360 attendance, testimony or production of books. papers or other data. (b) The district courts of the United States at the 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 and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce such provisions. (c) The paragraph added by section 1310 of the revenue act of 1921 at the end of paragraph twentieth of section 24 of the judicial code, relating to the jurisdiction of district courts, is re-enacted without change, as follows: "Concurrent with the Court of Claims, of any suit or proceeding, commenced after the passage of the revenue act of 1921. for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected or of any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected. under the internal revenue laws, even if the claim exceeds $10.000. if the collector of internal revenue by whom such tax. penalty or sum was collected is dead at the time such suit or proceeding is commenced." Frauds on Purchasers. Sec. 1026. Whoever 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, (1) 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 ished by a fine of not more than $1.000 or by imprisonment not exceeding one year, or both. pun Lost Stamps for Tobacco, Cigars and So Forth. Sec. 1027. Section 3315 of the revised statis amended, re-enacted utes. without as change, as follows: internal "Sec. 3315. The commissioner of revenue may, under regulations prescribed by him with the approval of the secretary of the issue for restamping treasury, stamps 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 stroyed by unavoidable accident." or de Consolidation of Liberty Bond Tax Sec. 1028. The various acts authorizing the issues of liberty bonds are amended and supplemented as follows: (a) On and after Jan. 1, 1924. 4 per centum and 44 per centum liberty bonds shall be exempt graduated income from additional commonly known and taxes. as surtaxes, now or www.profits and war-profits taxes. fter imposed by the United States upon the income or profits of individuals, partnerships, corporations or associations, in respect to the interest on aggregate principal amounts thereof as follows: Until the expiration of two years after the date of the termination of the war between the United States and the German government, as fixed by proclamation of the president, on $125,000 aggregate principal amount; and for three years more on $50,000 aggregate principal amount. (b) The exemptions provided in subdivision (a) shall be in addition to the exemptions bond act, and in addition to the exemption provided in section 7 of the second liberty provided in subdivision (3) of section 1 of the supplement to the second liberty bond act in respect to bonds issued upon conversion of 3% per centum bonds, but shall be in lieu of the exemptions provided and free from the conditions and limitations imposed (1) and in subdivisions (2) of section 1 of the supplement to the second liberty bond act and in section 2 of the victory liberty loan act. Deposits of United States Bonds or Notes in Lieu of Surety. may. Sec. 1020. Wherever by the laws of the United States or regulations made pursuant thereto, any person is required to furnish any recognizance, stipulation, bond, guaranty or undertaking, hereinafter called "penal bond." with surety or sureties, such person in lieu of such surety or sureties, deposit as security with the official having authority to United States libapprove such penal bond. erty bonds or other bonds or notes of the United States in a sum equal at their par penal bond value to the amount of such required to be furnished, together with an agreement authorizing such official to collect or sell such bonds or notes so deposited in case of any default in the performance of any of the conditions or stipulations of such The acceptance of such United penal bond. States bonds or notes in lieu of surety or sureties required by law shall have the same force and effect as individual or corporate sureties or certified checks, bank drafts, postThe bonds or office money orders or cash, for the penalty or amount of such penal bond. notes deposited, hereunder and such other United States bonds or notes as may be sub stituted therefor from time to time as such security, may be deposited with the treasurer of the United States, a federal reserve bank or other depositary duly designated for that purpose by the secretary, which shall issue receipts therefor, describing such notes so deposited. As soon as security for the performance of such penal bond is no longer necessary, such bonds or notes so deposited shall be returned to the depositor: a person or persons Provided. That in case supplying a contractor with labor or material as provided by the act of congress, approved Feb. 24. 1905 (33 Stat. 811), entitled "An amend an act approved Aug. 13. act to 1894. entitled 'An act for the protection of persons furnishing materials 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 or notes nor any surplus proceeds thereof until the expiration of the time limited by said ac's for the institution of suit by such persons or per sons, and in case suit shall be instituted within such time, shall hold said bonds or notes or proceeds subject to the order of the court having jurisdiction thereof: Provided further. bonds or That nothing herein contained shall affect or Enforcement of Tax Liens. Sec. 1030. Section 3207 of the revised statutes is amended to read as follows: "Sec. 3207. (a) In any case where there has been a refusal or neglect to pay any tax, and it has become necessary to seize and sell real estate to satisfy the same, the commissioner of internal revenue may direct a bill in chancery to be filed. in a district court of the United States, to enforce the lion of the United States for tax upon any real estate or to subject any real estate owned by the delinquent or in which he has any right. title or interest, to the payment of such tax. All persons having liens upon or claiming any interest in the real estate sought to be subjected as aforesaid, shall be made parties to such proceedings, and be brought into court as provided in other suits in chancery therein. And the said court shall, at the term next after the parties have been duly notified of the proceedings, unless otherwise ordered by the court, proceed to adjudicate all matters involved therein, and finally determine the merits of all claims to and liens upon the real estate in question, and, in all cases where a claim or interest of the United States therein is established, shall decree a sale of such real estate. by a proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States. of such bill the district court shall proceed to adjudicate the matters involved therein, in the same manner as in the case of bills filed under subdivision (a) of this section. For the purpose of such adjudication, the assessment of the tax upon which the lien of the United States is based shall be conclusively presumed to be valid, and all costs of the proceedings on the petition and the bill shall be borne by the person filing the bill." Special Deposits. Sec. 1031. (a) Section 3195 of the revised statutes is amended to read as follows: Sec. 3195. When any property liable to distraint for taxes is not divisible, so as to enable the collector by sale of a part thereof to raise the whole amount of the tax, with all costs and charges, the whole of such property shall be sold, and the surplus of the proceeds of the sale, alter making allowance for the amount of the tax, interest, penalties, and additions thereto, and for the costs and charges of the distraint and sale, shall be deposited with the treasurer of the United States as provided in subdivision (b) of section 3210." (b) Section 3210 of the revised statutes is amended to read as follows: "Sec. 3210. (a) Except as provided in subdivision (b) the gross amount of all taxes and revenues received under the provisions of this act, and collections of whatever nature received or collected by authority of any internal revenue law, shall be paid daily into the treasury of the United States under instructions of the secretary of the treasury as internal revenue collections, by the officer receiving or collecting the same, without any abatement or deduction on account of salary. compensation, fees, costs. charges. expenses or claims of any description. A certificate of such payment, stating the name of th depositor and the specific account on which the deposit was made, signed by the treasurer. assistant treasurer, designated depositary or proper officer of a deposit bank, shall be transmitted to the commissioner of internal revenue. "(b) Sums offered in compromise under the provisions of section 3229 of the revised statutes and section 35 of title II. of the national prohibition act, sums offered for the purchase of real estate under the provisions of section 3208 of the revised statutes, and surplus proceeds in any distraint sale, after making allowance for the amount of the tax interest, penalties and additions thereto, and for costs and charges of the distraint and sale, shall be deposited with the treasurer of the United States in a special deposit account in the name of the collector making the deposit. Upon acceptance of such offer in compromise or offer for the purchase of such real estate, the amount so accepted shall be withdrawn by the collector from his special deposit account with the treasurer of the United States and deposited in the treasury of the United States as internal revenue collections. Upon the rejection of any such offer, the commissioner shall authorize the collector, through whom the amount of such offer was submitted, to refund to the maker of such offer the amount thereof. In the case of surplus proceeds from distraint sales the commissioner shall, upon application and satisfactory proof in support thereof, "(b) Any person having a lien upon or any interest in such real estate, notice of which has been duly filed of record in the jurisdiction in which the real estate is located prior to the filing of notice of the lien of the United States as provided by section 3186 of the revised statutes as amended or any person purchasing the real estate at a sale to satisfy such prior lien or interest. may make written request to the commissioner of internal revenue to direct the filing of a bill in chancery as provided in subdivision (a), and if the commissioner fails to direct the filing of such bill within six months after receipt of such written request, such person or purchaser may, after giving notice to the commissioner, file a petition in the district court of the United States for the district in which the real estate is located, praying leave to file a bill for a final determination of all claims to or iiens upon the real estate in question. After a full hearing in open court, the district court may in its discretion enter an order granting leave to file such bill. in which the United States and all persons hav-thorize the collector through whom the ing liens upon or claiming any inerest in the real estate shall be made parties. Service on the United States shall be had in the manner provided by section 5 and 6 of the act of March 3. 1887. entitled 'An act to provide for the bringing of suits against the government of the United States.' Upon the filing au amount was received to refund the same to the person or persons legally entitled thereto." TITLE XI-GENERAL PROVISIONS. Repeals. Sec. 1100. (a) The following parts of the revenue act of 1921 are repealed, to take L 362 effect (except as otherwise provided in this act) upon the enactment of this act, subject to the limitations provided in subdivisions (b) and (c): Title II. (called "Income Tax") as of Jan. 1. 1924: Title IV. (called "Estate Tax"); and Title V. (called "Tax on Telegraph Telephone Messages") except subdivision (d) of section 500, effective on the expiration of thirty days after the enactment of this act; Sections 602 and 603 of title VI. (being the taxes on certain beverages and constituent parts thereof); Title VII. (called "Tax on Cigars, Tobacco and Manufactures Thereof"); Title VIII. (called "Tax on Admissions and Dues"), effective on the expiration of thirty days after he enactment of this act; Sections 901, 902, 903 and 904 of title IX. (being certain excise taxes); Section 900 of title IX. (being certain excise taxes) and section 905 of title IX. (being the tax on jewelry and similar articles). effective on the expiration of thirty days after the enactment of this act; Title X. (called "Special Taxes") effective on June 30, 1924; Title XI. (called "Stamp Taxes") effective on the expiration of thirty days after the enactment of this act; Title XII. (called "Tax on Employment of Child Labor"); Sections 1307, 1308, 1309, subdivision (c) of section 1310, sections 1311, 1312, 1313, 1314, 1315, 1316, 1318, 1320, 1321, 1322. 1323, 1324, 1325, 1326, 1328, 1329 and 1330 (being certain administrative provisions). (b) The parts of the revenue act of 1921 which are repealed by this act shall (except as provided in sections 280 and 316 and except as otherwise specifically provided in this act) remain in force for the assessment and collection of all taxes imposed by such act. and for the assessment, imposition, and collection of all interest, penalties or forfeitures which have accrued or may accrue in relation to any such taxes, and for the assess ment and collection, to the extent provided in the revenue act of 1921, of all taxes imposed by prior income, war-profits or excess-profits tax acts, and for the assessment, imposition and collection of all interest, penalties or forfeitures which have accrued or may In the crue in relation to any such taxes. case of any tax imposed by any part of the revenue act of 1921 repealed by this act, if there is a tax imposed by this act in lieu thereof, the provision imposing such tax shall remain in force until the corresponding tax under this act takes effect under the provisions of this act. ac (c) The repeal of title II. and title IV. of the revenue act of 1921 shall not be construed to take away the retroactive benefits (12) of subdivision allowed by paragraph (a) of section 214 or paragraph (14) of subdivision (a) of section 234, of the revenue act of 1921, or by section 401 or 403 of such act. Legislative Drafting Service. Sec. 1101. Section 1303 of the revenue act of 1918 is amended by adding at the end thereof a new subdivision to read as follows: "(d) After this subdivision takes effect the legislative drafting service shall be known as the office of the legislative counsel, and the (wo draftsmen shall be known as legislative Counsel. The positions of legislative counsel be allocated from time to time by the dont of the senate and the speaker of the of representatives, jointly, to the apgrade in the compensation schedules of section 13 of the classification act of 1923. matter as other officers of the United States Government Actuary. Sec. 1102. The salary of the government actuary, so long as the position is held by the present incumbent, shall be at the rate of $7.500 a year. Saving Clause in Event of Unconstitutionality. Sec. 1103. If any provision of this act or the application thereof to any person or circumstances is held invalid, the remainder of the act, and the application of such provision to other persons or circumstances, shall not be affected thereby. Effective Date of Act. re Sec. 1104. Except as otherwise provided, this act shall take effect upon its enactment. TITLE XII.-REDUCTION OF INCOME TAX PAYABLE IN 1924. taxpayer Sec. 1200. (a) Any making turn, for the calendar year 1923, of the taxes imposed by parts I. and II. of title II. of the revenue act of 1921 shall be entitled to an allowance by credit or refund of 25 per centum of the amount shown as the tax upon his return. (b) If the amount shown as the tax upon the return has been paid in full on or before the time of the enactment of this act, the amount of the allowance provided in subdivision (a) shall be credited or refunded as provided in section 281 of this act. (c) If the taxpayer has elected to pay the tax in installments and, at the time of the enactment of this act, the date prescribed for the payment of the last installment has not yet arrived, the amount of the allowance provided in subdivision (a) shall be prorated to the four installments. The amount so prorated to any installment, the date for payment of which has not arrived, shall be applied in The amount reduction of such installment. so prorated to any installment, the date for payment of which has arrived, shall be credited against the installment next falling due after the enactment of this act. (d) If the taxpayer has been granted an extension of time for payment of the tax or any installment thereof to a date subsequent to the enactment of this act, the amount of the allowance provided in subdivision (a) shall be applied in reduction of the amount of tax shown upon the return, or, if the tax is to be paid in installments, shall be proThe amount rated to the four installments. so prorated to any installment, the date for (e) Where the taxpayer at the time of the enactment of this act has not paid in full that part of the amount shown as the tax upon the return which should have been paid on or before the time of the enactment of this act, then 25 per centum of any amount already paid shall be applied in reduction of the amount unpaid (such unpaid amount being first reduced by 25 per centum thereof) and any excess shall be credited or refunded as provided in section 281 of this act. (f) If the correct amount of the tax is determined to be in excess of the amount shown as the tax upon the return, and a deficiency has been assessed before the enactment of this act, then 25 per centum of any amount of such deficiency which has been paid shall be applied in reduction of the amount unpaid (such unpaid amount being first reduced by 25 per centum thereof) and any excess shall be credited or refunded as provided in section 281 of this act. Any deficiency assessed after the enactment of this act shall be reduced by 25 per centum of the amount which would have been assessed as a ficiency if this title had not been enacted. (g) The allowance provided in subdivision (a) shall be deducted from the tax or deficiency for the purpose of determining the amount on which any interest, penalties or additions to the tax shall be based. de re Sec. 1201. (a) Any taxpayer making turn, for a period beginning in 1922 and ending in 1923. of the taxes imposed by parts I. and II. of title II. of the revenue act of 1921. shall be entitled to an allowance by credit or refund of 25 per centum of the same proportion of his tax for such period (determined under the law applicable to the calendar year 1923 and at the rates for such year) which the portion of such period falling within the calendar year 1923 is of the entire period. a an (b) Any taxpayer making return, for period beginning in 1923 and ending in 1924, of the taxes imposed by parts I. and II. of title II. of this act shall be entitled to allowance by credit or refund of 25 per centum of the same proportion of a tax for such period (determined under the law applicable to the calendar year 1923 and at the rates for such year) which the portion of such period falling within the calendar year 1923 is of the entire period. (c) In the case of a deficiency assessed upon a taxpayer entitled to the benefits of subdivision (a) or (b) in respect of the tax for a period beginning in 1922 and ending in 1923 or beginning in 1923 and ending in 1924, the allowance provided for in subdiVisions (a) and (b) shall be made in respect of such deficiency in a similar manner to that provided in subdivision (f) of section 1200. Sec. 1202. Any taxpayer who has made return of the taxes imposed by parts I and II. of title II. of the revenue act of 1921, for a period of less than a year and beginning and ending within the calendar year 1923, shall be entitled to an allowance by credit or refund of 25 per centum of the amount shown as the tax upon his return. If the correct amount of the tax for such period is determined to be in excess of the amount shown as the tax upon the return, the taxpayer shall be entitled to the benefits of subdivision (f) of section 1200 of this act. Sec. 1203. The allowance provided in sections 1201 and 1202 shall, under rules and regulations prescribed by the commissioner, with the approval of the secretary, be made in a similar manner to that provided in section 1200. Sec. 1204. The interest provided in section 1019 of this act shall not be allowed in respect of the allowance provided for in this title. Sec. 1205. The benefits of the allowance provided for in this title shall be granted to the taxpayer under rules and regulations prescribed by the commissioner with the approval of the secretary. Sec. 1206. Terms defined in the revenue act of 1921 shall, when used in this title, have the meaning assigned to such terms in that act. (Approved June 2, 1924.) Criticized by the President. In approving the foregoing act President Coolidge issued the following statement: The passage of a new revenue bill was required for two reasons, the reduction of taxation and the reform of taxation. The bill as passed provides a certain amount of tax reduction. It improves some of the features of administration, but it is not only lacking in tax reform, it actually adds some undesirable features to the present law. As a permanent expression of government fiscal policy this bill contains provisions which, in my opinion, are not only unsatisfactory but are harmful to the future of this country. for The reduction of high surtaxes from 50 to 40 per cent is quite immaterial to accomplish a real improvement in the law. The resolution a constitutional amendment giving to the states and the federal government reciprocal rights of taxation on securities issued by the other, which was urged in my annual message to the congress, failed of passage. The suggestion of reaching in part the abuse of tax-exemption by limiting the deduction for interest of a nonbusiness character to the amount that such interest exceeds the tax-exempt revenue of the taxpayer, has not been adopted. With some $12,000,000.000 of tax-exempt securities now outstanding. and $1.000.000.000 of new issues each year, it is idle to propose high surtaxes. A man with large inherited or accumuof his income to the government if he inlated capital is told he must pay one-half vests it in productive business, but he is invited to be relieved of all tax by the simple expedient of withdrawing from business and investing in tax-exempt securities. This does not mean that wealth in existence is taxed: it is not. It escapes. It does mean, however, that initiative and new enterprises are throttled. High Taxes a Failure. While the inconsistency of high surtaxes existing side by side with a lawfully authorized means of avoidance is obvious, it is not simply through tax-exempting that high sur taxes are uneconomical. The experience for the few years under high surtaxes shows the increasing failure of these taxes as a source of revenue. There are many means of escaping the tax, and with the settlement of conditions abroad we may anticipate the movement of capital from this country to other parts of the world where income is not so penalized. Ways will always be found to avoid taxation inherently excessive. We are presented, then, with a plan of taxation which punishes energy and initiative and must decrease revenue. Such a plan will ultimately work harm to the country and should not be permitted to continue much longer. The cure does not lie in attacking the symptoms by other unsound penalties worse than the disease itself. such as an undisturbed surplus tax, but in correcting the cause. The remedy is such a reduction in the peak of the surtaxes as will attract capital to new enterprises and prevent the continual diminution of taxable income in the higher brackets. In this way alone can high living costs, the indirect tax paid by all of the people, be reduced and the productivity of a graduated income tax maintained. The principles applicable to high surtaxes apply similarly to high estate taxes. The bill raises the estate tax to 40 per cent. As a concomitant is added a gift tax, which is further invasion of the rights of the citizen, both unusual in nature and of doubtful legality. When there are added to this the inheritance taxes levied by the states there amounts a practical confiscation of capital. To meet these taxes executors must realize cash on forced sales of property, with a general lowering of all values upon which the credit structure of our country is based. and diminishing the very source from which this revenue comes. It is proposed to take capital and to use it in the ordinary operating expenses of government. We are thus to live not on income but on principal, and to that extent we exhaust our resources and prevent the industrial expansion essential to our increasing population and our high standard of living. Heretofore estate taxes in the federal government have been It is now war measures. pro posed to use these reserves in times of peace. They should be kept for emergencies. The states have a very real interest in this tax. Inheritance taxes constitute a material part of state revenue. They are a comparatively small factor in federal revenue. As the federal government invades this sphere, belonging primarily to the states, it will cut down the flow of income to the states from this tax, and thus force the states to higher taxes from other sources, which will mean increased land taxes. For the sake of $12,000,000 of additional revenue the federal government in its strength should not further handicap the states, already burdened with expenditures which can be met only by taxation. Conference of States Is Suggested. I believe also it would be advisable to call a conference of the taxing authorities of the states and the treasury, before the next session of the congress, to give consideration to some comprehensive plan of division of this field of taxation between the various states and the federal government, and the elimination of overlapping and unfair taxes. Our institutions guarantee to our citizens sanctity in their private affairs, a right giving way only to the needs of government. Under the law as it now exists, the treasury has access to all information useful in determining the liability of the taxpayer. For the needs of revenue, publicity is unneces sary. While the bill purports not to give full publicity, this is scarcely true, and it still sacrifices without reason the rights of the taxpayer. In each post office, the amount which the citizen contributes to the treasury must be exhibited to the curious and to the taxpayers' business rivals. Committees in congress have access to returns and other private papers without any restriction as to their publication in open committee or on the floor of congress, the most certain means of publicity. If a taxpayer desires a hearing before the board of tax appeals he must expose to the public the complete details of his income. To put this price upon the fair determination of tax liability in its regular administrative course is entirely unjustifiable. Yet, such is done in the publicity provisions of the board of tax appeals. It is not alone in the unwarranted interrence with the right of the citizen to prithat these provisions are hurtful. It is d that far from increasing revenue, the desire to avoid the gratification of the idle curiosity of others or the exposure of one's personal affairs to one's competitor will result in the concealment of millions of dollars of income which would otherwise be reported. This means a change in the fundamental policy of our laws, violative of private rights and harmful to government revenues. Criticism of the income tax and a large part of the dissatisfaction with it are the result of delay and uncertainty in the final determination of a taxpayer's liability. Taxes can usually be paid within a short time after the receipt of the income on which the tax 18 based without serious embarrassment to the payment. However, a large additional tax on income received several years previously, and which may have since its receipt either been wiped out by subsequent losses or invested in nonliquid assets, may force a taxpayer into bankruptcy and often causes financial sacrifice and hardship. a Provision should be made for the prompt and final determination of taxpayer's liability, and such was the purpose in the suggestion for a board of tax appeals. The provisions of the bill, however, with reference to the board make it in all its essentials practically a court of record. The board is to be bound by formal rules of evidence and procedure. In each case a formal record must be prepared and all oral testimony in cases involving more than $10,900 must be reduced to writing and an opinion, in addition to the findings of fact, and a decision must be written. A taxpayer is entitled to appeal to the board before any assessment can be made. The reduction in the salary of the members of the board from $10.000, as recommended by the treasury, to $7,500 and the reduction of the term of office of the original appointees from the ten years recommended to two years make it difficult to secure for membership on the board men with training, experience and ability. This board of tax appeals, unable to secure the proper type of men for membership. hampered and burdened with rules of procedure and evidence and forced to prepare a record, a finding of fact, and a decision in practically every case, will be unable to handle the business which will come to it. The result will be greater delay in the final settlement of tax cases, and may ultimately result in the complete breakdown of the administrative machinery for the collection of taxes. The purpose of a tax bill is to provide the government with revenue, and the primary consideration on tax reduction is the probable receipts and expenditures of the government after the bill becomes a law. We shall close the fiscal year ending June 30 next with a surplus, but it is the next fiscal year that must have consideration. By far the greater part of the loss of revenue which will be brought about by the bill is in income taxes. Aside from the 25 per cent credit in 1924 taxes, the bill applies to incomes received in 1924, the tax on which is payable in the calendar year 1925. So this income tax reduction will not be felt until the last of the fiscal year. Under these circumstances, after giving effect to the bonus law and the reduction contemplated by the bill, and provided no further commitments in large amounts are made by the congress, the treasury may reasonably expect to conclude the fiscal year 1925 without a deficit. Looking beyond 1925 to later years, there are certain factors which deserve considera |