Statement showing estimated obligations, by objects of expenditure, applying on the appropriation "Salaries and administrative expenses, sec. 915, Revenue Ad of 1936 (transfer from Exportation and Domestic Consumption of Agricultural Commodities, Department of Agriculture, 1936), 1937" for the fiscal year 1937

Total, estimated obligations, 1937.

Mr. WOODRUM. Is that civil-service personnel?

$3, 514, 705

49.275

12,937

194, 237

330

61, 895 58, 764 9.272

5,003

93, 892

4, 000, 310

Mr. CARTER. All of the departmental personnel in 1938 except attorneys in the office of the chief counsel will be civil-service employees. The collectors' force of deputy collectors will be noncivilservice employees.

Mr. RABAUT. How many are there?

Mr. CARTER. The collectors' force will comprise 1,084 persons, whom 874 are employed at present.

Mr. RABAUT. How many attorneys have you?

Mr. CARTER. You mean at the present time?

Mr. RABAUT. Yes. You said "all except attorneys", and I am just wondering how many you have.

Mr. CARTER. Mr. Burrus, how many attorneys do you have at the present time in the office of the chief counsel who are engaged on this work?

Mr. BURRUS. There are seven attorneys now engaged on work in connection with title VII.

Mr. WIGGLESWORTH. Is that all that you have?

Mr. BURRUS. Yes, sir; with the exception of six men who are detailed from the Office of the Solicitor, Department of Agriculture. Mr. RABAUT. Six attorneys?

Mr. BURRUS. Yes, sir.

Mr. TABER. Are they paid out of your appropriation or out of theirs?

Mr. BURRUS. The transfer of funds is provided for in section 917(b) of the Revenue Act of 1936. These six attorneys are paid by the Department of Agriculture and that Department is reimbursed by the Treasury from the Bureau's funds for the time they devote on this work.

DUTIES IN ADMINISTERING CLAIMS ADJUSTMENT WORK

Mr. TABER. What do you have to do and what have you done? Suppose you give us a little idea of that. Do you have a general statement to make?

Mr. CARTER. I have a statement which explains in detail, Mr. Taber, just what we are required to do in administering the claims adjustment work.

Mr. TABER. Yes. We want to have that.

Mr. CARTER. Since the greater part of the funds requested will be needed for paying refunds and administrative expenses under title VII

of the Revenue Act of 1936, the claims procedure under this title will be discussed first.

Title VII of the Revenue Act of 1936 prescribes a procedure for the refunding of taxes collected under the Agricultural Adjustment Act. Under that act there were 51 taxes effective under the three categories of (1) floor stocks taxes, (2) compensating taxes, and (3) processing taxes. The latter is divided into two classes: Customs processing taxes, which were small in amount, and regular processing taxes. Title VII provides that the taxes shall be refunded only to the extent that the burden of the tax was borne by the claimant and not shifted to others.

Regulations 96 relating to claims under title VII provide for the filing of four different types of claims. Three of these types, namely (1) claims for floor stock taxes paid upon the initiation of the processing taxes, (2) compensating tax claims, and (3) customs processing tax claims, do not come within the jurisdiction of the Processing Tax Board of Review established by title VII.

I might state at this point that up to the present time we have no definite information as to the exact number of claims that will be filed under title VII.

Mr. TABER. Do you know whether any have been filed?

Mr. CARTER. Yes, sir; to date, a total of 3,134 claims, involving $6,405,239.26 have been received by the Bureau in Washington. Mr. WOODRUM. What is the nature of these claims?

Mr. CARTER. These are claims for refund of floor-stock taxes paid on the initiation of the processing tax, regular processing taxes, customs processing taxes, and compensating taxes.

Mr. WOODRUM. That is the smallest part of it?

Mr. CARTER. If we have claims come in at the rate we anticipate, this number will be insignificant so far as the total number and amount of claims to be filed is concerned.

Mr. WOODRUM. You may finish your statement.

Mr. CARTER. The delay in filing these claims has been due to litigation over the validity of the procedure under which the refunds will be made. Most of these claimants or anticipated claimants are holding their claims hoping that the Supreme Court will make a decision prior to June 30 in the case which is now before that body. If the decision is favorable to the Government, possibly the number of claims will be substantially reduced. Am I right in that conclusion, Captain Bliss?

Mr. BLISS. Yes. If they hold that it is constitutional. The procedure necessary is extremely difficult due to the formulas that have been set forth in the act as to what is prima-facie evidence that the tax was not borne by the claimant. They are contending that it is unconstitutional because the Government after the Supreme Court held the Agricultural Adjustment Act to be unconstitutional is still trying to retain this money by making the proof of claims so difficult as to make it impossible for them to recover. We expect the larger claims to come in just before June 30.

Mr. CANNON. They are concerned with the amount of taxes which the Government claims were not actually paid into the Treasury. Mr. CARTER. That will not come under this character of claims. They are not involved in the procedure that we set up here.

140265-37~~ -18

Under title VII of the 1936 Revenue Act claimants have until June 30, 1937, within which to file their claims. There are over 800,000 potential claimants under this title, of which approximately 75,000 persons paid processing taxes, 700,000 paid floor stocks taxes, and 25,000 paid compensating tax. In view of the nature of the proof required to entitle a claimant to a refund of tax paid under the Agricultural Adjustment Act, and the inability of many potential claimants to meet the burden of proof required, it is estimated that the number of claims which will be filed prior to July 1, 1937, will not exceed 100,000. That is purely an estimate. The Bureau has no data at this time on which to make a reliable statement as to the number of claims that will be filed. We expect that 20,000 claims will be filed by persons who paid processing tax, 70,000 by persons who paid floorstocks tax, and 10,000 by prsons who paid compensating tax.

There have been a number of cases tried in the lower courts involving the validity of title VII of the Revenue Act of 1936, and in most cases its validity has been upheld. One of these cases has reached the Supreme Court of the United States; and, pending a decision by that Court, a number of claimants are withholding the filing of their claims. The complicated requirements of the statute relating to the manner of proving a claim is also a large factor in delaying the filing of such claims. In view of the foregoing it is almost an impossibility to estimate the total number of claims that will be filed under title VII. When claims are received in the collector's offices, they will be stamped, recorded, and given a preliminary examination. If the claim is not properly filled in or executed, the collector will correspond with the claimant for the purpose of getting the claim properly executed. There has been much correspondence to date with regard to claims already filed. Before forwarding the claim to the Bureau, the Collector will check his record of tax payments made by the claimant and certify on the claim the date and amount of each payment. In a great many cases the number of payments and amount of each will be quite large, requiring considerable detailed work.

Upon receipt of a claim in the Bureau it will be numbered and an appropriate record made. The record of tax payments listed by the claimant and the certification made by the collector of such payments will be checked against the certification lists on file in the Bureau. The refunds and credits listed in the claim which have been previously allowed to the claimant or to third persons against tax payments made by the claimant will be checked against the records of the Bureau.

The claim will then be assigned to an examiner for the purpose of ascertaining whether the claimant has established the fact that he has borne the burden of the tax. During the course of this examination the various aspects of the claim that require field investigation will be determined. All investigations that do not require investigators with special qualifications investigators experienced in cost accounting, industry practice and procedure, and legal matters-will be handled by deputy collectors. In the more difficult cases the special investigators will conduct the investigations, using the deptuy collectors to assist them.

Reports of field investigations will be forwarded to the Bureau and associated with the claims. Based upon these reports and the data submitted by the claimant the Commissioner will act upon the claims.