to the passage of this Act, shall be paid as soon as practicable after the passage of this Act, and in the case of separation from the service after the passage of this Act shall be paid at the time of such separation. 214 GENERAL PROVISIONS The amounts herein provided for shall be paid out of the appropriations for "Pay of the Army" and "Pay of the Navy," respectively, by such dis- bursing officers as may be designated by the Secre- tary of War and the Secretary of the Navy. The Secretary of War and the Secretary of the Navy respectively shall make all regulations neces- sary for the enforcement of the provisions of this section. Sec. 1407. That the provisions of section c of Extension of uquor iA'ti;(A» '*■"* *° District of the Act entitled An Act making appropriations coiumMa for the service of the Post Office Department for the fiscal year ending June 30, 191 8, and for other purposes," approved March 3, 1917, relating to intoxicating liquors in interstate commerce, as amended by section mo of an Act entitled "An Act to provide revenue to defray w^ar expenses and for other purposes," approved October 3, 1917, be, and the same are hereby, made applicable to the District of Columbia. Sec. 1408. That every person who on or after copy to be fiied of April 6, 1917, has entered into any contract, under- unHe^stTt^^c*"'' taking, or agreement with the United States, or with any department, bureau, officer, commission, board, or agency under the United States or acting in its behalf, or with any other person having con- tract relations with the United States, for the per- formance of any work or the supplying of any materials or property for the use of or for the ac- count of the United States, shall, within thirty days after a request of the Commissioner therefor, file with the Commissioner a true and correct copy of every such contract, undertaking, or agreement. 215 eminent after April 6, 1917 Penalty Supplementary statements may be required This Act to take effect REVENUE ACT OF 1918 Whoever fails to comply with such request of the Commissioner shall be guilty of a misdemeanor and shall be punished by a fine of not more than $i,ooo, or by imprisonment for not more than one year, or both. The Commissioner shall (when not violative of the technical military or naval secrets of the Gov- ernment) have access to all information and data relating to any such contract, undertaking, or agreement, in the possession, control or custody of any department, bureau, board, agency, officer or commission of the United States and may call upon any such department, bureau, board, agency, officer or commission for a full statement and description of any allowance for amortization, obsolescence, depreciation or loss, or of any valuation, appraisal, adjustment or final settlement, made in pursuance of any such contract, undertaking, or agreement. Sec. 1409. That unless otherwise herein spe- cially provided, this Act shall take effect on the day following its passage. 216 Index PAGE Abatement of tax for loss, claim with 1918 return ... 24, 48 Absence of taxpayer: Extension of time 39j 40, 56 When agent shall make return 37 Accident and health insurance received, is exempt . . . . 19 Accounting period, change of 16, 38, 39 Accumulated profits of corporations, how taxed 32 Act to take effect 216 Additional income or surtax 11, 12 Dividends included for 16 Adjustment for over- or understatement in return .... 57 Administrative Provisions, General, Title XIII .... 189 Administrative Provisions, Income Tax, Title II, Part IV . 55 Additional penalty for fraudulent statement .... 57 Adjustment of over- or understatement 57 Brokers' returns of information 62 Collection of foreign items 65 Commissioner to examine returns 56 May prevent departure to evade tax 58 Dividend payments, information of 62 Information at source of payments 62, 63 Instructions on return form are notice and demand for first payment 58 Notice and demand 57 Payment of tax in installments 55 In single payment 56 Penalty for delay in payment 58 Other penalties 61 Porto Rico and Philippine Islands, tax for 66 Receipts for taxes on request 60 Refunds of overpayments 61 United States possessions, tax on citizens of .... 65 Admissions and Dues, Tax on. Title VII 142 Admission defined 144 Boxes and seats at opera or theater 143 217 INDEX PAGE Cabarets 143 Children under twelve 142 Collection of taxes 145 Dues, tax on, after April i, 1919 144 Excess price of tickets, tax on 143 Exemptions and exceptions 144, 142 Fraternal orders, exempt 145 Free admissions and reduced rates 142 Price of ticket and name of vendor to be thereon . . . 144 Returns, by person collecting tax 145 Roof gardens 143 Theater tickets 142 Advisory Tax Board created 190 Agent, returns by 37 Agreement of sale of produce, stamp tax on 180 Of sale of shares, stamp tax on 178 Agricultural organizations exempt from income tax ... 41 Alcohol, provisions pertaining to ill Ale, tax on 116 Alien residents, credits for taxes 36 Aliens, nonresident individual: Claims for exemption from withholding .... 27, 34 Credits 27, 34 Credits for tax withheld 35 Property subject to distraint for tax . 28 Return must be filed to obtain credit 27 Returns 40 Tax paid at source for 33 Allocation of stock dividends to years earned 5 Provisions for taxing allocations 10 Amortization of war plant and equipment: By individuals 22 By corporations 46 Annuity, amount of premium returned, exempt 17 Art porcelains and bronzes, etc., tax on sale of 149 Articles sold or leased, tax on 146 Held for sale when act is passed: Distilled spirits, tax on 106, 112, 113 Exceptions 114 Tobacco and snuff 137 Wines 113,120 Assessment and Collection of Tax : As to individuals: Date of payment 55, 39 Deductions of tax at source on tax-free covenant bonds 33,34 Deductions of normal tax on aliens' income .... 33 218 INDEX PAGE License required to collect foreign items 65 Payment of tax, installments or single payment . . 55, 56 By U. S. certificates of indebtedness or check . . . 200 Penalty for delay in payment 58 Returns required 37 Returns, when and where to be filed 39 Tax due 55 As to corporations: Date of payment 55, 39 Deduction of tax at source on tax-free covenant bonds . 51 Deduction of tax on income of foreign corporations . 51 License required to collect foreign items 65 Payment of tax by U. S. certificates of indebtedness or uncertified check 200 Penalty for delay in payment 58 Returns required 52, 53 Time and place for filing 55 Tax due (same as for individuals, see page 39) ... 55 War-profits and excess-profits tax (provisions same as for income tax) 85 As to employment of child labor 188 Athletic goods sold, tax on 146 Attorney, power of, stamp tax on 183 Automatic slot machines, sale or lease of, tax on ... . 148 Automobile, tax on sale of, and accessories 146 Tax on operation for hire 160 Bathrobes, tax on excess price of 151 Beer, tax on sale of 116 Bequests, exempt from income tax 18 Betterments, no deduction allowed for improvements: Individuals 26 Corporations (same as individuals, page 26) .... 50 Beverages, tax on, Title VI 106 Alcohol, provisions pertaining to 1 11 Ale and beer, tax on 116 Bottled water, tax on 132 Brandy, tax on 119 Carbonated drinks, tax on 132 Champagnes, tax on 119 Cordials, tax on 119 Distilled spirits, tax on 106 Fermented liquors, tax on 116 Ginger ale, tax on 132 Grape juice, tax on 132 Ice-cream sold at ice-cream parlors, tax on 133 219 INDEX PAGE Ice-cream sodas 133 Perfumes containing distilled spirits, tax on .... 109 Rectified spirits, tax on II3 Sales at soda fountains and ice-cream parlors .... 133 Soft drinks, tax on 132, 133 Bill for cash sales, exempt from stamp tax 181 Billiard room owners, tax on 160 Boats, sale of, excise tax on 148 User of boat, special tax on 162 Bond interest, exemptions from income tax 18 Bonds : Containing tax-free covenant, interest deductible at source 34i 5i Interest on government bonds, exempt to what extent . 18 Returns (disclosure) of all interest payments regardless of amounts 63 Returns (disclosure) of all interest payments on bonds and dividends of foreign corporations 63 Bonds of indebtedness, stamp tax on 177 Bonds, indemnity and surety, stamp tax on 177 Bonds of United States, exempt only to extent provided in Act authorizing same 18 Bonnets, tax on excess price of 151 Bookkeeping : Corporations 52 Individuals 16, 38 Inventories 7 Books, examination of, by government officers 194 Boots, tax on excess price of 151 Bottled water, etc., tax on 132 Bowling-alley owners, tax on 160 Brandy, tax on 119 Brewers, tax on 160 Brokers, returns of information 62, 63 Information to be disclosed by, regarding customers . . 62 Tax on 157 Business expense, allowable deduction to individuals ... 20 Corporations 44 Foreign corporations 49 Business leagues exempt from tax 42 Cabarets, tax on admission to 143 Cameras, sale of, tax on 147 Candy, tax on 147 Capital invested, determined for war-excess-profits tax . . 76 Does not Include . . . . • 77 Of foreign corporations 78 220 INDEX PAGE How determined in difficult cases 78 Stock, without par value, as invested capital .... 76 Capital stock tax on capital stock of corporations . . . .155 Capital stock, stamp tax on issue 178 Stamp tax on sale or transfer of 177 Caps, tax on excess price of 151 Carbonated drinks, tax on 132 Cards, playing, stamp tax on 183 Carpets, tax on excess price of 150 Carriers, taxed on transportation of own commodities . . . lOl Cash sale, bill for, exempt from stamp tax 181 Casualty insurance policy, tax on 105 Cemetery companies exempt from tax 41 Certificates of indebtedness in payment of taxes 200 Champagne, tax on 119 Charitable organizations: Contributions to, are partly deductible from net income by citizens 23 Exempt from tax 41 Checks, uncertified, in payment of tax 200 Stamp tax on 181 Chewing gum, tax on 147 Child labor, employment of, Title XII, tax on 184 Age certificates 186 Assessment of tax 188 Computation of net profits 185 Employment certificates 187 Fair market price governs tax on sale 186 Inspection of working places 188 Net profits 185 Payment of tax . . .... .... 188 Tax basis 184 Taxable year 188 Children, additional exemption of $200 for each dependent . 27 Admission tax 142 Cigars and cigarettes, tax on sale of 134 Floor tax on . 137 Manufacturers of, tax on 162 Cigarette papers and tubes, tax on 137 Circus owners, tax on 159 Citizens of U. S. possessions, tax on 260 Claim for exemption to be filed with withholding agent on or before February i 34 Claims for credits by nonresident aliens 27, 34 Club dues, tax on 144 Coca leaves, tax on manufactures of and sale of . . 165, 167 Collateral security, no stamp tax on, when 178 221 INDEX PAGE Collection of foreign items, license required 65 Collection of taxes where not specifically provided for . . . 194 Collector of Internal Revenue: Annual returns made by, in v\rhat cases 204 May grant extension 206 May make returns, v^hen 206 To examine books of taxpayer 205 To extend time for filing return 206 To proceed through district for inspection 203 When he may proceed outside his district 205 Commissioner of Internal Revenue: Assesses income taxes 206 May grant extension 206 May make return, when 206 To examine books, papers, when no return 194 To examine returns 56 Concert halls, tax on owners of 158 Consumption taxes on articles sold 146-149 Contributions to charitable organizations 23 Contracts made prior to May 9, 1917, and September 3, 1918 . 198 Conveyances, stamp tax on 182 Cordials, tax on 119 Corporation defined i Corporations (Income Tax), Title II, Part III .... 40 Accounting 52, 53 Change of method of accounting 38 Adjustment for over- or underpayment of taxes ... 57 Administrative provisions 55 Affiliated corporations 53, 54 Amortization of war plant and equipment 46 Assessment and collection of tax 55, 56, 206 Consolidated return for affiliated corporations .... 53 Corporation owning voting stock of foreign corporation . 54 Credits allowed 50 For taxes 51,52, 61 Deductions allowed 44 Definition of i Depletion of mines and other natural resources ... 46 Depreciation ^5 Dividends, returns of payments of 62 Received from another corporation, deductible ... 45 Exempt corporations 41, 42, 43 Exemption for domestic corporation $2,000 .... 50 Fiscal year 2 Foreign corporation: Deductions allowed ^q Gross income ^ 222 INDEX PAGE Returns 52, 55 Tax withheld at source 5i Voting stock of, owned by domestic corporation . . 54 Government contracts 2, 53, 54 Gross income defined 43 Information of dividend payments 62 Of interest paid on bonds 63 Of payments of $1,000 or over 62, 63 By brokers 62 Returns of, due • 55, 39 Returns of, for tax withheld, due 34 Insurance companies' reserves, when deductible . . 47, 48 Items not deductible 50 Losses allowable as deduction 45, 49 Net income 43 Notice and demand for payment 57 Return form sufficient notice and demand for first pay- ment 57 Payment of tax withheld at source 51, 34 Payment of corporation income tax 55, 56 Penalties 56, 57, 58, 61 Personal service corporation, defined 3 No corporation tax 29, 43 Philippines, Act of 19 16, applies 66 Porto Rico, Act of 1916, applies 66 Possessions of the United States, citizens of, how taxed . 65 Profits of corporations taxable to stockholders .... 32 Receipts for taxes upon request 60 Refunds of excess tax payments 61 Reserves for insurance companies 47, 48 Returns of income tax 52, 55 Of foreign corporations 55 Extension of time for filing 56 Taxable year 3 Tax due gg Tax rate, year 1918 40 Year 1919 40 Tax on transportation systems when apportioned ... 41 Understatement in return and penalties 57 Cosmetics, tax on sale of ig^ Courts, jurisdiction of 207 Covenants, tax-free, in bonds . 33, 34 Credit, sales on, provisions for ig5 Credits for normal tax: Alien, nonresident individuals must file returns to obtain 27,28 For dependents or children under eighteen, $200 ... 27 223 INDEX PAGE For dividends 26 For married person or head of family, $2,000 .... 26 For single person 20 For partners 20 For trust estates 3i For U. S. bond interest 26 When apportioned 39 Credit for taxes: Individuals 35) 3° Corporations 51 Personal service corporation 9 Customers of brokers, information at source 62 Customhouse brokers, tax on 158 Customhouse entries, stamp tax on 182 Daggers and hunting knives, tax on sale of I47 Dealer, defined 166, 199 Debts, worthless and charged off, deductible : By corporations 45 By individuals 22 Decedent estates, delay in payment of tax 95 Deduction of tax at source: On income of nonresident aliens 33 On income of foreign corporations 51 Applies to interest on tax-free covenant bonds . . 33, 34, 52 Exemption to be claimed on or before February 1 . . .34 Deductions allowed corporations in computing net income . 46-48 As to domestic corporations : Amortization of war plant, etc 46 Business expense 44 Debts charged off 45 Depletion of natural resources 46 Depreciation, reasonable 46 Dividends 45 Interest paid on indebtedness ■ . . 44 Losses sustained 45 Reserves of insurance companies and conditions . 47, 48 Deductions allowed individuals (see also Credits) .... 20 As to citizens or residents : Amortization of war plant equipment 22 Business expense 20 Contributions 23 Debts charged off 22 Depletion 23 Depreciation 22 Interest paid on indebtedness 20 Items not deductible 25 224 INDEX PAGE Losses 21, 22 Loss sustained in 1919 on 1918 inventory .... 24 Taxes 21 As to nonresident aliens 25, 27 Deeds, stamp tax on 182 Definitions: general definitions i Admission defined 144 Capital invested for war and excess-profits tax ... 76 Corporation i Dealer 166, 199 Dividend 4 Domestic i Fiduciary 3 First taxable year 3 Fiscal year 3 Foreign i Government contract 2 Gross income, corporations 43 Gross income, individuals 16 Military and naval forces of U. S 2 Net income, corporations 43 Net income, individuals 16 Paid 4 Person I Personal Service Corporation 3 Present war 3 Prewar period 71 Taxable year 3 Taxpayer 2 United States 1 Withholding agent 3 Delay in payment of tax, penalty for : Corporations 58 Individuals 58 Decedents' estates 94, 95 Depletion of mines and wells : Individuals 23 Corporations 46 Depreciation, deduction for: Corporations 46 Individuals 22 Descent, property acquired by, exempt from income tax . . 18 Devises exempt from income tax 18 Distilled spirits: Exemptions no Imports prohibited jog Penalties 114 225 INDEX PAGE Regulations regarding io6 Tax on 106,112,113 Transfer to warehouse 109 Distilleries, regulations affecting 115 Distillers, tax on 160 Distributions deemed to be from earnings or profits . . • 5,6 Dividend, defined 4 Deemed to be out of earnings since February 28, 1913 . 5 Included in gross income of individuals 17 Of corporations 43 Credited for normal tax of individuals 26 Deductible by corporations for tax 45 Information of, by corporations 62 Stock dividends considered income 5 Domestic, when applied to corporations, defined .... i Drafts, stamp tax on i8l Dues, tax on 144 Exemptions 145 Educational organizations exempt 41-42 Essences, tax on sale of 154 Estate Tax, Title IV 85 Administrator same as "executor" 85 Beneficiary of insurance to bear share of tax .... 96 Collection of tax when not paid 94, 95 Collector defined 85 May assess when no return is made 94 May enforce payment 94 Commissioner may grant extension 94 Deductions, resident decedent estate .... 89, 90, 91 Nonresident decedent estate 91,92 Executor defined 85 To give collector notice 93 To pay collector the tax 94 Exempt estates (of those in service) 87 Exemption of $50,000 91 Extension of time for return 94 Gross estate determined, resident 89 Nonresident 91, 92 Payment of tax 94 Penalties gg^ gy Property of nonresident which is deemed within the U. S. 92 Receipts for taxes gg Refunds for taxes redetermined 92 Return, when collector to make 94 Extension gt When gross estate exceeds $50,000 93 226 INDEX PAGE Tax rates on net estate 86 Tax a lien on estate ten years 96 Due one year after death 94 Transfers in contemplation of death 96 Trusts in contemplation of death 96 Estates and Trusts — Income Tax 30 Beneficiary to pay tax, when 3' Credits allowed .... 31 Fiduciary to make return 30 Fiduciary, when to pay tax 31 Excess-profits tax (see index at War-profits Tax) .... 67 Excise Taxes, Title IX 146 On articles sold or leased 146-149 On excess prices paid for articles 150-152 On jewelry sold 152 On motion pictures 153 On toilet articles and proprietary medicines . . . .154 Exempt income 17 Annuities 17 Bequests 18 Devises 18 Gifts 18 Income of foreign governments 18 Interest on farm loan securities . 18 Interest on government obligations 18 Proceeds from insurance policies I7> 19 Public utility income accruing to State or United States . 19 Salary of those in active service up to $3,500 .... 19 Exempt organizations from income tax, and conditions ... 41 Agricultural 41 Building loan associations, domestic 41 Business leagues 42 Cemetery companies 41 Charitable associations 41 Civic leagues 42 Clubs for recreation only 42 Corporations holding title only 42 Educational organizations 41 Farmers' associations 42 Federal land banks 43 Fraternal beneficial societies 41 Fruit growers' associations 42 Labor organizations 41 Mutual insurance companies 42 Mutual savings banks 41 National farm loan associations 43 Personal service corporations 43 227 INDEX PAGE Religious, etc., organizations 41 Scientific organizations 41 Exhibitions, owners of public, tax on I59 Express transportation, tax on 98 Extension of time for filing return 39-40i 206 When interest runs on amount of tax 56 Extension of general laws to this Act 193 Extracts, tax on 154 Failure to make return or supply information, penalty . . 58, 61 False or fraudulent return, penalty 57 Fans, tax on excess price of 151 Farm Loan Act securities exempt from income tax . . . . 18 Fermented liquors, tax on 116 Fiduciary defined 3 Subject to provisions for individuals 38 To make information returns 38 To make returns for trusts and estates 30 When to pay the tax 31 Films, tax on 147 Fire-arms, tax on sale of 147 Fire insurance, tax on policies of 104 Fiscal year defined 3 Change of period of 16 Adjustment of income tax for years 1917-1918-1919 . . 9 Apportionment of partner's income ....... 10 With different rates 8 Floor tax on distilled spirits 106, 112, 113 Exceptions to 114 On tobacco, etc., and snuff 137 On wines 113,120 On articles on which tax is paid at passage of Act . . 194 Foreign defined i Foreign governments, income from U. S. exempt .... 18 Foreign items, collections of, license required 65 Fraction of a cent 199 Fraternal organizations, when exempt from income tax . . 41 Freight, tax on transportation of 98 Gain or loss on sale determined 6 Gains included in gross income 17 Games, tax on i^n General Provisions, Title XIV 210 Administrative provisions of previous Act retained . .211 Extension of liquor law to District of Columbia . . .215 Copy of contract with U. S. Government to be filed . .215 This Act to take effect 216 228 INDEX PAGE Gifts received exempt from income tax 18 Gifts to charitable, educational and scientific corporations, de- duction allowed for 23 Ginger ale, tax on 132 Government bonds exempt from stamp tax 172 Interest from, exempt 18 Government contract defined 2 Government officials, which are subject to income tax . . .17 Grape-juice, tax on 132 Gross income defined, citizen's and resident's 16 Nonresident alien's 20 Handbags, tax on excess price of 150 Hats, tax on excess price of 151 Head of a family, specific exemption 26 Holding companies, evidence of attempt to evade tax ... 32 Housecoats, tax on excess price of 151 Husband and wife, specific exemption 26 Improvements, when no deduction allowed for: Individuals 26 Corporations 50 Income from within U. S. to foreign governments exempt . . 18 Income exempted (see Exempt Income) 17 Income Tax as to Corporations. See Index at "Corporations." Income Tax — Individuals, Title II, Part II 11 Accounting method of 16 Additional or surtax 11 Agent, when to make return 37 Amortization of war plant equipment 22 Citizens of U. S. possessions, how taxed 65 Contributions deductible 23 Credits allowed 26 Credits for taxes 35, 36, 37 Deductions allowed 20 Depletion of natural resources 23 Depreciation 22 Estates, income of 30 Exempt income 17-19 Exemption of $3,500 pay of active service 19 Fiduciary returns 38 Fiscal year changed 16 Gains included in income 18 Gross income 16 Gross income does not include 17 Information at source 62 By brokers 62 229 INDEX PAGE Losses deductible 21,22 Mines, profits on sale of 15 Natural resources, profits on sale of 15 Net income 16 Nonresident aliens: Claim for exemption from withholding .... 34, 27 Credits (must file returns to obtain) 27 Credits for tax withheld 35 Deductions allowed 25 Gross income 20 Normal tax for year 1918 11 For year 1919 and thereafter 11 Partners taxed, not partnership 28 Payment of income tax 55-59 Payment of tax withheld at source 34 Penalties 56, 57, 58, 61 Personal service corporation: Income from taxable to individual 28, 29 Receipts for tax on request 60 Refunds of taxes erroneously paid 61 Resident aliens, credits for taxes 36 Returns of income tax 39 Of information 62, 63 Of tax withheld 34, 63 By brokers 62 By fiduciary 38 Salaries of certain government officials taxable ... 17 Salary exemption of $3,500 to those in active service . . 19 Surtaxes 11-15 Taxes deductible 21 Trusts, income of, taxable 30 Credit for taxes 36 Credits to 31 Understatement in returns 40 Income tax rates: Individuals 11 Corporations 40 Information at source: By brokers 62 By corporations 62, 63 Penalties 61 Inheritance Tax, Estate Tax, Title IV 85 Installment payments of tax 55 Insurance company reserve, when deductible . . . . 47, 48 Insurance, Tax on. Title V, at page 103 Accident insurance 104 Casualty insurance 105 Collection of tax 106 230 INDEX PAGE Exempt policies i05 Fire insurance 104 Group policies 104 Inland insurance 104 Life insurance policies 104 Life, accident and health combination policies .... 104 Marine insurance 104 Penalties 106 Reinsurance exempt 105 Returns 105 Interest: Information to be furnished of payments of . . . 62, 63 On tax-free bonds to be withheld 33) 34 On government bonds exempt 18 On government bonds issued after September i, 1917 . . l8 Paid on indebtedness, deductible: By individuals 20 By corporations 44 Withholding at source from foreign corporations . . .51 Inventories, when Commissioner may prescribe 7 Invested Capital (see Capital Invested). Jewelry, tax on sale of 152 Joint-stock company, included in term corporation .... I Judges of U. S. Court, salary taxed 17 Jurisdiction of U. S. Court 207 Keeping accounts, no prescribed form: Individuals 16, 38 Corporations 52 Kimonos, tax on excess price of 152 Legislative Drafting Service created 191 Letters from sailors and soldiers abroad exempt from postage 212 License required for collection of foreign items 65 Life insurance policy, proceeds of, when exempt 17 Life insurance, tax on 104 Liquors, tax on 119 Liquor dealers, tax on 160 Losses deductible by individual 21, 22 By corporation 45 Losses, when apportionable to partner or beneficiary ... 8 Loss or gain on sale determined 6 Lost stamps, when replaced for liquors and tobacco . . . 200 Luxury taxes on articles sold 150 Exceptions 152 231 INDEX PAGE Mail, first class postage reduced 3i2 Letters of soldiers and sailors abroad, free 212 Marine insurance, tax on 104 Married man or woman, personal exemption 26 Medicines, tax on i54 Membership dues, tax on ... . 144 Military and naval forces of U. S. includes 2 Mineral waters, tax on 132 Mines, depletion of, deduction for 23 Mines, tax limited on profits of sale of 15 Moving pictures, tax on 153 Motor-boats, tax on sale of 148 Tax on use of 162 Motorcycles, tax on sale of 146 Municipal bonds, exempt from stamp tax 172 Interest of, exempt from tax 18 Musical instruments, tax on 146 Mutual insurance companies, additional deductions ... 48 Neckwear, tax on excess price of 151 Net income, income tax, individuals 16 Income tax, corporations 43 War-profits and excess-profits tax 74 Net losses for income tax defined 7 Nightclothes, tax on excess price of 151 Nonresident aliens, tax withheld at source 33 Claims for exemption from withholding .... 27, 34 Credits 27, 34 Credits for tax withheld 35 Property subject to distraint for tax 28 Returns 40 Normal tax, individuals 11 Notes, promissory, tax on 181 Occupational Taxes (see index at Special Taxes) .... 157 Oil, tax on transportation of 99 Opera boxes, tax on 14,3 Opera tickets, tax on 142 Opium and derivatives, dealers in, tax on 165 Quantity sold, tax on 167 Organs, tax on 146 Paid means paid or accrued 4 Paintings, tax on sale of 14.9 Parcel post, stamp tax on 183 Partners, credits to 28 Partnerships, partners, not partnership, taxed . . . . 28, 29 232 INDEX PAGE Adjustment of partner's income for fiscal year .... 28 Net income, how computed 29 To make returns 37 Passage tickets, tax on 182 Passengers, tax on 98 Patent medicines, tax on 134 Pawnbrokers, tax on 157 Payment of income taxes in installments SSi S6 Payment of tax at source for nonresident aliens 33 For foreign corporations 51 On tax-free covenant bonds 33> 34 Returns for amounts withheld 34 Payments to be reported: Of $1,000 or more 62 Of interest on bonds 63 Penalties : For failure to affix stamps 173 For failure to make returns 58,206,207 For fraud in connection with stamps 174 For failure to supply information returns 61 For making false returns 62, 207 For delay in paying tax: Corporations 58, 206 Individuals 58, 206 Decedent's estate 94, 95 For disclosing contents of return 202 Perfumes, tax on 109, 154 Person, word as used includes I Personal expenses not a deduction 25 Personal service corporation defined 3 Distributees of, taxed 29 Refund for taxes paid 9 Tax does not apply to year begun in 1917 10 Permanent improvements no deduction for 26, 50 Petticoats, tax on excess price of 152 Philippine Islands, tax for 66 Pianos, tax on 146 Picture frames, tax on excess price of 150 Pills, tax on 154 Playing cards, tax on 183 Portable lighting fixtures, tax on excess price of .... 150 Porto Rico, tax for 66 Postage rate after July i, 1919 212 Power of attorney, stamp tax on 183 Premiums paid on life insurance not deductible 26 Present war means 3 Prewar period defined 71 233 INDEX PAGE Produce, sale of, stamp tax on i8o Profits of corporation, when taxed to stockholders .... 32 Promissory notes, stamp tax on 181 Proprietary medicines, tax on 154 Proxy, stamp tax on 182 Public records, returns are 64 Public utility contracts, income from, when exempt . . .19 Purses, tax on excess price of 150 Railroads under Federal control, tax apportioned .... 41 Rates, normal tax 11 Surtax 11-15 Receipts for income taxes paid, on request 60 Receivers' returns • ■ • 53 Rectified spirits, tax on 113 Redetermination of tax, for loss 8 Refund of excess payments of tax 61 Restoration of property, when not deductible 26 Return form for income tax constitutes notice and demand . 58 Returns : By agents 37 Brokers 62 Compelled 193 Corporations 52, 55 Individuals 37, 39 Information 62 Fiduciary 38, 39 Nonresident aliens 37) 39j 40 Partnership 37 Penalties 61 When accounting period is changed 38 Understatement in returns 40 Returns not otherwise provided for in the Act .... 203 Returns to be public records 64 To be listed 64 Riding academy owners, tax on 160 Roof gardens, tax on admission to 143 Rugs, tax on excess price of 150 Salaries of some government officials taxed 17 $3,500 of soldiers and sailors in active service exempt . 19 Sale of property, gain or loss determined 202 Secretary defined I Shirts, tax on excess price of 151 Shipbrokers, tax on 158 Shoes, tax on excess price of 151 Slippers, tax on excess price of 151 234 INDEX PAGE Smoking jackets, tax on excess price of '51 Snuff, tax on 136, 137 Soft drinks, tax on • • '32> 133 Soldiers' mail, when postage free ^'^ Soldiers in active service, exemption '9 Special Taxes (Capital Stock and Occupational Taxes), Title X 155 Automobile owners, operating for hire or renting . . . 160 Billiard room owners loo Boat owners and users 162 Bowling alley, owners of 160 Brewers 160 Brokers i57 Capital stock tax (corporations) 156 Cigars and cigarettes, manufacturers of 162 Circus owners I59 Coca leaves and compounds, importers of . . . 165, 167 Concert hall owners 158 Customhouse brokers 158 Dealer defined 166 Distillers 160 Exhibitions, owners of public 159 Importer and manufacturer defined 165 Liquor dealers 160 Museums, owners of 158 Opium, coca leaves and compounds 165, 167 Pawnbrokers 157 Person defined 166 Registration, when required for drug dealers .... 166 Riding academies, owners of 160 Shipbrokers 158 Shooting galleries, owners of 160 Taxes imposed are in addition to other taxes .... 167 Tobacco, manufacturers and dealers in i6l Theaters, owners of 158 Sporting goods, tax on 146 Stamp taxes. Title XI 172 Bonds, of indebtedness 177 Bonds, indemnity and surety 177 Capital stock, issue of 178 Capital stock, sale of 177 Checks and drafts 181 Conveyances 182 Customhouse entries 182 Customhouse entries for withdrawal 182 Exemptions and exceptions 172, 178, 179, 181 Insurance policies 183 235 INDEX ' rAGE Parcel post 183 Passage tickets 182 Playing cards io3 Promissory notes i°i Powers of attorney 183 Produce, sale of, on exchange 180 Proxies 182 Statistics to be published by Commissioner 65 Stockholders, when taxed on corporation profits .... 32 Stockings (silk), tax on excess price of 151 Surtax rates 12 Taxable year defined 3 Tax-free covenant bonds 33> 34 Taxes deductible: By individuals 21 By corporations 45 Taxpayer defined 2 Telephone and telegraph, tax on 99 Theater owners, tax on 158 Theater tickets, tax on 142 Theater boxes, tax on 143 Tobacco, tax on 135, 137 Leaf, dealers in, additional tax for violation .... 141 Manufacturers of, tax on 161 Toilet goods, tax on 154 Transportation, tax on, Title V 98 All services for hire as specified are taxable .... lOl Berths 99 Cable messages 99 Collection of 'tax 102 Credit for refunds upon which tax has been paid . . . 103 Exemptions 100 Express 98 Freight 98 Leased wires lOO Mileage books and tickets 100 Parlor-car seats 99 Penalties 103 Persons by rail or water 98 Pipe lines 99, 102 Returns 103 Tax, who paid by lOo Need not be listed separately 102 Telephone messages 99 Telegrams gg Tickets 100 236 INDEX PAGE Trunks, tax on excess price of _ • _ ■ ■ • '50 Trusts and estates, income taxable. "^(See also Fiduciary.) . 30 Trusts and transfers in contemplation of death 96 Umbrellas, tax on excess price of '5' Understatements in returns 40 Underwear, tax on excess price of 151 Undistributed profits of corporations, when taxed to stock- holders 32 United States defined I United States Courts, jurisdiction of 207 United States bonds, exemptions from income tax . . . . 18 United States possessions, how citizens of, are taxed ... 65 Validating clause 213 Valises, tax on excess price of 150 Virgin Islands, importations from 193 Waistcoats, tax on excess price of 151 Waists, tax on excess price of 152 War-Profits and Excess-Profits Tax (on corporations only), Title III 67 Provisions of income tax apply to 85 Admissible assets 75 Computation of tax 68, 69, 73, 78, 79 When 30% of income is from personal service cor- poration 70 Credits for war-profits tax 71 When no prewar existence 72 When no prewar income 72 Prewar period defined 71 Exemption $3,000 to domestic corporation .... 72 No $3,000 exemption to foreign corporation .... 72 Credits for excess-profits tax 73 $3,000 exemption not allowed to foreign corporations . 73 Definitions of terms 67 Exempt corporations 71 Gold mining, income from, exempt 71 Government contract, income from 68 Inadmissible assets 75 Intangible property defined 75 Invested Capital defined 76 Does not include 77 Of foreign corporation 78 Unable to determine 78 Limitation on amount of tax 69 Mines, profits on sale of 85 237 INDEX PAGE Net income, for taxable and prewar years 74 Oil and gas wells, profits on sale of 15 Partnership excess-profits tax paid for part of 1918 to be refunded 85 Personal service corporation tax paid for 1918 to be refunded 85 Prewar incomes 74 Provisions of income tax applicable .... 79, 81, 83, 85 Reorganizations 81 Predecessor business, individual or partnership . . .81 Ownership in the same persons 83 Readjustment of values of assets 82 When option as to basis of tax 81 Returns by every corporation not exempt 85 Time and place for filing 85 Stock without par value 76 Tangible property 75 Taxable year 74 Tax for part of year 71 For year 1918 67 For year 1919 68 For first taxable year 67 Tax due 85 Wines, tax on 118,119,120 Withholding agent defined 3 Withholding of tax, by whom and when 33, 51 Works of art, tax on sale of 149 Yachts, sale of, tax on 148 User of, tax on i52 238