2 a >uzwi hs \ REVENUE ACT of 1918 Approved by President Woodrow Wilson February 24, 1919 HJ237? ASI Compliment* of The American Exchange National Bank NEW YORK CITY p a ft 1 h r TritoW‘ »v< »v> tw*».•/ * . iWAW 1 Wwirrar i- tt.? ? v V^3'l3 r n A S1 AN ACT To provide revenue, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of Amer¬ ica in Congress assembled , TITLE I.—GENERAL DEFINITIONS. Definitions: “Person,” “Corporation,” “Domestic,” “Foreign,” “United States,” “Secretary,” “Commissioner,” “Collector,” “Revenue Act of 1916,” “Revenue Act of 1917,” “Taxpayer,” “Government Contract,” “Military or Naval Forces of the United States,” “Present War,” “Government Con¬ tract Made Between April 6, 1917, and Nov. 11*1918” . Sec. 1. That when used in this Act— The term “person” includes partnerships and corporations as well as individuals; The term “corporation” includes associa¬ tions, joint stock companies, and insurance companies; The term “domestic” when applied to a corporation or partnership means created or organized in the United States; The term “foreign” when applied to a corporation or partnership means created or organized outside the United ^States; The term “United States” when used in a geographical sense includes only the States, the Territories of Alaska and Hawaii, and the District of Columbia; The term “Secretary” means the Secre¬ tary of the Treasury; The term “Commissioner” means the Commissioner 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 pur¬ poses.” approved October 3, 1917; The term “taxpayer” includes 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 services to be furnished under the subcontract are for the benefit of the United States. The term “Government Contract or Contracts made between April 6, 1917, and November 11, 1918, both dates inclusive” when applied to a contract of the kind referred to in clause (a) of this paragraph, includes all such con¬ tracts which, although entered into during such period, were originally not enforceable, but which have been or may become en¬ forceable by reason of subsequent valida¬ tion 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 Navy Nurse Corps, Fe¬ male, but this shall not be deemed to ex¬ clude other units otherwise included within such term; The term “present war” means the war in which the United States is now engaged against the German Government. For the purposes of this Act the date of the termination of the present war shall be fixed by proclamation of the President. TITLE II.—INCOME TAX. Part I.—General Provisions. Definitions: “Taxable Year,” “Fiduciary,” “Withholding Agent,” “Personal Serv¬ ice Corporation,” “Paid.” Sec. 200. That when used in this title— The term “taxable year” means the cal¬ endar year, or the fiscal year ending dur¬ ing such calendar year, upon the basis of which the net income is computed under section 212 or section 232. The term “fiscal — 2 — 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 1918, shall be the calendar year 1918 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 person 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 primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-pro¬ ducing factor; but does not include any foreign corporation, nor any corporation 50 per centum or more of whose gross income consists either (1) of gains, profits, or in¬ come derived from trading as a principal, or (2) of gains, profits, commissions, or other income, derived from a government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive; The term “Paid,” for the purposes of the deductions and credits under this title, means “Paid or Accrued” or “Paid or In¬ curred,” 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 com¬ puted under section 212. Dividends. Sec. 201. (a) That the term “dividend” when used in this title (except in paragraph (10) or subdivision (a) of section 234) means (1) any distribution made by a cor¬ poration, other than a personal service cor¬ poration, 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, — 3 — 1913, or (2) any such distribution made by a personal service corporation out of its earnings or profits accumulated since Feb¬ ruary 28, 1913, and prior to January 1, 1918. Distribution of Dividends. (b) Any distribution shall be deemed to have been made from earnings or profits unless all earnings and profits have first been distributed. Any distribution made in the year 1918 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 corporation, from the most recently ac¬ cumulated earnings or profits; but any earnings or profits accumulated prior to March 1, 1913, may be distributed in stock dividends or otherwise, exempt from the tax, after the earnings and profits accumu¬ lated since February 28, 1913, have been distributed. Stock Dividends. (c) A dividend paid in stock of the cor¬ poration shall be considered income to the amount of the earnings or profits distrib¬ uted. Amounts distributed in the liquida¬ tion of a corporation shall be treated as pay¬ ments 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 (1) is received by a taxpayer between January 1 and No¬ vember 1, 1918, both dates inclusive, or (2) is during such period bona fide authorized or declared, and entered on the books of the corporation, and is received by a tax¬ payer after November 1, 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 cor¬ poration 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 earn¬ ings or profits. — 4 — When Distribution Considered from Profits of Preceding Taxable Year. (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 tax¬ able years; but any distribution made dur¬ ing 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 corpora¬ tion do not show the amount of such earn¬ ings 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. Basis for Determining Gain or Loss—Value of Property Determined. Sec. 202. (a) That for the purpose of ascertaining the gain derived or loss sus¬ tained from the sale or other disposition of property, real, personal, or mixed, the basis shall be— - (1) In the case of property acquired be¬ fore March 1, 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 section 203. Exchange of Property Loss or Gain Deter¬ mined — Consolidation, Merger — Ex¬ change of Similar Values. (b) When property is exchanged for other property, the property received in ex¬ change shall for the purpose of determin¬ ing 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 persoh 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, and the new stock or securities received shall be treated — 5 — as taking the place of the stock, securities, or property exchanged. When in the case of any such reorganiza¬ tion, merger or consolidation the aggregate par or face value of the new stock or secur¬ ities 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 1, 1913, the fair market value as of that date) of the stock or securities exchanged. Inventories. Sec. 203. That whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the ap¬ proval of the Secretary, may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. Net Losses. Sec. 204 (a) That as used in this sec¬ tion the term “net loss” refers only to net losses resulting from either (1) the oper¬ ation of any business regularly carried on by the taxpayer, or (2) the bona fide sale by the taxpayer of plant, buildings, ma¬ chinery, equipment or other facilities, con¬ structed, installed or acquired by the tax¬ payer on or after April 6, 1917, for the pro¬ duction of articles contributing to the prose¬ cution of the present war; and when so re¬ sulting means the excess of the deductions allowed by law (excluding in the case of corporations amounts allowed as a deduc¬ tion 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. Excess Payments—Deductible Succeeding Year. (b) If for any taxable year beginning af¬ ter October 31, 1918, and ending prior to January 1, 1920, it appears upon the produc¬ tion of evidence satisfactory to the Commis¬ sioner that any taxpayer has sustained a net loss, the amount of such net loss shall un¬ der regulations prescribed by the Commis¬ sioner with the approval of the Secretary be deducted from the net income of the tax¬ payer for the preceding taxable year; and the taxes imposed by this title and by Title III for such preceding taxable year shall be redetermined accordingly. Any amount found to be due to the taxpayer upon the basis of such redetermination shall be cred¬ ited or refunded to the taxpayer in accord¬ ance 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 regulations pre¬ scribed by the Commissioner with the ap¬ proval of the Secretary be allowed as a de¬ duction 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 beneficiaries of an estate or trust under regulations prescribed by the Com¬ missioner with the approval of the Secre¬ tary. Fiscal Year With Different Rates—Method of Determining and Applying the Different Rates. Sec. 205. (a) That if a taxpayer makes return for a fiscal year beginning in 1917 and ending in 1918, his tax under this title for the first taxable year shall be the sum of: (1) The same proportion of a tax for the entire period computed 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, 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 por¬ tion of such period falling within the calen- — 7 — dar year 1918 is of the entire period: Pro¬ vided, That in the case of a personal service corporation the amount to be paid shall be only that specified in clause (1). Any amount heretofore or hereafter paid on account of the tax imposed for such fiscal year by Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917, and by Title I of the Revenue Act of 1917, 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 specified in clause (1), the ex¬ cess shall be credited or refunded in accord¬ ance with the provisions of section 252. (b) If a taxpayer makes a return for a fiscal year beginning in 1918 and ending in 1919, the tax under this title for such fiscal year shall be the sum of: (1) the same pro¬ portion of a tax for the entire period com¬ puted under this title at the rates specified for the calendar year 1918 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 this title at the rates specified for the calendar year 1919 whi<;h the portion of such period falling within the calendar year 1919 is of the entire period. (c) If a fiscal year of a partnership be¬ gins in 1917 and ends in 1918 or begins in 1918 and ends in 1919, then notwithstanding the provisions of subdivision (b) of section 218, (1) the rates for the calendar year dur¬ ing 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 proportion 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 during which such fiscal year ends shall apply to an amount of each partner’s share of such partnership net in¬ come (determined under the law applicable to such calendar year) equal to the propor¬ tion which the part of such fiscal year fall¬ ing within such calendar year bears to the full fiscal year: Provided , That in the case — 8 — of a personal service corporation with re¬ spect to a fiscal year beginning in 1917 and ending in 1918, the amount specified in clause (1) shall not be subject to normal tax. Parts of Income Subject to Rates for Different Years—Method of Determining Same. Sec. 206. That whenever parts of a tax¬ payer’s income are subject to rates for dif¬ ferent calendar years, the part subject to the rates for the most recent 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 applic¬ able to that year, and so on until the en¬ tire net income has been accounted for. In determining the income, any deductions, ex¬ emptions or credits of a kind not plainly and properly chargeable against the income tax¬ able 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. Normal Tax. Sec. 210. That, in lieu of the taxes im¬ posed by subdivision (a) of section 1 of the Revenue Act of 1916 and by section 1 of the Revenue Act of 1917, there shall be lev¬ ied, collected, and paid for each taxable year upon the net income of every individ¬ ual a normal tax at the following rates: (a) For the calendar year 1918, 12 per centum of the amount of the net income in excess of the credits provided in section 216: Provided, That in the case o£ 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 centum of the amount of the net income in excess of the credits provided in section 216: Provided, That in the case of a citi¬ zen or resident of the United States the — 9 — rate upon the first $4,000 of such excess amount shall be 4 per centum. Surtax. Sec. 211. (a) That, in lieu of the taxes imposed by subdivision (b) of section 1 of the Revenue Act of 1916 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, collected, and paid for each taxable year upon the net income of every individual, a surtax equal to the sum of the following: 1 per centum of the amount by which the net income exceeds $5,000 and does not ex¬ ceed $6,000; 2 per centum of the amount by which the net income exceeds $6,000 and does not ex¬ ceed $8,000; 3 per centum of the amount by which the net income exceeds $8,000 and does not ex¬ ceed $10,000; 4 per centum of the amount by which the net income exceeds $10,000 and does not ex¬ ceed $12,000; 5 per centum of the amount by which the net income exceeds $12,000 and does not ex¬ ceed $14,000; 6 per centum of the amount by which the net income exceeds $14,000 and does not ex¬ ceed $16,000; 7 per centum of the amount by which the net income exceeds $16,000 and does not ex¬ ceed $18,000; 8 per centum of the amount by which the net income exceeds $18,000 and does not ex¬ ceed $20,000; 9 per centum of the amount by which the net amount exceeds $20,000 and does not ex¬ ceed $22,000; 10 per centum of the amount by which the net income exceeds $22,000 and does not ex¬ ceed $24,000; 11 per centum of the amount by which the net income exceeds $24,000 and does not ex¬ ceed $26,000; 12 per centum of the amount by which the net income exceeds $26,000 and does not ex¬ ceed $28,000; 13 per centum of the amount by which the net income exceeds $28,000 and does not ex¬ ceed $30,000; — 10 — 14 per centum of the amount by which the net income exceeds $30,000 and does not ex¬ ceed $32,000; 15 per centum of the amount by which the net income exceeds $32,000 and does not ex¬ ceed $34,000; 16 per centum of the amount by which the net income exceeds $34,000 and does not ex¬ ceed $36,000; 17 per centum of the amount by which the net income exceeds $36,000 and does not ex¬ ceed $38,000; 18 per centum of the amount by which the net income exceeds $38,000 and does not ex¬ ceed $40,000; 19 per centum of the amount by which the net income exceeds $40,000 and does not ex¬ ceed $42,000; 20 per centum of the amount by which the net income exceeds $42,000 and does not ex¬ ceed $44,000; 21 per centum of the amount by which the net income exceeds $44,000 and does not ex¬ ceed $46,000; 22 per centum of the amount by which the net income exceeds $46,000 and does not ex¬ ceed $48,000; 23 per centum of the amount by which the net income exceeds $48,000 and does not ex¬ ceed $50,000; 24 per centum of the amount by which the net income exceeds $50,000 and does not ex¬ ceed $52,000; 25 per centum of the amount by which the net income exceeds $52,000 and does not exceed $54,000; 26 per centum of the amount by which the net income exceeds $54,000 and does not exceed $56,000; 27 per centum of the amount by which the net income exceeds $56,000 and does not exceed $58,000; 28 per centum of the amount by which the net income exceeds $58,000 and does not exceed $60,000; 29 per centum of the amount by which the net income exceeds $60,000 and does not ex¬ ceed $62,000; 30 per centum of the amount by which the net income exceeds $62,000 and does not exceed $64,000; 11 31 per centum of the amount by which the net income exceeds $64,000 and does not exceed $66,000; 32 per centum of the amount by which the net income exceeds $66,000 and does not exceed $68,000; 33 per centum of the amount by which the net income exceeds $68,000 and does not exceed $70,000; 34 per centum of the amount by which the net income exceeds $70,000 and does not exceed $72,000; 35 per centum of the amount by which the net income exceeds $72,000 and does not exceed $74,000; 36 per centum of the amount by which the net income exceeds $74,000 and does not exceed $76,000; 37 per centum of the amount by which the net income exceeds $76,000 and does not exceed $78,000; 38 per centum of the amount by which the net income exceeds $78,000 and does not exceed $80,000; 39 per centum of the amount by which the net income exceeds $80,000 and does not exceed $82,000; 40 per centum of the amount by which the net income exceeds $82,000 and does not exceed $84,000; 41 per centum of the amount by which me net income exceeds $84,000 and does not exceed $86,000; 42 per centum of the amount by which the net income exceeds $86,000 and does not exceed $88,000; 43 per centum of the amount by which the net income exceeds $88,000 and does not exceed $90,000; 44 per centum of the amount by which the net income exceeds $90,000 and does not exceed $92,000; 45 per centum of the amount by which the net income exceeds $92,000 and does not exceed $94,000; 46 per centum of the amount by which the net income exceeds $94,000 and does not exceed $96,000; 47 per centum of the amount by which the net income exceeds $96,000 and does not exceed $98,000; 48 per centum of the amount by which — 12 — 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 $150,000; 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. Sale of Mines, Oil or Gas Wells—How Valued—How Taxed. (b) In the case of a bona fide sale of mines, oil or gas wells, or any interest there¬ in. where the principal value of the prop¬ erty has been demonstrated by prospecting or exploration and discovery 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—Basis of Computa¬ tions—Accounting Methods—Fiscal or Calendar Year. Sec. 212 (a) That in the case of an in¬ dividual the term “net income” means the gross income as defined in section 213, less the deductions allowed by section 214. (b) The net income shall be computed upon the basis of the taxpayer's annual ac¬ counting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly em¬ ployed in keeping the books of such tax¬ payer; but if no such method of accounting has been so employed, or if the method em¬ ployed 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 account- — 13 — ing period is other than a hscal year as de¬ fined in section 200 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be com¬ puted on the basis of the calendar year. If a taxpayer changes his accounting period from 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 pro¬ visions of section 226. Gross Income Defined. Sec. 213. That for the purposes of this title (except as otherwise provided in sec¬ tion 233) the term “gross income”— (a) Includes gains, profits, and income derived from salaries, wages, or compensa¬ tion 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, whether elected or appointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensa¬ tion received as such), of whatever kind and in whatever form paid, or from profes¬ sions, 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 interest, 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 tax¬ payer, 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 shall be exempt from taxation under this title: Items Not Taxable—Exemptions. (1) The proceeds of life insurance poli¬ cies paid upon the death of the insured — 14 — to individual beneficiaries or to the estate of the insured; (2) The amount received by the insured as a return of premium or premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the con¬ tract ; (3) The value of property acquired by gift, bequest, devise, or descent (but the in¬ come from such property shall be included in gross income) ; (4; Interest upon (a) the obligations of a State, Territory, or any political sub¬ division 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 is¬ sued by the War Finance Corporation: Provided, That every person owning any of the obligations, securities or bonds enu¬ merated in clauses (a), (b), (c), and (d) shall, in the return required by this title, sub¬ mit a statement showing the number and amount of such obligations, securities and bonds owned by him and the income re¬ ceived therefrom, in such form and with such information as the Commissioner may require. In the case of obligations of the United States issued after September 1, 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 supple¬ mented, 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 from Investments in the United States. (5) The income of foreign governments received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign govern¬ ments, 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: (6) Amounts received, through accident or health insurance or under workmen’s compensation acts, as compensation for per¬ sonal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness; (7) Income derived from any public util¬ ity or the exercise of any essential govern¬ mental function and accruing to any State, Territory, or the District of Columbia, or any political subdivision of a State or Terri¬ tory, or income accruing to the government of any possession of the United States, or any political subdivision thereof. Whenever any State, Territory, or the District of Columbia, or any political sub¬ division of a State or Territory, prior to September 8, 1916, entered in good faith into a contract with any person, the object and purpose of which is to acquire, construct, operate, or maintain a public utility, no tax shall be levied under the provisions of this title upon the income derived from the oper¬ ation of such public utility, so far as the payment thereof wil impose a loss or bur¬ den upon such State, Territory, District of Columbia, or political subdivision; but this provision is not intended to confer upon such person any financial gain or exemption 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 dur¬ ing the present war by a person in the mili¬ tary or naval forces of the United States as salary or compensation in any form from the United States or active services in such forces as does not exceed $3,500. Nonresident Alien Individuals—Gross Income Defined. (c) In the case of nonresident alien in¬ dividuals, gross income includes only the gross income from sources within the United States, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, divi¬ dends from resident corporations, and in¬ cluding all amounts received (although paid — 16 — under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods with¬ in the United States. Deductions Allowed. Sec. 214. (a) That in computing net in¬ come there shall be allowed as deductions: Necessary Expenses of Business. (1) All the ordinary and necessary ex¬ penses paid or incurred during the taxable year in carrying 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; Interest—When Deductible. (2) All interest paid or accrued within the taxable year on indebtedness, except on indebtedness incurred or continued to pur¬ chase or carry obligations or securities (other than obligations of the United States issued after September 24, 1917), the inter¬ est upon which is wholly exempt from tax¬ ation under this title as income to the tax¬ payer, 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 States bears to the amount of his gross income from all¬ sources within and without the United States; Taxes, Paid or Accrued, When Allowed as a Credit. (3) Taxes paid or accrued within the tax¬ able year imposed (a) by the authority of the United States, except income, war prof¬ its and excess-profits taxes; or (b) by the authority of any of its possessions, except the amount of income, war profits and ex- cess-profits taxes allowed as a credit under section 222; or (c) by the authority of any — 17 — State or Territory, or any county, school district, municipality, or other taxing sub¬ division of any State or Territory, not in¬ cluding those assessed against local benefits of a kind tending to increase the value of the property assessed; or (d) in the case of a citizen or resident of the United States, by the authority of any foreign country, ex¬ cept the amount of income, war-profits and excess-profits taxes allowed as a credit un¬ der section 222; or (e) in the case of a non¬ resident alien individual, by the authority of any foreign country (except income, war- profits and excess-profits taxes, and taxes assessed against local benefits of a kind tending to increase the value of the prop¬ erty assessed), upon property or business; Losses Sustained. (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or busi¬ ness ; (5) Losses sustained during the taxable year and 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; (6) Losses sustained during the taxable year of property not connected with the trade or business (but in the case of a non¬ resident alien individual only property with¬ in the L T nited States) if arising from fires, storms, shipwreck, or other casualty, or from theft, and if not compensated for by insurance or otherwise; Worthless Debts—Exhaustion, Wear and Tear. (7) Debts ascertained to be worthless and charged off within the taxable year; (8) A reasonable allowance for the ex¬ haustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence; (9) In the case of buildings, machinery, equipment, or other facilities, constructed, erected, installed, or acquired, on or after April 6, 1917, for the production of articles — 18 — contributing to the prosecution of the present war, and in the case of vessels con¬ structed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the pres¬ ent war, there shall be allowed a reasonable deduction for the amortization 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 al¬ lowed under 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 ap¬ praisal or from other evidence that the de¬ duction 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 col¬ lector, or the amount of tax overpaid, if an}-, 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, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions 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 1, 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 1, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair mar¬ ket value of the property is materially dis¬ proportionate to the cost, the depletion al¬ lowance shall be based upon the fair market value of the property at the date of the dis¬ covery, or within thirty days thereafter; such reasonable allowance in all the above cases to be made under rules and regula- — 19 — tions 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; Contributions or Gifts. (11) Contributions or gifts made within the taxable year to corporations organized and operated exclusively for religious, char¬ itable, scientific, or 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 private stockholder or individual, or to the special fund for vocational rehabilitation author¬ ized by section 7 of the Vocational Rehabili¬ tation 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 al¬ lowed only as to contributions or gifts made to domestic corporations, or to such voca¬ tional rehabilitation fund; Claim in Abatement. (12) (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 fluctation) of the value of the inventory for such tax¬ able 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 during 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 satis¬ factory to the Commissioner, conditioned — 20 — 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 re¬ mainder of the tax due shall on notice and demand by the collector be paid by the taxpayer with interest at the rate of 1 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 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 Com¬ missioner 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 1918 and the tax imposed by this title for such year shall be redetermined accordingly. Any amount found to be ^due to the tax¬ payer upon the basis of such redetermin¬ ation shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. Deductions Not Allowed Nonresident Aliens. (b) In the case of a nonresident alien individual the deduction allowed in para- graphs (1). (4), (7), (8), (9), (10), (12), and clause (e) of paragraph (3), of sub¬ division (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 apportion¬ ment and allocation of the deductions with respect to sources of income within and without the United States shall be deter¬ mined under rules and regulations pre¬ scribed by the Commissioner with the ap¬ proval of the Secretary. Items Not Deductible. Sec. 215. That in computing net income no deduction shall in any case be allowed in respect of— — 21 — (a) Personal, living, or family expenses; (b) Any amount paid out for new build¬ ings or for permanent improvements or bet¬ terments made to increase the value of any property or state; (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 em¬ ployee, or of any person financially inter¬ ested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy. Credits Allowed. Sec. 216. That for the purpose of the nor¬ mal tax only there shall be allowed the fol¬ lowing credits: Amounts Previously Taxed. (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 serv¬ ice corporation out of earnings or profits upon which income tax has been imposed by Act of Congress; Interest on Obligations of United States. (b) The amount received as interest upon obligations of the United States and bonds issued by the War Finance Corporation, which is included in gross income under sec¬ tion 213; Specific Personal Exemptions. (c) In the case of a single person, a per¬ sonal exemption of $1,000, or in the case of the head of a family or a married person liv¬ ing with husband or wife, a personal ex¬ emption of $2,000. A husband and wife liv¬ ing together shall receive but one personal exemption of $2,000 against their aggregate 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 re- — 22 — ceiving his chief support from the taxpayer, if such dependent person is under eighteen years of age or is incapable of self-support because mentally or physically defective. Credits to Nonresident Aliens, Conditional. (e) In the case of a nonresident alien in¬ dividual who is a citizen or subject of a coun¬ try which imposes an income tax, the credits allowed in subdivisions (c) and (d) shall be allowed only if such country allows a simi¬ lar credit to citizens of the United States not residing in such country. Nonresident Aliens—Allowance of Deduc¬ tions and Credits. Sec. 217. That a nonresident alien indi¬ vidual shall receive the benefit of the de¬ ductions and credits allowed in this title only by filing or causing to be filed with the collector a true and accurate return of his total income received from all sources cor¬ porate or otherwise in the United States, in tlie manner prescribed by this title, includ¬ ing therein all the information which the Commissioner may deem necessary for the calculation of such deductions and credits: Provided, That the benefit of the credits al¬ lowed in subdivisions (c) and (d) of sec¬ tion 216 may, in the discretion of the Com¬ missioner, and except as otherwise provided in subdivision (e) of that section, be re¬ ceived by filing a claim therefor with the withholding agent. In case of failure to file a return, the collector shall collect the tax on such income, and all property be- longng to such nonresident alien individual shall be liable to distraint for the tax. Partnerships and Personal Service Corpora¬ tions Exempt as Such—Individ¬ ual Liability. Sec. 218. (a) That individuals carrying on business in partnership shall be liable for income tax only in their individual ca¬ pacity. There shall be included in comput¬ ing the net income of each partner his dis¬ tributive share, whether distributed or not, of the net income of the partnership for the taxable year, or, if his net income for such — 23 — taxable year is computed upon the basis of a period different from that upon the basis of which the net income of the partnership is computed, then his distributive share of the net income of the partnership for any ac¬ counting period of the partnership ending within the fiscal of 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 addi¬ tion to the credits allowed to him under sec¬ tion 216, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the partnership. (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 (1) the rates for such preceding calendar year shall apply to an amount of each partner’s share of such part¬ nership 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 (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 partnership which makes return for a fiscal year beginning in 1917 and ending in 1918, his proportionate 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 em¬ braced in his personal return for the taxa¬ ble year 1918 to which the rates for 1917 ap- p'y- (d) The net income of the partnership shall be computed in the same manner and on the same basis as provided in section 212, except that the deduction provided in para¬ graph (11) of subdivision (a) of section 214 shall not be allowed. (e) Personal service corporations shall not be subject to taxation under this title, but the individual stockholders thereof shall — 24 — be taxed in the same manner as the mem¬ bers 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 purpose of this subdivision amounts distributed by a personal service corpora¬ tion during its taxable year shall be ac¬ counted for by the distributees; and any portion of the net income remaining undis¬ tributed 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 respective shares. Estates and Trusts—Periodical Distribu¬ tions—Income for Future Distribution —Fiduciary Responsibility. Sec. 219. (a) That the tax imposed by sections 210 and 211 shall apply to the in¬ come of estates or of any kind of property held in trust, including— (1) Income received by estates of de¬ ceased persons during the period of admin¬ istration or settlement 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 regular intervals, and the income col¬ lected by a guardian of an infant to be held or distributed as the court may direct. (b) The fiduciary shall be responsible for making 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 subdi- — 25 — vision thereof, or the District of Columbia, or any corporation organized and operated exclusively for religious, charitable, scientif¬ ic, or eductional purposes, or for the pre¬ vention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or in¬ dividual ; and in cases under paragraph (4) of subdivision (a) of this section the fidu¬ ciary 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. Deductions—Credits—Donations, When Exempt. (c) In cases under paragraph (1), (2), or (3) of subdivision (a) the tax shall be im¬ posed upon the net income of the estate or trust and shall be paid by the fiduciary, ex¬ cept that in determining the ner 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 leg'atee, 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 sec¬ tion 216. (d) In cases under paragraph (4) of sub¬ division (a), and in the case of any income of an estate during the period of adminis¬ tration or settlement permitted by subdi¬ vision (c) to be deducted from the net income upon which tax is to be paid by the fidu¬ ciary, the tax shall not be paid by the fidu¬ ciary, but there shall be included in comput¬ ing 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 income 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 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 bene- — 26 — ficiary’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 un¬ der section 216, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the estate or trust. Profits of Corporations Taxable to Stockholders—When Formed to Evade Tax. Sec. 220. That if any corporation, how¬ ever created or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its stock¬ holders or members through the medium 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 stock¬ holders or members thereof shall be subject to taxation under this title in the same man¬ ner as provided in subdivision (e) of section 218 in the case *of stockholders of a personal 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 com¬ pany, or that the gains and profits are per¬ mitted 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 be¬ come surplus shall not be construed as evi¬ dence of a purpose to escape the tax in such case unless the Commissioner certifies that in his opinion such accumulation is unrea¬ sonable for the purposes of the. business. When requested by the Commissioner, or any collector, every corporation shall for¬ ward to him a correct statement of such gains and profits and the names and ad¬ dresses of the individuals or shareholders who would be entitled to the same if div¬ ided or distributed, and of the amounts that would be payable to each. — 27 — Payment of Tax at Source. Deductions Allowed—Claim Filed. Sec. 221. (a) That all individuals, cor¬ porations and partnerships, in whatever ca¬ pacity acting, including lessees or mort¬ gagors of real or personal property, fidu¬ ciaries, employers, and all officers and em¬ ployees of the United States, having the control, receipt, custody, disposal, or pay¬ ment, of interest, rent, salaries, wages, pre¬ miums, annuities, compensations, remuner¬ ations, emoluments, or other fixed or de¬ terminable annual or periodical gains, prof¬ its, and income, of any nonresident alien in¬ dividual (other than income received as dividends from a corporation which is tax¬ able under this title upon its net income) shall (except in the cases provided for in subdivision (b) and except as otherwise provided in regulations prescribed by the Commissioner under section 217) deduct and withhold from such annual or period¬ ical 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 interest 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 obliga¬ tions of a corporation contain a contract or provision by which the obligor agrees to pay any portion of the 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 there¬ from 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 pe- . riods and whether payable to a nonresident alien individual or to an individual citizen or resident of the United States or to a part¬ nership : Provided, That the Commissioner may authorize such tax to be deducted and withheld in the case of interest upon any such bonds, mortgages, deeds of trust or — 28 — other obligations, the owners of which are not known to the withholding agent. Such deduction and withholding shall not be re¬ quired in the case of a citizen or resident entitled to receive such interest, if he files with the withholding agent on or before February 1, 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 nonresident alien indi¬ vidual if so provided for in regulations pre¬ scribed by the Commissioner under section 217. Returns—Payment. (c) Every individual, corporation, or partnership required to deduct and with¬ hold any tax under this section shall make return thereof on or before March first of each year and shall on or before June fif¬ teenth pay the tax to the official of the United States Government authorized to re¬ ceive it. Every such individual, corpora¬ tion, or partnership is hereby made liable for such tax and is hereby indemnified against the claims and demands of any in¬ dividual, corporation, or partnership for the amount of any payments made in accord¬ ance with the provisions of this section. (d) Income upon which any tax is re¬ quired to be withheld at the source under this section shall 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. Payments Not Re-collectible from With¬ holding Agent. (e) If any tax required under this sec¬ tion to be deducted and withheld is paid by the recipient of the income, it shall not be re-collected 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 withholding agent for failure to return or pay the same, unless such failure was fraudulent and for the purpose of evading payment. — 29 — Credit for Taxes. Sec. 222. (a) That the tax computed un¬ der Part II of this title shall be credited with: Citizens. (1) In the case of a citizen of the United States, 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 States, the amount of any such taxes paid during the taxable year to any possession of the United States; and Alien Residents. (3) In the case of an alien resident of the United States who is a citizen or subject of a foreign country, the amount of any such taxes 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 Members of Partnerships—Estates. (4) In the case of any such individual who is a member of a partnership or a bene¬ ficiary of an estate or trust, his proportion¬ ate share of such taxes of the partnership or the estate or trust paid during the taxable year to a foreign country or to any posses¬ sion of the United States, as the case may be. Credits—Differences Arising—Penal Bonds. (b) If accrued taxes when paid differ from the amounts claimed as credits by the tax¬ payer, 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 re¬ determination, if any, shall be paid by the taxpayer upon notice and demand by the collector, or the amount of tax overpaid, if — 30 — ’ any, shall be credited or refunded to the taxpayer 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 taxpayer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such penal sum as the Commissioner may re¬ quire, conditioned for the payment by the taxpayer of any amount of tax found due upon any such redetermination; and the bond herein prescribed shall contain such further conditions as the Commissioner may require. Satisfactory Evidence. (c) These credits shall be allowed only if the taxpayer furnishes evidence satisfactory to the Commissioner showing the amount of income derived 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. Single and Married Persons. Sec. 223. That every individual having a net income for the taxable year of $1,000 or over if single or if married and not living with husband or wife, or of $2,000 or over if married and living with husband or wife, shall make under oath a return stating spe¬ cifically the items of his gross income 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. 0 Returns by Agent. If the taxpayer is unable to make his own return, 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 taxpayer. Partnership Returns. Sec. 224. That every partnership shall make a return for each taxable year, stating — 31 - specifically the items of its gross income and the deductions allowed 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 distrib¬ uted and the amount of the distributive share of each individual. The return shall be sworn to by any one of the partners. Fiduciary Returns. Sec. 225. That every fiduciary (except re¬ ceivers appointed by authority of law in possession of part only of the property of an individual) shall make under oath a re¬ turn for the individual, estate or trust for which he acts (1) 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 in¬ come of such estate or trust is $1,000 or over or if any beneficiary of such estate or trust is a nonresident alien, stating specifi¬ cally the items of the gross income and the deductions and credits allowed by this title. Under such regulations as the Commis¬ sioner with the approval 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 affairs 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 un¬ der this Act shall be subject to all the pro¬ visions of this Act which apply to individ¬ uals. Returns When Accounting Period Changed. Sec. 226. That if a taxpayer, with the ap¬ proval of the Commissioner, changes the basis of computing net income from fiscal year to calendar year a separate return shall be made for the period between the close — 32 — of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate return shall be made for the period between the close of the last calendar year for w r hich return w r as 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 to another fiscal year a separate return for income tax keeps his accounts on the basis of a fiscal year he shall make a sepa¬ rate return for the period between the be¬ ginning of the calendar year in which such fiscal year ends and the end of such fiscal year. Basis of Computation. In all of the above cases the net income shall be computed on the basis of such pe¬ riod for which 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 sub¬ divisions (c) and (d) of section 216 shall be reduced respectively to amounts which bear the same ratio to the full credits pro¬ vided in such subdivisions as the number of months in such period bears to twelve months. Time and Place for Filing Returns. Extensions by Commissioner. Sec. 227. (a) That returns shall be made on or before the fifteenth day of the third month following the close of the fiscal year, or, if the return is made on the basis of the calendar rear, then the return shall be made on or before the fifteenth day of March. The Commissioner may grant a reasonable ex¬ tension 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 abroad, no such exten¬ sion shall be for more than six months. —33 (b) Returns shall be made to the collec¬ tor for the district in which is located the legal residence or principal place of busi¬ ness of the person making the return, or, if he has no legal residence or principal place of business in the United States, then to the collector at Baltimore, Maryland. Understatement in Returns. Appeal from Increased Return. Sec. 228. That if the collector or deputy collecto'r has reason to believe that the amount of any income returned is under¬ stated, he shall give due notice to the tax¬ payer making the return to show cause why the amount of the return should not be in¬ creased, and upon proof of the amount un¬ derstated, may increase the same accord¬ ingly. Such taxpayer may furnish sworn testimony to prove any relevant facts and if dissatisfied with the decision of the col¬ lector 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. PART III.—CORPORATIONS. Tax on Corporations. Sec. 230. (a) That, in lieu of the taxes imposed by section 10 of the Revenue Act of 1916, as amended by the Revenue Act of 1917, and by section 4 of the Revenue Act of 1917, there shall be levied, collected, and paid for each taxable year upon the net in¬ come of every corporation a tax at the fol¬ lowing rates: Year 1918. (1) 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 Succeeding Years. (2) For each calendar year thereafter, 10 per centum of such excess amount. Transportation Systems. (b) For the purposes of the Act approved March 21, 1918, entitled “An Act to pro- —34 vide for the operation of transportation systems while under Federal control, for the just compensation of their owners and for other purposes,” five-sixths of the tax imposed by paragraph (1) of subdivision (a) and four-fifths of the tax imposed by paragraph (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 organiza¬ tions shall be exempt from taxation under this title— (1) Labor, agricultural, or horticultural organizations; (2) Mutual savings banks not having a capital stock represented by shares; \ • Fraternal Beneficiary Societies. (3) Fraternal beneficiary societies, orders, or 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 so¬ ciety, order, or association or their depend¬ ents ; Building and Loan Associations— Cooperative Banks. (4) Domestic building and loan associa¬ tions and cooperative banks without capital stock organized and operated for mutual purposes and without profit; Cemetery Companies. (5) Cemetery companies owned and op¬ erated exclusively for the benefit of their members; Religious, Charitable, Scientific, Educa¬ tional Corporations. (6) Corporations organized and operated exclusively for religious, charitable, scien¬ tific, or 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 private stockholder or individual; Business Leagues—Chambers of Commerce —Boards of Trade. (7) Business leagues, chambers of com¬ merce, 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 organized for profit but operated exclusive¬ ly for the promotion of social welfare; Clubs. (9) Clubs organized and operated exclu¬ sively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private stockholder or member; Mutual Hail, Cyclone, Fire Ins. or Other Like Companies. (10) Farmers’ or other mutual hail, cy¬ clone, or fire insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations of a purely local character, the income of which consists solely of as¬ sessments, dues, and fees collected from members for the sole purpose of meeting expenses; (11) Farmers’, fruit growers’, or like as¬ sociations, 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 neces¬ sary selling expenses, on the basis of the quantity of produce furnished by them; Title Holding Companies for Exempt Corporations. (12) Corporations organized for the ex¬ clusive purpose of holding title to property, collecting income therefrom, and turning oter the entire amount thereof, less ex¬ penses, to an organization which itself is exempt from the tax imposed by this title; Federal Land Banks—National Farm Loan Associations. (13) Federal land banks and national farm-loan associations as provided in sec- —36— tion 26 of the Act approved July 17, 1916, entitled “An Act to provide capital for ag¬ ricultural development, to create standard forms of investment based upon farm mort¬ gage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create Government de¬ positaries and financial agents for the United States, and for other purposes”; (14) Personal service corporations. Net Income Defined. Sec. 232. That in the case of a corpora¬ tion subject to the tax imposed by section 230 the term “net income” means the gross income as defined in section 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. Gross Income Defined. Sec. 233. (a) That in the case of a cor¬ poration subject to the tax imposed by sec¬ tion 230 the term “gross income” means the gross income as defined in section 213: Life Insurance Companies. (1) In the case of life insurance com¬ panies there shall not be included in gross income such portion of any actual premium received from any individual policyholder as is paid back or credited to or treated as an abatement of premium of such policy¬ holder within the taxable year. (2) Mutual marine insurance companies shall include in gross income the gross pre¬ miums collected and received by them less amounts paid for reinsurance. Foreign Corporations. (b) In the case of a foreign corporation 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 —37— contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States. Deductions Allowed. Sec. 234. (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be al¬ lowed as deductions: Expenses. (1) All the ordinary and necessary ex¬ penses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for sal¬ aries 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 cor¬ poration has not taken or is not taking title, or in which it has-no equity; Interest. (2) All interest paid or accrued within the taxable year on its indebtedness, ex¬ cept on indebtedness incurred or continued to purchase or carry obligations or secur¬ ities (other than obligations of the United States issued after September 24, 1917) the interest upon which is wholly exempt from taxation under this title as income to the taxpayer, or, in the case of a foreign cor¬ poration, the proportion of such interest which the amount of its gross income from sources within the United States bears to the amount of its gross income from all sources within and without the United States; Taxes—Exceptions. (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 possessions, ex¬ cept the amount of income, war profits and excess-profits taxes allowed as a credit un¬ der section 238; or (c) by the authority — 38 — of any State or Territory, or any county, school district, municipality, or other tax¬ ing 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 sec¬ tion 238; or (e) in the case of a foreign corporation, by the authority of any for¬ eign country (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 sub¬ division (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 sub¬ division, shall be allowed; Losses Sustained—Worthless Debts. (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise; (5) Debts ascertained to be worthless and charged ofif within the taxable year; Dividends Previously Taxed. (6) Amounts received as dividends from a corporation which is taxable under this title upon its net income, and amounts re¬ ceived as dividends from a personal service corporation out of earnings or profits upon which income tax has been imposed by Act of Congress; Exhaustion, Wear and Tear—Amortization. (7) A reasonable allowance for the exhaus¬ tion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence; (8) In the case of buildings, machinery, equipment, or other facilities, constructed, erected, installed, or acquired, on or after April 6, 1917, for the production of articles contributing to the prosecution of the pres¬ ent war, and in the case of vessels con- 39 — structed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the pres¬ ent war, there shall be allowed a reasonable deduction for the amortization 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 al¬ lowed under 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 ap¬ praisal oif from other evidence that the de¬ duction 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 col¬ lector, or the amount of tax overpaid, if any, shall be credited or refunded to the tax¬ payer in accordance with the provisions of section 252; Mines, Oil and Gas Wells. Depletion—Depreciation. (9) In the case of mines, oil and gas wells, other natural deposits, and timber, a rea¬ sonable allowance for depletion and for de¬ preciation of improvements, according to the peculiar conditions 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 1, 1913, the fair market value of the property (or the taxpayer’s interest there¬ in) 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, dis¬ covered by the taxpayer, on or after March 1, 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 de¬ pletion allowance shall be based upon the fair market value of the property at the date of the discovery, or within thirty days thereafter; such reasonable allowance in all 40 — the above cases to be made under rules and regulations to be prescribed by the Com¬ missioner with the approval of the Secre¬ tary. In the case of leases the deductions allowed by this paragraph shall be equita¬ bly apportioned between the lessor and lessee; Insurance Companies—Reserve Funds (10) In the case of insurance companies, in addition to the above: (a) The net addi¬ tion required by law to be made within the taxable year to reserve funds (including in the case of assessment insurance compa¬ nies the actual deposit of sums with State or Territorial officers pursuant to law as ad¬ ditions to guarantee or reserve funds) ; and (b) the sums other than dividends paid within the taxable year on policy and an¬ nuity contracts; (11) In the case of corporations issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan contin¬ uing for life and not subject to cancellation, in addition to the above, such portion 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 protection of the holders of such poli¬ cies only; Mutual Marine Insurance Companies. (12) In the case of mutual marine insur¬ ance companies, there shall be allowed, in addition to the deductions allowed in para¬ graphs (1) to (10), inclusive, amounts re¬ paid to policyholders on account of pre¬ miums previously paid by them, and inter¬ est paid upon such amounts between the ascertainment and the payment thereof; Other Mutual Insurance Companies. (13) In the case of mutual insurance companies (other than mutual life or mu¬ tual marine insurance companies) requiring their members to make premium deposits to provide for losses and expenses, there shall be allowed, in addition to the deductions al¬ lowed in paragraphs (1) to (10), inclusive, —41— (unless otherwise allowed under such para¬ graphs) the amount of premium deposits returned to their policyholders and the amount of premium deposits retained for the payment of losses, expenses, and rein¬ surance reserves; Losses—Claim in Abatement—Disallowance of Claim. (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 (wheth¬ er or not actually realized by sale or other disposition) resulting from any material re¬ duction (not due to temporary fluctuation) of the value of the inventory for such taxa¬ ble 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 during 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 cov¬ ered by the claim, with sureties satisfactory to the Commissioner, conditioned 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 col¬ lector be paid by the taxpayer with interest at the rate of 1 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 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 sustained a substantial loss of the char¬ acter above described then the amount of such loss shall be deducted from the net in¬ come for the taxable year 1918 and the taxes imposed by this title and by Title III for such year shall be redetermined according- 42 — ly. Any amount found to be due to the tax¬ payer upon the basis of such redetermina¬ tion shall be credited or refunded to the tax¬ payer in accordance with the provisions of section 252. (b) In the case of a foreign corporation the deductions allowed in subdivision (a) r except those allowed in paragraph (2) and in clauses (a), (b), and (c) of paragraph (3), shall be allowed only if and to the ex¬ tent 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 Sec¬ retary. Items Not Deductible. Sec. 235. That in computing net income no deduction shall in any case be allowed in respect of any of the items specified in sec¬ tion 215. Credits Allowed. Sec. 236. That for the purpose only of the tax imposed by section 230 there shall be allowed the following credits: Interest on U. S. Obligations. (a) The amount received as interest upon obligations of the United States and bonds issued by the War Finance Corporation, which is included in gross income under sec¬ tion 233; Other Credits. (b) The amount of any taxes imposed by Title III for the same taxable year: Provid¬ ed, 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 Rev¬ enue Act of 1917 shall be credited against the net income computed for the en¬ tire 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 1918 shall be credited against the net income computed for the entire period under this title; and Specific Credit. (c) In the case of a domestic corporation, $ 2 , 000 . Payment of Tax at Source. Foreign Corporations. Sec. 237. That in the case of foreign cor¬ porations subject to taxation under this title not engaged in trade or business within the United States and not having any office or place of business therein, there shall be de¬ ducted 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 returned 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 deduc¬ tion and withholding shall be at the rate of 2 per centum. Credit for Taxes. Domestic Corporation—Foreign Payments. Sec. 238. (a) That in the case of a domes¬ tic 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 cor¬ poration, or if any tax paid is refunded in whole or in part, the corporation shall at once notify the Commissioner who shall re- 44 determine the amount of the taxes due un¬ der this title and under Title III for the year or years affected, and the amount of taxes due upon such redetermination, if any, shall be paid by the corporation upon notice and demand by the collector, or the amount of taxes overpaid, if any, shall 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 corporation to give a bond with sureties sat¬ isfactory to and to be approved by him in such penal sum as he may require, con¬ ditioned for the payment by the taxpayer of any amount of taxes found due upon any such redetermination; and the bond herein prescribed shall contain such further condi¬ tions as the Commissioner may require. Evidence of Payment. (b) This credit shall be allowed only if the taxpayer furnishes evidence satisfac¬ tory to the Commissioner showing the amount of income derived from sources within such foreign country or such posses¬ sion of the United States, as the case may be, and all other information necessary for the computation of such credit. (c) If a domestic corporation makes a re¬ turn 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 1918 bears to the entire period. Corporation Returns. Requirements for Trustees, Receivers, and Agents for Foreign Corporations. Sec. 239. That every corporation subject to taxation under this title and every per¬ sonal service corporation shall make a re¬ turn, 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 45 — other principal officer and by the treasurer or assistant treasurer. If any foreign cor¬ poration has no office or place of business in the United States but has an agent in the United States, the return shall be made by che agent. In cases where receivers, trus¬ tees in bankruptcy, or assignees are oper¬ ating the property or business of corpora^ tions, such receivers, trustees, or assignees shall make returns 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 re¬ ceivers, trustees, or assignees shall be col¬ lected in the same manner as if collected from the corporations of whose business or property they have custody 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 sec¬ tion 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. Consolidated Returns. How Considered—Computed. Sec. 240. (a) That corporations which are affiliated within the meaning of this sec¬ tion shall, under regulations to be pre¬ scribed by the Commissioner with the ap¬ proval of the Secretary, make a consolidated return of net income and invested capital for the purposes of this title and Title III, and the taxes thereunder shall be computed and determined 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 1, 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 in¬ come, derived from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive. In such case the corporation so taken out shall be separately assessed on the basis of its own invested 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 in¬ come. Specific Credits. In anv case in which a tax is assessed upon the basis of a consolidated return, the total tax shall be computed in the first in¬ stance as a unit and shall then be assessed upon the respective affiliated corporations 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 in¬ come 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 provided in section 312) only one spe¬ cific exemption of $3,000. Corporations—When Deemed Affiliated. (b) For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corpora¬ tion owns directly or controls 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 controlled by the same interests. Domestic Corporation Controlling Foreign Corporation. (c) For the purposes of section 238 a do¬ mestic corporation which owns a majority of the voting stock of a foreign corporation shall be deemed to have paid the same pro¬ portion of any income, war-profits and ex¬ cess-profits taxes paid (but not including taxes accrued) by such foreign corporation during the taxable year to any foreign country or to any possession of the United \ 7 — States upon income derived from sources without the United States, which the amount of any dividends (not deductible under section 234) received by such domes¬ tic corporation from such foreign corpora¬ tion during the taxable year bears to the total taxable income of such foreign corpo¬ ration 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) re¬ ceived by such domestic corporation during the taxable year. Time and Place for Filing Returns. Sec. 241. (a) That returns of corporations shall be made at the same time as is pro¬ vided in subdivision (a) of section 227. (b) Returns shall be made to the collec¬ tor of the district in which is located the principal place of business or principal of¬ fice or agency of the corporation, 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. Payment of Taxes. Four Installments—Extension of Time— Interest—Non-payment—Matures All Installments. Sec. 250. (a) That except as otherwise provided in this section and sections 221 and 237 the tax shall be paid in four install¬ ments, each consisting of one-fourth of the total amount of the tax. The first install merit 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 fifteenth day of the ninth month, after the time fixed by law for filing the return. Where an extension of time for filing a return is granted the time for payment of the first installment shall be postponed until the date of the ex¬ piration of the period of the extension, but the time for payment of the other install- 48 — ments shall not be postponed unless the Commissioner so provides in granting the extension. In any case in which the time for the payment of any installment is at the request of the taxpayer thus postponed there shall be added as part of such install¬ ment interest thereon at the rate of 3/2 of 1 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 pay¬ able upon notice and demand by the col¬ lector. One Payment Optional. The tax may at the option of the tax¬ payer 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 expira¬ tion of the period of such extension. Errors in Payments—Adjustments— Interest. (b) As soon as practicable after the re¬ turn is filed, the Commissioner shall exam¬ ine 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 al¬ ready 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 subsequent install¬ ments; and if the amount already paid ex¬ ceeds the correct amount of the tax, the excess 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 should have been paid, the dif¬ ference 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 understate¬ ment of the amount in the return is not due to any fault of the taxpayer, there shall be 49 no penalty because ol such understatement. If the understatement is due to negligence on the part of the taxpayer, but without in¬ tent 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 1 per centum per month on the amount of the deficiency of each installment from the time the installment was due. Fraudulent Statements. If the understatement is false or fraud¬ ulent with intent to evade the tax, then, in lieu of the penalty provided by section 3176 of the Revised Statutes, as amended, for false or fraudulent returns willfully 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 sec¬ tion 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 fraud¬ ulent returns with intent to evade the tax, the amount of tax due under any return shall be determined and assessed by the Commissioner within five years after the re¬ turn 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 col¬ lected at any time after it becomes due. Additional Tax and Interest on Unpaid Taxes. (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 the case of estates of insane, de¬ ceased, 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 1 per centum per —50— month upon such amount from the time it became due: Provided, 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 of * 1 per centum per month. Returns, Sufficient Notice. In the case of the first installment pro¬ vided for in subdivision (a) the instructions printed on the return shall be deemed suffi¬ cient notice of the date when the tax is due and sufficient demand, and the tax¬ payer's computation of the tax on the re¬ turn shall be deemed sufficient notice of the amount due. Warrant of Distraint, $5.00. (f) In any case in which in order to en¬ force 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. Departure or Removal From United States to Avoid Tax—Security for Payment of Tax. (g) If the Commissioner finds that a tax¬ payer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his prop¬ erty therein, or to do any other act tend¬ ing to prejudice or to render wholly or part¬ ly ineffectual proceedings to collect the tax for the taxable year then last past or the taxable year then current unless such pro¬ ceedings be brought without delay, the Commissioner shall declare the taxable pe¬ riod for such taxpayer terminated at the end of the calendar month then last past and shall cause notice of such finding and decla¬ ration 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 un¬ paid, whether or not the time otherwise al¬ lowed by law for filing return and paying the tax has expired; and such taxes shall Pi • —51— 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 subdivision the finding of the Commis¬ sioner, made as herein provided, whether made after notice to the taxpayer or not, shall be for all purposes presumptive evi¬ dence of the taxpayer’s design. A tax¬ payer who is not in default in making any return or paying income, war profits, or ex¬ cess-profits tax under any Act of Congress may furnish to the United States, under regulations to be prescribed by the Com¬ missioner with the approval of the Secre¬ tary, security approved by the Commis¬ sioner 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 vir¬ tue of the provisions of this subdivision, provided the taxpayer has paid in full all other income, war profits, or excess-profits taxes due from him under any Act of Con¬ gress. If security is approved and accepted pursuant to the provisions of this subdivi¬ sion and such further or other security with respect to the tax or taxes covered thereby is given as the Commissioner shall from time to time find necessary and require, pay¬ ment 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 Taxes. Sec. 251. That every collector to whom any 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 when¬ ever any debtor pays taxes on account of payments made or to be made by him to separate creditors the collector shall, if re¬ quested by such debtor, give a separate re- --52— ceipt for the tax paid on account of each creditor in such form that the debtor can conveniently produce such receipts sep¬ arately to his several creditors in satisfac¬ tion of their respective demands up to the amounts stated in the receipts; and such re¬ ceipt shall be sufficient evidence in favor of such debtor to justify him in withholding from his next payment to his creditor the amount therein stated; but the creditor may, upon giving to his debtor a full writ¬ ten receipt acknowledging the payment to him of any sum actually paid and accepting the amount of tax paid as aforesaid (speci¬ fying the same) as a further satisfaction of the debt to that amount, require the sur¬ render to him of such collector’s receipt. Refunds. Sec. 252. That if, upon examination of any return of income made pursuant to this Act, the Act of August 5, 1909, entitled “An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes,” the Act of October 3, 1913, entitled “An Act to re¬ duce 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 1917, 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 pro¬ visions of section 3228 of the Revised Stat¬ utes, 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 re¬ fund 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. Penalties. Sec. 253. That any individual, corpora¬ tion, or partnership required under this —53— title to pay or collect any tax, to make a re¬ turn or to supply information, who fails to pay or collect such tax, to make such re¬ turn, 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 part¬ nership, 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 required under this title, or who will¬ fully 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 of Dividends. Sec. 254. That every corporation subject to the tax imposed by this title and every personal service corporation shall, when re¬ quired by the Commissioner, render a cor¬ rect return duly verified under oath, of its payments of dividends, stating the name and address of each stockholder, the num¬ ber of shares owned by him, and the amount of dividends paid to him. Returns of Brokers. List of Customers and Transactions. Sec. 255. That every individual, corpora¬ tion, or partnership doing business as a broker shall, when required by the Com¬ missioner, render a correct return duly veri¬ fied under oath, under such rules and regu¬ lations 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 de¬ tails as to the profits, losses, or other in¬ formation which the Commissioner may re¬ quire, 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. —54 Information at Source. Sec. 256. That all individuals, corpora¬ tions, and partnerships, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, and employers, making payment to another in¬ dividual, corporation, or partnership, of in¬ terest, rent, salaries, wages, premiums, an¬ nuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than pay¬ ments described in sections 254 and 255), of SI.000 or more in any taxable 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 payments and required to make re¬ turns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Commissioner, 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 pay¬ ment. Interest on Obligations of Foreign Corporations. Such returns may be required, regardless of amounts, (1) in the case of payments of interest upon bonds, mortgages, deeds of trust, or other similar obligations of cor¬ porations, and (2) in the case of collections of items (not payable in the United States) of interest upon the bonds of foreign coun¬ tries and interest upon the bonds of and dividends from foreign corporations by in¬ dividuals, 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 cou¬ pons, checks, or bills of exchange. When necessary to make effective the provisions of this section the name and ad- —55— dress of the recipient of income shall be furnished upon demand of the individual, corporation, or partnership paying the in¬ come. The provisions of this section shall apply to the calendar year 1918 and each calendar year thereafter, but shall not apply to the payment of interest on obligations of the United States. Returns to Be Public Records. Open Only on Presidential Order—Returns Accessible to Stockholders—Penalty for Disclosure. Sec. 257. That returns upon which the tax has been determined by the Commis¬ sioner shall constitute public records; but they shall be open to inspection only upon order of the President and under rules and regulations prescribed by the Secretary and approved by the President: Provided, That the proper officers of any State impos¬ ing an income tax may, upon the request of the governor thereof, have access to the re¬ turns of any corporation, or to an abstract thereof showing the name and income of the corporation, at such times and in such man¬ ner as the Secretary may prescribe: Pro¬ vided further, That all bona fide stockhold¬ ers of record owning 1 per centum or more of the outstanding stock of any corporation shall, upon making request of the Commis¬ sioner, be allowed to examine the annual in¬ come returns of such corporation and of its subsidiaries. Any stockholder who pur¬ suant to the provisions of this section is al¬ lowed to examine the return of any corpo¬ ration, and who makes known in any man¬ ner 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 pun¬ ished by a fine not exceeding $1,000, or by imprisonment not exceeding one year, or both. — 56 — List of Income-Taxpayers Available. The Commissioner shall as soon as prac¬ ticable in each year cause to be prepared and made available to public inspection in such manner as he may determine, in the office of the collector in each internal-rev- I enue district and in such other places as he may determine, lists containing the names I and the post-office addresses of all individ¬ uals making income-tax returns in such dis¬ trict. Publication of Statistics, Annually. Sec. 258. That the Commissioner, with the approval of the Secretary, shall prepare : and publish annually statistics reasonably available with respect to the operation of the income, war profits and excess-profits tax laws, including classifications of tax- j payers and of income, the amounts allowed as deductions, exemptions, and credits, and any other facts deemed pertinent and valu¬ able. Collection of Foreign Items. License Necessary. Sec. 259. That all individuals, corpora¬ tions, or partnerships undertaking as a mat¬ ter of business or for profit the collection of foreign payments of interest or dividends by means of coupons, checks, or bills of ex¬ change shall obtain a license from the Com¬ missioner and shall be subject to such regu¬ lations enabling the Government to obtain the information required under this title as the Commissioner, with the approval of the Secretary, shall prescribe; and whoever knowingly undertakes to collect such pay¬ ments 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. * Citizens of United States Possessions. Tax on Income from United States. Sec. 260. That any individual who is a citizen of any possession of the United — 57 — States (but not otherwise a citizen of the United States) and who is not a resident of the United States, shall be subject to taxa¬ tion under this title only as to income de¬ rived 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 as in the case of other persons who are taxable only as to income derived from such sources. Porto Rico and Philippine Islands. Sec. 261. That in Porto Rico and the Philippine Islands the income tax shall be levied, assessed, collected, and paid in ac¬ cordance with the provisions of the Rev¬ enue Act of 1916 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 (1) every individual who is a citizen or resident of Porto Rico or the Philippine Islands or derives income from sources therein, and (2) every corporation created or organized in Porto Rico or the Philip¬ pine Islands or deriving income from sources therein. An individual who is neither a cit¬ izen nor a resident of Porto Rico or the Philippine Islands but derives income from sources therein, shall be taxed in Porto Rico or the Philippine Islands as a nonresident alien individual, and a corporation created or organized outside Porto Rico or the Philippine Islands and deriving income 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. The Porto Rican or Philippine Legisla¬ ture shall have power by due enactment to amend, alter, modify, or repeal the income tax laws in force in Porto Rico or the Philip¬ pine Islands, respectively. —58— TITLE III.—WAR-PROFITS AND EXCESS-PROFITS TAX. Part I.—General Definitions. Sec. 300. That when used in this title the terms “taxable year,” ‘‘fiscal year,” “per¬ sonal service corporation,” “paid or ac¬ crued” and “dividends” shall have the same meaning as provided for the purposes of in¬ come 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. Rates Year 1918. Sec. 301. (a) That in lieu of the tax im¬ posed by Title II of the Revenue Act of 1917, but in addition to the other taxes im¬ posed by this Act, there shall be levied, col¬ lected, and paid for the taxable year 1918 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-profits credit (determined under section 311) exceeds the amount of the tax computed under the first and second brac¬ kets. Year 1919 and Succeeding Years. (b) For the taxable year 1919 and each taxable year thereafter there shall be levied, collected, and paid upon the net income of every corporation (except corporations tax¬ able under subdivision (c) of this section j — 59 — a tax equal to the sum of the following: 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; Second Bracket. 40 per centum of the amount of the net income in excess of 20 per centum of the invested capital. Income, Excess of $10,000, on Government. Contracts. (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 contracts made between April 6, 1917, and November 11, 1918, both dates inclusive, a tax equal to the sum of the following: ^1) 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 contract or contracts bears to the entire net income. In comput¬ ing such tax the excess-profits credit and the war-profits credit applicable to the taxable year shall be used ; (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 contract or contracts bears to the entire net income. For the purpose of determining the part of the net income attributable to such Gov¬ ernment contract or contracts, the proper apportionment and allocation of the deduc¬ tions with respect to gross income derived from such Government contract or con¬ tracts and from other sources, respectively, shall be determined under rules and regu¬ lations prescribed by the Commissioner with the approval of the Secretary. — 60 — (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 de¬ ducted from the amount in the second bracket. Transportation Systems. (e) For the purposes of the Act approved March 21, 1918, 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. Basis of Computation. Sec. 302. That the tax imposed by subdi¬ vision (a) of section 301 shall in no case be more than 30 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 in¬ come in excess of $3,000 and not in excess of $20,000, plus 40 per centum of the amount of the net income in excess of $20,000; and the above limitations 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 increase the tax imposed by section 301. Income Partly Derived from Personal Service Corporation. Sec. 303. That if part of the net income of a corporation is derived (1) from a trade or business (or a branch of a trade or busi¬ ness) in which the employment of capital is necessary, and (2) a part (constituting not less than 30 per centum of its total net in¬ come) is derived from a separate trade or • business (or a distinctly separate branch of — 61 — the trade or business) which if constituting the sole trade or business would bring it within the class of “personal service cor¬ porations/’ then (under regulations pre¬ scribed by the Commissioner with the ap¬ proval of the Secretary) the tax upon the first part of such net income shall be sep¬ arately computed (allowing in such compu¬ tation only the same proportionate part of the credits authorized in sections 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 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 bene¬ fit 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 refer¬ ence to this section, as other taxes are de¬ termined under this title. The total tax computed under this section shall be sub¬ ject to the limitations provided in section 302. Corporations—When Exempt. Sec. 304. (a) That the corporations enu¬ merated in section 231 shall, to the extent that they are exempt from income tax un¬ der Title II, be exempt from taxation under this title. (b) Any corporation whose net income for the taxable year is less than $3,000 shall be exempt from taxation under this title. Gold Mining. (c) In the case of any corporation en¬ gaged in the mining of gold, the portion of the net income derived from the mining of gold shall be exempt from the tax im¬ posed by this title, and the tax on the re¬ maining portion of the net income shall be the proportion of a tax computed with¬ out the benefit of this subdivision which such remaining portion of the net income bears to the entire net income. Apportionment of Exemption. Sec. 305. That if a tax is computed un¬ der this title for a period of less than twelve —62— 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. Prewar Period Defined. Sec. 310. That as used in this title the term “p rewar period” means the calendar years 1911, 1912, and 1913, or, if a corpora¬ tion was not in existence during the whole of such period, then as many of such years during the whole of which the corporation was in existence. War-profits Credits. Sec. 311. (a) That the war-profits credit shall consist of the sum of: (1) 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 pe¬ riod and the invested capital for the tax¬ able year. If the tax is computed for a period of less than twelve months such amount shall be reduced to the same propor¬ tion thereof as the number 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 com¬ puted under paragraph (2) of subdivision (a) is less than 10 per centum of its in¬ vested capital for the taxable year, then the war-profit's credit shall be the sum of: Specific Exemptions. (1) 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 ex¬ istence during the whole of at least one calendar year during the prewar period, then, except as provided in subdivision (d), the war-profits credit shall be the sum of: (1) A specific exemption of $3,000; and (2) An amount equal to the same percent¬ age of the invested capital of the taxpayer for the taxable year as the average percent- —63— age of net income to invested capital, for the prewar period, of corporations 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 for the taxable year. Such average percentage shall be determined by the Commissioner on the basis of data con¬ tained in returns made under Tile II of the Revenue Act of 1917, and the average known as the median shall be used. If such average percentage has not been de¬ termined and published at least 3G days prior to the time when the return of the I 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 determining the correct amount of the tax. * Method of Determination (d) The war-profits credit shall be deter¬ mined in the manner provided in subdivi¬ sion (b) instead of in the manner provided , in subdivision (c), in the case of any cor- ; poration which was not in existence dur¬ ing the whole of at least one calendar year during the prewar period, if (1) a majority of its stock at any time during the taxable year is owned or controlled, directly or in¬ directly, by a corporation which was in ex¬ istence during the whole of at least one calendar year during the prewar 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, de¬ rived from a Government contract or con- . tracts made between April 6, 1917, and No¬ vember 11, 1918, both dates inclusive. Foreign Corporations Not Entitled to Specific Exemption. (e) A foreign corporation shall not be en¬ titled to a specific exemption of $3,000. Excess-Profits Exemption. Sec. 312. That the excess-profits credit shall consist of a specific exemption of $3,000 plus an amount equal to 8 per cen¬ tum of the invested capital for the taxable year. A foreign corporation shall not be entitled to the specific exemption of $3,000. Part IV.—Net Income. Method of Determination Sec. 320. (a) That for the purpose of this title the net income of a corporation shall be ascertained and returned— (1) For the calendar years 1911 and 1912 upon the same basis and in the same man¬ ner as provided in section 38 of the Act entitled “An Act to provide revenue, equal¬ ize 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 corporation within the year shall be in¬ cluded ; (2) For the calendar year 1913 upon the same basis and in the same manner as pro¬ vided in Section 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, ex¬ cept 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 re¬ ceived by it as dividends upon the stock or from the net earnings of other corporations subject to the tax imposed by Section II of such Act of October 3, 1913, shall be de¬ ducted ; 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 pre¬ war period shall be determined by dividing the number of years within that period dur¬ ing the whole 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. — 65 — Part V.—Invested Capital. Intangible Property. Sec. 325. (a) That as used in this title— The term “intangible property” means patents, copyrights, secret processes and formulae, good will, trade-marks, trade- brands, franchises, and other like property; Tangible Property. The term “tangible property” means stocks, bonds, notes, and other evidences of indebtedness, bills and accounts receivable, leaseholds, and other property other than intangible property; Personal Capital. The term “borrowed capital” means money or other property borrowed, whether represented by bonds, notes, open accounts, or otherwise; . Inadmissible Assets. The term “inadmissible assets” means stocks, bonds, and other obligations (other than obligations of the United States), the dividends or interest from which is not in¬ cluded in computing net income, but where the income derived from such assets con¬ sists 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 corresponding part of the capital invested in such assets shall not be deemed to be inadmissible assets. Admissible Assets. The term “admissible assets” means all assets other than inadmissible assets, valued in accordance with the provisions of sub¬ division (a) of section 326, section 330, and section 331. Par Value of Stock. (b) For the purposes of this title, the par value of stock or shares shall, in the case of stocks 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. Invested Capital. 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): (1) Actual cash bona fide paid in for stock or shares; Cash Value of Tangible Property. (2) Actual cash value of tangible prop¬ erty, other than cash, bona fide paid in for stock or shares, at the time of such pay¬ ment, but in no case to exceed the par value of the original stock or shares specifically issued therefor, unless the actual cash val¬ ue of such tangible property at the time paid in is shown to the satisfaction of the Commissioner to have been clearly and sub¬ stantially in excess of such par value, in which case such excess shall be treated as paid-in surplus: Proznded, That the Com¬ missioner shall keep a record of all cases in which tangible property is included in invested 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 engaged, the amount of invested capital and net income shown by the return, the value of the tangible prop¬ erty 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 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; Surplus and Undivided Profits. (3) Paid-in or earned surplus and un¬ divided profits; not including surplus and undivided profits earned during the year; Intangible Property Paid in for Stock. (4) Intangible property bona fide paid in for stock or shares prior to March 3, 1917, —67— 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 outstand¬ ing on March 3, 191Z, 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 ag¬ gregate 25 per centum of the par value of the total stock or shares of the corporation outstanding 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 corpora¬ tion outstanding at the beginning of the taxable year; but (b) As used in this title the term “in¬ vested capital” does not include borrowed capital. Invested Capital Deductions. (c) There shall be deducted from in¬ vested capital as above defined a percentage thereof equal to the percentage which the amount of inadmissible assets is of the amount of admissible and inadmissible as¬ sets held during the taxable year. Average Invested Capital. (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 pre¬ war period shall be determined by dividing the number of years within that period dur¬ ing the whole of which the corporation was in existence into the sum of the average invested capital for such years. Determination of Invested Capital. Sec. 327. That in the following cases the — 68 — tax shall be determined as provided in sec¬ tion 328: (a) Where the Commissioner is unable to determine the invested capital as pro¬ vided in section 326; (b) In the case of a foreign corporation; (c) Where a mixed aggregate of tangible property and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfac¬ torily 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 cor¬ poration the Commissioner finds and so de¬ clares of record that the tax if determined without benefit of this section would, ow¬ ing to abnormal conditions affecting the cap¬ ital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative corporations specified in section 328. This subdivision shall not apply to any case (1) 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, com¬ missions, or other income, derived on a cost- plus basis from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive. Computations—Conditions. Sec. 328. (a) In the cases specified in section 327 the tax shall be the amount which bears the same ratio to the net in¬ come of the taxpayer (in excess of the spe¬ cific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar — 69 — trade or business, bears to their average net income (in excess of the specific exemption of $3,000) for such year. In the case of a foreign corporation the tax shall be com¬ puted without deducting the specific ex¬ emption of $3,000 either for the taxpayer or the representative corporations. In computing the tax under this section the Commissioner shall compare the tax¬ payer only with representative corporations whose invested capital can be satisfactorily determined under section 326 and which are, as nearly as may be, similarly circum¬ stanced with respect to gross income, net income, profits per unit of business trans¬ acted and 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 cor¬ porations shall be determined by the Com¬ missioner in accordance with regulations prescribed by him with the approval of the Secretary. In cases in which the tax is to be com¬ puted under this section, if the tax as com¬ puted 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 com¬ puted is 50 per centum or more of the net income, the installments shall in the first instance be computed upon the basis of a tax equal to 50 per centum of the net in¬ come. In any case, the actual ratio when ascertained 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 Yi of 1 per centum per month on such ex¬ cess from the time the installment was due. Commissioner’s Record—Report to Congress. (c) The Commissioner shall keep a record of all cases in which the tax is de- — 70 — termined in the manner prescribed in subdi¬ vision (a), 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, and the «r amount of invested capital as determined under- such subdivision. The Commis¬ sioner 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 reor¬ ganization, consolidation, or change of own¬ ership after January 1, 1911, of a trade or business now carried on by a corporation, the corporation shall for the purposes of this title be deemed to have been in exist¬ ence prior to that date, and the net income and invested capital of such predecessor trade or business for all or any part of the prewar period prior to the organization of the corporation now carrying on such trade or business shall be deemed to have been the net income and invested capital of such cor¬ poration. If such predecessor trade or business was carried on by a partnership or individual the net income for the prewar period shall, under regulations prescribed by the Com¬ missioner with the approval of the Secre¬ tary, 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 ac¬ tually rendered. In the case of the organization as a cor¬ poration before July 1, 1919, of any trade or business in which capital is a material income-producing factor and which was previously owned by a partnership or indi¬ vidual, the net income of such trade or busi¬ ness from January 1, 1918, to the date of such reorganization may at the option of the individual or partnership be taxed as the net income of a corporation is taxed under Titles II and III; in which event the —71— 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 1, 1918, and the undis¬ tributed profits or earnings of such trade or business shall not be subject to the surtax imposed in section 211, but amounts dis¬ tributed on or after January 1, 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 relat¬ ing to corporations shall, so far as practi¬ cable, apply to such trade or business: Pro¬ vided, That this paragraph shall not apply to any trade or business the net income of which for the taxable year 1918 was less than 20 per centum of its invested capital for such year: Provided further, That any taxpayer who takes advantage of this para¬ graph shall pay the tax imposed by sec¬ tion 1000 of this Act and by the first sub¬ division of section 407 of the Revenue Act of 1916, as if such taxpayer had been a cor¬ poration on and after January 1, 1918, with a capital stock having no par value. If any asset of the trade or business in existence both during the taxable year and any prewar year is included in the invested capital for the taxable year but is not in¬ cluded in the invested capital for such pre¬ war year, or is valued on a different basis in computing the invested capital for the taxable year and such prewar year, respec¬ tively, then under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary such read¬ justments shall be made as are necessary to place the computation of the invested capital for such prewar year on the basis employed in determining the invested cap¬ ital for the taxable year. Sec. 331. In the case of the reorganiza¬ tion, consolidation, or change of ownership of a trade or business, or change of own¬ ership of property, after March 3, 1917, if an interest or control in such trade or business or property of 50 per centum or more re¬ mains 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 — 72 — greater value than would have been al¬ lowed under this title in computing the in¬ vested capital of such previous owner if such asset had not been so transferred or received: Provided, That if such previous 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 allowance for deprecia¬ tion, impairment, betterment or develop¬ ment, but no addition to the original cost I shall be made for any charge or expenditure j deducted as expense or otherwise on or after I March 1, 1913, in computing the net income of such previous owner for purposes of tax¬ ation. Part VII.—Miscellaneous. Corporations Other Than Personal Service Corporations. Sec. 335. (a) That if a corporation (other than a personal service corporation) makes return for a fiscal year beginning in 1917 and ending in 1918, the tax for the first taxable year under this title shall be the sum of: (1) 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 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 specified in subdivision (a) of sec¬ tion 301 which the portion of such period falling within the calendar year 1918 is of the entire period. Any amount heretofore or hereafter paid on account of the tax imposed for such fis¬ cal 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 ex¬ ceeds the amount of the tax imposed by this title, the excess shall be credited or refunded to the corporation in accordance with the provisions of section 252. — 73 — Tax Computation for Fiscal Year Beginning 1918, Ending 1919—Refunds. (b^ If a corporation makes return for a fiscal year beginning in 1918 and ending in 1919, the tax for such fiscal year under this title shall be the sum of: (1) the same proportion of tax for the entire period com¬ puted under subdivision (a) of section 301 which the portion of such period falling within the calendar year 1918 is of the en¬ tire 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 serv¬ ice corporation makes return for a fiscal year beginning in 1917 and ending in 1918, 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 calendar year 1917 is of the entire period. Any tax paid by a partnership or per¬ sonal service corporation for any period beginning on or after January 1, 1918, shall be immediately refunded to the partnership or corporation as a tax erroneously or il¬ legally collected. Corporations Not Exempt to Make Returns. Sec. 336. That every corporation, not ex¬ empt under section 304, shall make a return for the purposes 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 corporations 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. Sale of Mines, Oil or Gas Wells. Sec. 337. That in the case of a bona fide sale of mines, oil or gas wells, or any inter¬ est therein, where the principal value of — 74 — I 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 s 20 per centum of the selling price of such property or interest. TITLE IV.—ESTATE TAX. Definitions: “Executor”—“Collector.” Sec. 400. That when used in this title— 1 he term “executor” means the executor or administrator of the decedent, or, if there is no executor or administrator, any person who takes possession of any property of the decedent; and The term “collector” means the collector of internal revenue of the district in which was the domicile of the decedent at the time of his death, or, if there was no such domi¬ cile in the United States, then the collector of the district in which is situated the part of the gross estate of the decedent 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 district as may be designated by the Commissioner. Rates. Sec. 401. That (in lieu of the tax im¬ posed by Title II of the Revenue Act of 1916, as amended, and in lieu of the tax im¬ posed by Title IX of the Revenue Act of 1917) a tax equal to the sum of the follow¬ ing percentages of the value of the net es¬ tate (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: 1 per centum of the amount of the net estate not in excess of $50,000; 2 per centum of the amount by which the net estate exceeds $50,000 and does not ex¬ ceed $150,000; 3 per centum of the amount by which the net estate exceeds $150,000 and does not ex¬ ceed $250,000; 4 per centum of the amount by which the net estate exceeds $250,000 and does not exceed $450,000; — 75 — 6 per centum of the amount by which the net estate exceeds $450,000 and does not ex¬ ceed $750,000; 8 per centum of the amount by which the net estate exceeds $750,000 and does not ex¬ ceed $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; 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. Exemptions—Army or Navy Service The taxes imposed by this title or by Title II of the Revenue Act of 1916 (as amended by 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 fortifications, and for other purposes,” ap¬ proved March 3, 1917) or by Titl** IX of the Revenue Act of 1917, shall not apply to the transfer of the net estate 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 service, and any such tax collected upon such trans¬ fer shall be refunded to the executor. — 76 — Determination of Gross Estate Sec. 402. That the value of the gross es¬ tate of the decedent 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 pay¬ ment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his es¬ tate ; (b) To the extent of any interest therein of the surviving spouse, existing at the time of the decedent’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 transfer, or with respect to which he has at any time created a trust, in contempla¬ tion of or intended to take effect in posses¬ sion 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 consideration in money or money’s worth. Any transfer of a material part of his property in the nature of a final disposi¬ tion 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; (d) To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or de¬ posited 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 be¬ longed to the decedent; (e) To the extent of any property pass¬ ing under a general power of appointment exercised by the decedent (1) by will, or (2) —77— by deed executed in contemplation of, or intended to take effect in possession or en¬ joyment 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 receiva¬ ble by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under poli¬ cies taken out by the decedent upon his own life. Determination of Net Estate. Sec. 403. That for the purpose of the tax the value of the net estate shall be deter¬ mined— Resident Deductions. (a) In the case of a resident, by deduct¬ ing from the value of the gross estate— (1) Such amounts for funeral expenses, administration 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 re¬ quired and actually expended for the sup¬ port during the settlement of 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 ad¬ ministered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes; (2) An amount equal to the value at the time of the decedent’s death of any proper¬ ty, real, personal, or mixed, which can be identified as having been received by the de¬ cedent as a share in the estate of any per¬ son who died within five years prior to the death of the decedent, or which can be iden¬ tified as having been acquired by the de¬ cedent in exchange for property so received, if an estate tax under the Revenue Act of — 78 — 1917 or under this Act was collected from such estate, and if such property is included in the decedent’s gross estate; Gifts, Etc., When Exempt. (3) The amount of all bequests, legacies, devises, or gifts, to or for the use of the United States, any state, territory, any polit¬ ical subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any corporation or¬ ganized and operated exclusively for relig¬ ious, charitable, scientific, literary, or edu¬ cational purposes, including the encourage¬ ment of art and the prevention of cruelty to children or animals, no part of the net earn¬ ings of which inures to the benefit of any private stockholder or individual, 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 dece¬ dents who have died since December 31, 1917;and Specific Exemption. (4) An exemption of $50,000; (b) In the case of a nonresident, by de¬ ducting from the value of that part of his gross estate which at the time of his death is situated in the United States— Nonresident Deductions. (1) That proportion of the deductions specified in paragraph (1) 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 situ¬ ated in the United States; (2) An amount equal to the value at the time of the decedent’s death of any prop¬ erty, real, personal, or mixed, which can be identified as having been received by the decedent as a share in the estate of any per¬ son who died within five years prior to the death of the decedent, or which can be identified as having been acquired by the —79— decedent in exchange for property so re¬ ceived, if an estate tax under the Revenue Act of 1917 or under this Act was collected from such estate, and if such property is in¬ cluded in that part of the decedent’s gross estate which at the time of his death is situ¬ ated in the United States; and Gifts, Etc., When Exempt. (3) The amount of all bequests, legacies, devises, or gifts, to or for the use of the United States, any state, territory, any po¬ litical subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any domestic corpo¬ ration organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the en¬ couragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the bene¬ fit of any private stockholder or individual, or to a trustee or trustees exclusively for such religious, charitable, scientific, liter¬ ary, 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 shall be allowed in the case of a nonresident unless the executor in¬ cludes in the return required to be filed un¬ der 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. For the purpose of this title stock in a do¬ mestic corporation owned and held by a non¬ resident decedent, and the amount receivable as insurance upon the life of a nonresident decedent where the insurer is a domestic corporation, shall be deemed property with¬ in 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 situ- — 80 — ated 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. Refunds. 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 paragraph (3) of subdi¬ vision (a) or (b) the tax shall be redeter¬ mined and any excess of tax paid shall be refunded to the executor. Duties of Executor. Sec. 404. That the executor, within sixty days after qualifying as such, or after com¬ ing into possession 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 regula¬ tions made pursuant to law, file with the collector a return under oath in duplicate, setting forth (a) the value of the gross es¬ tate of the decedent at the time of his death, or, in case of a nonresident, of that part of his gross estate situated in the United States; (b) the deductions allowed under 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 supple¬ mental data as may be necessary to estab¬ lish the correct tax. Returns—When Made—Inability to Make Complete Returns. Return shall be made in all cases where the gross estate at the death of the de¬ cedent 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 snail include in his return a description of such part and the — 81 — 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 assessments of the tax under the author¬ ity of existing administrative special and general provisions of law relating to the as¬ sessment and collection of taxes. Administration Not Granted—No Return— False Return. 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 contains 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. Tax—When Due. Sec. 406. That the tax shall be due one year after the decedent’s death; but in any case where the Commissioner finds that pay¬ ment 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 de¬ cedent’s death, interest at the rate of 6 per centum per annum from the expiration of one year after the decedent’s death shall be added as part of the tax. Payments When Correct Amount Is Not Determinable—Refund. 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 collector, to discharge the tax shall be deemed payment in full of the tax, except as in this section otherwise pro¬ vided. If the amount so n paid exceeds the amount of the tax as finally determined, the Commissioner shall refund such ex¬ cess to the executor. If the amount of the tax as finally determined exceeds the —82— amount so paid, the collector shall notify the executor of the amount of such excess and demand payment thereof. If such ex¬ cess part of the tax is not paid within thirty days after such notification, interest shall be added thereto at the rate of 10 per centum per annum from the expiration of such thir ty days’ period until paid, and the amount of such excess shall be a lien upon the en¬ tire 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. Receipts. The collector shall grant to the person paying the tax duplicate receipts, either of which shall be sufficient evidence of such payment, and shall entitle the executor to be credited and allowed the amount thereof by any court having jurisdiction to audit or settle his accounts. Failure to Pay—Proceedings. Sec. 408. That if the tax herein imposed is not paid within 180 days after it is due, the collector shall, unless there is reasonable cause for further delay, proceed to collect the tax under the provisions of general law, or commence appropriate proceedings in any court of the United States, in the name of the United States, to subject the property of the decedent to be sold under the judg¬ ment or decree of the court. From the pro¬ ceeds of such sale the amount of the tax, to¬ gether with the costs and expenses of every description to be allowed by the court, shall be first paid, and the balance shall be de¬ posited according to the order of the court, to be paid under its direction to the person entitled thereto. Property Passing to Person Other Than Executor—How Computed. If the tax or any part thereof is paid by, or collected out of that part of the estate passing to or in the possession of, any per¬ son other than the executor in his capacity as such, such person shall be entitled to re¬ imbursement out of any part of the estate still undistributed or by a just and equitable —83— contribution by the persons whose interest in the estate of the decedent would have been reduced if the tax had been paid be¬ fore 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 pur¬ pose and intent of this title that so far as is practicable and unless otherwise directed by the will of the decedent the tax shall be paid out of the estate before its distribution. If any part of the gross estate consists of pro¬ ceeds of policies of insurance upon the life of the decedent receivable by a beneficiary other than the executor, the executor shall be entitled to recover from such beneficiary such portion of the total tax paid as the proceeds, in excess of $40,000, or such poli¬ cies bear to the net estate. If there is more than one such beneficiary the executor shall be entitled to recover from such bene¬ ficiaries in the same ratio. Unpaid Taxes Lien on Gross Estate. 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, ex¬ cept 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 jurisdic¬ tion thereof, shall be divested of such lien. If the Commissioner is satisfied that the tax liability of an estate has been fully dis¬ charged or provided for, he may, under reg¬ ulations prescribed by him with the ap¬ proval of the Secretary, issue his certificate releasing any or all property of such estate from the lien herein imposed. Transfer by Decedent. If (a) the decedent makes a transfer of, or creates a trust with respect to, any property in contemplation of or intended to take ef¬ fect in possession 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 —84 cither 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 in¬ surance, 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 considera¬ tion in money or money’s worth shall be di¬ vested of the lien and a like lien shall then attach to all the property of such trans¬ feree or trustee, except any part sold to a bona fide purchaser for a fair consideration in money or money’s worth. False Return—Penalty. Sec. 410. That whoever knowingly makes any 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 exceeding one year, or both. Withholding Records, Information, Prop¬ erty—Penalty. Whoever fails to comply with any duty imposed upon him by section 404, or, having in his possession or control any record, file, or paper, containing or supposed to contain any information concerning 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 collector or law officer of the United States, or his duly authorized deputy or agent, who desires to examine the same in the performance of his duties under this title, shall be liable to a penalty of not ex¬ ceeding $500, to be recovered, with costs of suit, in a civil action in the name of the United States. TITLE V.—TAX ON .TRANSPORTA¬ TION AND OTHER FACILITIES, AND ON INSURANCE. Sec. 500. That from and after April 1, 1919, there shall be levied, assessed, col- — 85 — % lected, and paid, in lieu of the taxes imposed by section 500 of the Revenue Act of 1917— Transportation. (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 an¬ other; and a like tax on the amount paid for such transportation within the United States of property transported from a point without the United States to a point within the United States; (b) A tax of 1 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 competi¬ tion 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 property 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 date of persons by rail or water, or by any form of mechanical motor power on a regular established line when in com¬ petition 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 transpor¬ tation the fare for which does hot exceed 42 cents: Provided, That where such water transportation lines are in competition be¬ tween American ports with foreign water transportation lines from adjacent foreign ports, the tax imposed under this subdivi¬ sion on amounts paid for water transporta¬ tion between American ports shall not ex¬ ceed the amount of the transportation tax — 86 — to which such foreign water transportation lines are subjected by their government cor¬ responding to this tax: (d) A tax equivalent to 8 per centum of the amount paid for seats, berths, and state¬ rooms in parlor cars, sleeping cars, or on vessels, used on or after such date in con¬ nection with transportation upon which tax is imposed by subdivision (c; ; (e) A tax equivalent to 8 per centum of the amount paid for the transportation on or after such date of oil by pipe line; Telephone, Telegraph, Etc. (f) In the case of each telegraph, tele¬ phone, 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: Pro¬ vided, That only one payment of such tax shall be required, notwithstanding the lines or stations of one or more persons are used for the transmission of such dispatch, mes¬ sage, or conversation; and (g) A tax equivalent to 10 per centum of the amount paid after such date to any tele¬ graph or telephone company for any leased wire or talking circuit special service fur¬ nished after such date. This subdivision shall not apply to the amount paid for so much of such service as is utilized (1) in the collection and dissemination of news through the public press, or (2) in the con¬ duct. by a common carrier or telegraph or telephone company, of its business as such. Exemptions. (h) No tax shall be imposed under this section upon any payment received for serv¬ ices rendered to the United States or to any State or Territory or the District of Colum¬ bia. The right to exemption under this subdivision shall be evidenced in such man¬ ner as the Commissioner, with the approval of the Secretary, may by regulation pre¬ scribe. — 87 — By Whom Paid. Sec. 501. (a) That the taxes imposed by section 500 shall be paid by the person pay¬ ing for the services or facilities rendered. Mileage Books. (b) If a mileage book used for transpor¬ tation or accommodation was purchased be¬ fore November 1, 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 accommo¬ dation, 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 Secretary, may pre¬ scribe ; if a ticket (other than a mileage book) was bought and partially used before November 1, 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 regula¬ tion prescribe. When Applied. (c) The taxes imposed by section 500 shall apply to all services or facilities spe¬ cified in such section 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 fa¬ cilities 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 transpor¬ tation of such goods if the carrier received payment for such transportation, such tax, if it can not be computed trom actual rates or tariffs of the carrier, to be computed on the basis of the rates or tariffs of other car¬ riers for like services as determined by the — 88 — Commissioner. In the case of any carrier (other than a pipe line) the principal busi¬ ness of which is to transport goods belong¬ ing 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 actually rendered by it for hire. Nothing in thisor the preceding section shall be construed as imposing a tax (1) 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 in¬ tended to be so used or has been so used; or (2) upon the transportation of company material transported by one carrier, which constitutes a part of a railroad system, for another carrier which is also a part of the same system. Transportation by Pipe Line. (d) The tax imposed by subdivision (e) of section 500 shall apply to all transporta¬ tion 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 transport¬ ing by pipe line shall pay a tax equivalent to the tax which would be imposed if such person received payment for such transpor¬ tation, and if the tax can not be computed from actual bona fide rates or tariffs, it shall be computed (1) 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 transporta¬ tion, as determined by the Commissioner. By Whom Collected—Returns and Pay¬ ments Monthly—Refunds. Sec. 502. That each person receiving any payments referred to in section 500 shall collect the amount of the tax, if any, im¬ posed by such section from the person mak¬ ing 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 sec¬ tion 501 to the collector of the district in which the principal office or place of busi¬ ness is located. — 89 — No carrier collecting the taxes imposed by subdivision (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 similar document, if the total amount of the transportation charge and the tax is stated therein. Any person making a refund of any pay¬ ment 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 subsequent month¬ ly return. The returns required under this section shall contain such information, and be made at such times and in such manner, as the Commissioner, with the approval of the Secretary, may by regulation prescribe. Delayed Payment Penalty. The tax shall, without assessment by the Commissioner 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 1 per centum for each full month, from the time when the tax became due. Insurance Rates. Sec. 503. That from and after April 1, 1919, there shall be levied, assessed, col¬ lected, and paid, in lieu of the taxes imposed by section 504 of the Revenue Act of 1917, the following taxes on the issuance of in¬ surance 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 acting 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 $100 or fractional part thereof of the amount for which any life is insured under any policy of insurance, or other instrument, by whatever name the same is called: Provided, That on all poli- —90— cies for life insurance only by which a life is insured not in excess of $500, issued on the industrial or weekly or monthly pay¬ ment 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 premium, as the case may be: Provided, fur¬ ther, That on policies of group life insur¬ ance, covering groups of not less than 25 lives in the employ of the same person, for the benefit of persons other than the em¬ ployer, 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 in¬ surance 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 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; (b) Marine, inland, and fire insurance: A tax equivalent to 1 cent on each dollar or fractional part thereof of the premium charged under each policy of insurance or other instrument by whatever name the same is called whereby insurance is made or renewed upon property of any descrip¬ tion (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 equiv¬ alent to 1 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 tax¬ able under subdivision 2 of schedule A of Title XI) issued or executed or renewed by any person transacting the business of em¬ ployer’s liability, workmen’s compensation, accident, health, tornado, plate glass, steam boiler, elevator, burglary, automatic sprink¬ ler, automobile, or other branch of insur¬ ance (except life insurance, and insurance described and taxed in the preceding subdi- —91— vision) : Provided, That in case of policies of insurance issued on the industrial or weekly or monthly payment 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 premium, as the case may be; Exemptions. (d) Policies issued by any corporation enumerated in section 231, and policies of reinsurance, shall be exempt from the taxes imposed by this section. Returns. Sec. 504. That every person issuing poli¬ cies of insurance upon the issuance of which a tax is imposed by section 503 shall make monthly returns under oath, in duplicate, and pay such tax to the collector of the dis¬ trict 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 Commissioner, with the approval of the Secretary, may by regulation prescribe. Delayed Payment Penalty. The tax shall, without assessment by the Commissioner 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 1 per centum for each full month, from the time when the tax became due. TITLE VI.—TAX ON BEVERAGES. Distilled Spirits. 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 here¬ after produced in or imported into the United States, except such distilled spirits as are subject to the tax provided in section 604, in lieu of the internal-revenue taxes now imposed thereon by law, a tax of $2.20 (or, if withdrawn for beverage purposes or for use in the manufacture or production —92— of any article used or intended for use as a beverage, a tax of $6.40) on each proof gal¬ lon, or wine gallon when below proof, and a proportionate tax at a like rate on all frac¬ tional parts of such proof or wine gallon, to be paid by the distiller or importer when withdrawn, and collected under the pro¬ visions of existing law. Taxes Not Due or Payable During Period of Prohibition. (b) That the tax imposed by subdivision (a) on distilled spirits intended for bever¬ age purposes shall not be due or payable on such spirits while stored in any distillery, bonded warehouse, or special or general bonded warehouse, and which, pursuant to any Act of Congress or proclamation of the President of the United States, can not be lawfully 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 pay¬ ment 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 cancellation exe¬ cute 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 re¬ moved 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 con¬ tain such further conditions as the Commis¬ sioner, with the approval of the Secretary, may by regulations require. The distiller may, subject to the provisions of this sec¬ tion, be permitted to retain in any such bonded warehouse distilled spirits on which, under the terms of any existing bond, the tax imposed thereon becomes due and pay¬ able prior to the date such prohibition takes —93— effect: Provided, That on the removal of such prohibition the distiller shall, as to all spirits as to which the bonded period fixed by law has not expired and which remain stored in warehouse, execute new and satis¬ factory bond in the form required by exist¬ ing law, conditioned for the payment of the tax on all such spirits; and all provisions of existing law relating to such bonded ware¬ houses, or the storage of spirits therein, or to 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 section. After Prohibition Period. Upon the withdrawal of distilled spirits from bonded warehouse, after the period of prohibition has ended, and under the condi¬ tions imposed by section 50 of an Act en¬ titled “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 allow¬ ance 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 pe¬ riod fixed by that section. Distilled Spirits, Etc., in Warehouse When Prohibition Takes Effect. Under regulations prescribed by the Sec¬ retary, any imported distilled spirits, wines or other liquors which may be in any cus¬ toms bonded warehouse under the customs laws on the date such prohibition takes ef¬ fect shall be permitted to remain therein without payment of any taxes or duties thereon, beyond the three-year period pro¬ vided in section 2971 of the Revised Stat¬ utes, during such period of prohibition; and may be exported at any time during such extended period. Any imported spirits, wines —94 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 pro¬ hibition takes effect may at the option of the owner remain in bond during such pe¬ riod of prohibition. Perfumes. (c) In lieu of the internal-revenue tax now imposed thereon by law there shall be levied and collected upon all perfumes here¬ after imported into the United States con¬ taining distilled spirits, a tax of $1.10 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 col¬ lector of customs and deposited as internal- revenue collections, under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe. Importation of Spirits from Virgin Islands, Porto Rico and Philippines. Sec. 601. That no distilled spirits pro¬ duced after October 3, 1917, shall be im¬ ported into the United States from any for¬ eign 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 intoxi¬ cating liquor is prohibited), or from Porto Rico, or the Philippine Islands. Under such rules, regulations, and bonds as the Secretary may prescribe, the provisions of this section shall not apply to distilled spirits imported for other than (1) beverage purposes or (2) use in the manufacture or production of any article used or intended for use as a beverage. Transfer of Spirits. Sec. 602. That at registered distilleries producing 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 trans¬ ferred from the receiving cisterns at such distilleries, by means of pipe lines, direct —95— 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 receiv¬ ing cisterns or warehouse storage tanks to barrels, drums, tanks, tank cars, or other approved containers, and may be trans¬ ported in such containers for exportation or other lawful purposes. The Commissioner, with the approval of the Secretary, is here¬ by empowered to prescribe all necessary regulations relating to the drawing off, transferring, gauging, storing, and trans¬ porting 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 stamp¬ ing of such packages and tanks; the kinds of stamps, if any, to be used; and the time and manner 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 prem¬ ises, or from general bonded warehouse in the case of spirits transferred thereto, ex¬ cept as otherwise provided by law. Under such regulations as the Commis¬ sioner, with the approval of the Secretary, may prescribe, distilled spirits may here¬ after be drawn from receiving cisterns and deposited in distillery warehouses without having affixed to the packages containing the same, distillery warehouse stamps, and such packages, when so deposited in ware¬ house, may be withdrawn therefrom on the original gauge where the same have re¬ mained in such warehouse for a period not exceeding thirty days from the date of de¬ posit. Ethyl Alcohol Excepted. Under such regulations as the Commis¬ sioner, with the approval of the Secretary, may prescribe, the manufacture, warehous¬ ing, withdrawal, and °Mpment, under the provisions of existing law, of ethyl alcohol for other than (1) beverage purposes or (2) use in the manufacture or production of any —96— article used or intended for use as a bever¬ age, and denatured alcohol, may be ex¬ empted from the provisions of section 3283 of the Revised Statutes. The Commissioner, with the approval of the Secretary, may by regulations exempt distillers of ethyl alcohol, for use in the pro¬ duction of munitions of war, or for other nonbeverage 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 distilleries, the period of fermentation, the filling and emptying of fermenting tubs, and assess¬ ments, as, in his judgment, may be expe¬ dient: Provided, That the bond prescribed in section 3260 of the Revised Statutes shall, in the cases herein provided, be in such sum and contain such further conditions as the Commissioner may require. Removal of Ethyl Alcohol. Sec. 603. That under such regulations as the 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 provisions of subsec¬ tion 2, paragraph N, of section IV 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, may be removed from such plant to any central denaturing bonded warehouse for denaturation, or may, before or after de- naturation, be removed from such plant or from such denaturing bonded warehouse, 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 author¬ ized may be made in such tank vessels, tank cars, drums, casks, or other containers as may be approved by the Commissioner. It shall be lawful, under regulations prescribed by the Commissioner, with the approval of the Secretary, for an allowance to be made for leakage or loss by unavoidable accident and without fault or negligence of the dis¬ tiller, owner, carrier, or his agent or em¬ ployees, which may occur during the trans- —97— portation of such spirits or while the same are lawfully stored on either of the premises herein described. Floor Tax on Distilled Spirits. Sec. 604. That upon all distilled spirits produced 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 pro¬ duction 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 purposes or for use in the manufacture or production of any article used or intended for use as a beverage) on each proof gallon, and a proportionate tax at a like rate on all fractional parts of such proof gallon. Rectified Spirits. Sec. 605. That in addition to the tax im¬ posed by this Act on distilled spirits and wines, there shall be levied, assessed, col¬ lected, 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 dis¬ tilled spirits or wines hereafter rectified, purified, or refined in such manner, and on all mixtures hereafter ~ produced in such manner, that the person so rectify¬ ing, 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 redistillation of a pure spirit over juniper berries and other aro¬ matics. Floor Tax. Upon all such articles heretofore pro¬ duced, and which on the day after the pas¬ sage of this Act are held by any person and intended for sale, there shall be levied, as- I sessed, 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 — 98 — 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 pur¬ pose of this section be regarded as rectified spirits. When the process of rectification is com¬ pleted and the taxes prescribed by this sec¬ tion 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 the process of rectification spirits already recti¬ fied and upon which the taxes have there¬ tofore been paid. Cordials or Liqueurs. The taxes imposed by this section shall lot attach to cordials or liqueurs on which i tax is imposed and paid under section 611 3r 613, nor to the mixing and blending of ►vines, where such blending is for the sole purpose of perfecting such wines accord- ng to commercial standards, nor to blends nade exclusively of two or more pure straight whiskies aged in wood for a period lot less than four years and without the iddition of coloring or flavoring matter or my other substance than pure water and f not reduced below ninety proof: Pro - 'ided, That such blended whiskies shall be ■xempt from tax under this section only vlien compounded under the immediate upervision of a revenue officer, in such anks and under such conditions and super- ision as the Commissioner, with the ap- >roval of the Secretary, may prescribe. All distilled spirits or wines taxable un- ler this section shall be subject to uniform egulations concerning the use thereof in he manufacture, blending, compounding, ; .i nixing, marking, branding, and sale of 5 vhisky and rectified spirits, and no discrim- nation whatsoever shall be made by reason f a difference in the character of the ma- — 99 — terial from which same may have been pro¬ duced. Rectifier of Spirits. | The business of a rectifier of spirits shall ; be carried on, and the tax on rectified spirits j shall be paid, under such rules, regulations, and bonds as may be prescribed by the Commissioner, with the approval of the Sec¬ retary. Penalty. Whoever violates any of the provisions off this section shall be deemed to be guilty of a misdemeanor and, upon conviction, shall be fined not more than $1,000 or imprisoned not more than two years, and shall, in ad¬ dition, be liable to double the tax evaded, together with the tax, to be collected by as-; sessment or on any bond given. Stamps—Exchange of—Discontinuance of. Sec. 606. That hereafter collectors shall not 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 Secretary, is authorized to discontinue the use of the following stamps whenever i in his judgment the interest of the Govern¬ ment will be subserved thereby: Distillery warehouse, special bonded warehouse, special bonded rewarehouse, • general bonded warehouse, general bonded retransfer, transfer brandy, export tobacco, export cigars, export oleomargarine, and ex¬ port fermented-liquor stamps. Installation of Meters and Other Apparatus for Protection of Revenue. Sec. 607. That the Commissioner, with the approval of the Secretary, is hereby au¬ thorized to require at distilleries, breweries, rectifying houses, and wherever else in his judgment such action may be deemed advis¬ able, 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 in- — 100 — cidcnt 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 apparatus when so required by the Commissioner shall not be permitted to conduct business on such premises. Fermented Liquor Tax. Sec. 608. That there shall be levied and collected on all beer, lager beer, ale, porter, and other similar fermented liquor, con¬ taining 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 what¬ ever name such liquors may be called, in lieu of the internal-revenue taxes now im¬ posed 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. Transfers Between Warehouses or Breweries Not Taxable. Sec. 609. That from and after the pas¬ sage of this Act taxable fermented liquors may be conveyed without payment of tax from the brewery premises where produced to a contiguous industrial 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 distillation, containing less than one-half of 1 per centum of alcohol by vol¬ ume, which is to be used in making bever¬ ages, may be manipulated by cooling, fla¬ voring, 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 operation of the distillery and re¬ moval of the residue therefrom shall be un¬ der the supervision of such officer or offi¬ cers as the Commissioner shall deem proper, and the Commissioner, with the approval of the Secretary, is hereby authorized to make — 101 — : such regulations from time to time as may be necessary to give force and effect to this section and to safeguard the revenue. Natural Wine Defined—Regulations. Sec. 610. That natural wine within the meaning 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, ex¬ cept 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 com¬ plete fermentation of the must under proper cellar treatment and corrected by the ad¬ dition (under the supervision of a gauger or storekeeper-gauger in the capacity of gauger) of a solution of water and pure cane, beet, or dextrose sugar (containing, respectively, not less than 95 per centum of actual sugar, calculated 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 product 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 fermentation, shall be deemed to be wine within the meaning of this Act, and may be labeled, transported, 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 proinded further, That wine as defined 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 forti¬ fied shall be considered sweet wine within the meaning of this Act. I Still Wines—Rates. Sec. 611. That upon all still wines, in¬ cluding vermuth, and all artificial or imita¬ tion wines or compounds sold as still wine, which are hereafter produced in or imported into the United States, or which on the day — 102 — 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 im¬ posed thereon by law, taxes at rates as fol¬ lows, when sold, or removed for consump¬ tion or sale: On wines containing not more than 14 per centum of absolute alcohol, 16 cents per wine gallon, the per centum of alcohol tax¬ able 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 alcohol, 40 cents per wine gallon; On wines containing more than 21 per centum and not exceeding 24 per centum of absolute alcohol, $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 accordingly. Grape Brandy or Wine Spirits for Fortification. Sec. 612. That under such regulations and official supervision and upon the giving of such notices, entries, bonds, and other se¬ curity as the Commissioner, with the ap¬ proval of the Secretary, may prescribe, any producer of wines defined under the pro¬ visions of this title, may withdraw from any fruit distillery or special bonded ware¬ house grape brandy, or wine spirits, for the fortification of such wines on the premises where actually made: Provided, That there shall be levied and assessed against the pro¬ ducer of such wines a tax (in lieu of the in¬ ternal-revenue tax now imposed 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 fortifi¬ cation of such wines during the preceding month, which assessment shall be paid by him within ten months from the date of no¬ tice thereof: Proinded further, That noth¬ ing contained in this section shall be con¬ strued as exempting any wines, cordials, liqueurs, or similar compounds from the —103— payment of any tax provided for in this title. .. Other Domestic or Imported Spirits. Sec. 613. That upon the following articles which are hereafter produced in or import¬ ed 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 re¬ moved for consumption or sale: On each bottle or other container of champagne or sparkling wine, 12 cents on each one-half pint or fraction thereof; On each bottle or other container of arti¬ ficially carbonated -wine, 6 cents on each one-half pint or fraction thereof; On each 'bottle or other container of liqueurs, cordials, or similar compounds, by whatever name sold or offered for sale, con¬ taining sweet wine fortified with grape brandy, 6 cents on each one-half pint or fraction thereof. The tax imposed by this section shall, in the case of any article upon which a corre¬ sponding internal-revenue tax is now im¬ posed by law, be in lieu of such tax. Floor Tax. Sec. 614. That upon all articles specified in section 611 or 613 upon which the inter¬ nal-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. Removal for Sale—Stamp Tax—Inventory —Marking—Labeling—Exceptions. Sec. 616. That the taxes imposed by sec¬ tion 611 or 613 shall be paid by stamp on —104— removal of the wines from the customhouse, winery, or other bonded place of storage for consumption or sale, and every person here¬ after producing, or having in his possession or under his control when this title takes ef¬ fect, any wines subject to the tax imposed in section 611 or 613 shall file such notice, de¬ scribing the premises on which such wines are produced or stored; shall execute a bond in such form; shall make such inven¬ tories under oath; and shall, prior to sale or removal for consumption, afiix 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 prescribe; and the premises de¬ scribed in such notice shall, for the purpose of this Act, be regarded as bonded prem¬ ises. But the provisions of this section, ex¬ cept as to payment of tax and the affixing of the required stamps or labels, shall not apply to wines held by retail dealers, as de¬ fined in section 3244 of the Revised Statutes, nor, subject to regulations 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 th° place of manufacture and not exceeding in any case two hundred gallons per year. Preparation of Sweet Wines—Credits. Sec. 617. That sections 42, 43, and 45 of the Act entitled “An Act to reduce the rev¬ enue and equalize duties on imports, and for other purposes,” approved October 1, 1890, as amended by section 68 of the Act entitled “An Act to reduce taxation, io pro¬ vide revenue for the Government, and for other purposes,” approved August 27, 1894, are further amended to read as follows: “Sec. 42. That any producer of pure sweet 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 keeping of such records and the rendition of such reports as to materials and products as the Commis¬ sioner of Internal Revenue, with the ap¬ proval of the Secretary of the Treasury, —105-- may prescribe, wine spirits produced by any duly authorized distiller, and the Commis¬ sioner of Internal Revenue, in determining the liability of any distiller of wine spirits to assessment under section 3309 of the Re¬ vised Statutes, is authorized to allow such distiller credit in his computations for the wine spirits withdrawn to be used in fortify¬ ing sweet wines under this Act. Fortification of Wines. “Sec. 43. That the wine spirits men¬ tioned in section 42 is the product resulting from the distillation of fermented grape juice, to which water may have been added prior to, during, or after fermentation, for the sole purpose of facilitating the fermenta¬ tion and economical distillation there¬ of, 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 provisions of this Act is fermented or partially fermented 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 condensed grape must or pure crystallized cane or beet sugar, or pure dextrose sugar containing, respectively, not less than 95 per centum of actual sugar, cal¬ culated 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 sw^eet wines ac¬ cording to commercial standards or for mechanical purposes, shall not be excluded by the definition of pure sweet wine afore¬ said : Provided, however , That the cane or beet sugar, or pure dextrose sugar added for sweetening purposes shall not be in ex¬ cess of 11 per centum of the weight of the wine to be fortified: And provided further, That the addition of water herein authorized — 106 — shall be under such regulations as the Com¬ missioner of Internal Revenue, with the ap¬ proval of the Secretary of the Treasury, may from time to time prescribe: Pro¬ vided, however , That records kept in accord¬ ance with such regulations as to the percent¬ age of saccharine, acid, alcoholic, and added water content of the wine offered for fortifi¬ cation shall be open to inspection by any official of the Department of Agriculture thereto duly authorized by the Secretary of Agriculture; but in no case shall such wines to which water has been added be eligible for fortification under the provisions of this Act, where the same, after fermentation and before fortification, have an alcoholic strength of less than 5 per centum of their volume. Withdrawal of Wine Spirits. “Sec. 45. That under such regulations and official supervision, and upon the exe¬ cution of such entries and the giving of such bonds, bills of lading, and other secur¬ ity as the Commissioner of Internal Rev¬ enue, 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 quan¬ tity not less than eighty wine gallons, and may use so much of the same as may be required by him under such regulations, and after the filing of such notices and bonds and the keeping of such records and the rendition of such reports as to mate¬ rials and products and the disposition of the same as the Commissioner of Internal Rev¬ enue, with the approval of the Secretary of the Treasury, shall prescribe, in fortifying the pure sweet wines made by him, and for no other purpose, in accordance with the foregoing limitations and provisions; and the Commissioner of Internal Revenue, with the approval of the Secretary of the Treas¬ ury, is authorized whenever he shall deem it to be necessary for the prevention of vio¬ lations 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 — 107 — distillery, rectifying house, winery, or other establishment used for producing or stor¬ ing distilled spirits, or for making or stor¬ ing 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 fortification of wines is practiced. The use of wine spirits for the fortification of sweet wines under this Act shall be under the im¬ mediate supervision of an officer of internal revenue, who shall make returns describ¬ ing the kinds and quantities of wine so forti¬ fied, and shall affix such stamps and seals to the packages containing such wines as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury; and the Com¬ missioner of Internal Revenue, with the ap¬ proval 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 in¬ spection, and for final accounting for the use of such wine spirits and for reware¬ housing or for payment of the tax on any portion of such wine spirits which remain not used in fortifying pure sweet wines.” Removal of Domestic Wines. Sec. 618. (a) That under such regula¬ tions and upon the execution of such no¬ tices, 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 611 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 al¬ lowed), or for exportation from the United States or for use as distilling material at any regularly registered distillery: Pro¬ vided, hozvever , That the distiller using any such wine as material shall, subject to the provisions of section 3309 of the Revised Statutes, as amended, be held to pay the tax on the product of such wines as will include both the alcoholic strength therein —108— produced by fermentation and that obtained from the brandy or wine spirits added to such wines at the time of fortification. Production of Grape Wine. (b) Under regulations prescribed by the Commissioner with the approval of the Sec¬ retary, it shall be lawful to produce grape wines on bonded winery premises by the usual method, and to transport and use the same, and like wines heretofore produced and now stored on bonded winery premises, as distilling material for the production of nonbeverage spirits in the production of nonalcoholic wines, containing less than ]/.2 of 1 per centum of alcohol by volume, in any fruit brandy or industrial distillery: Pro¬ vided, That all alcoholic spirits so obtained at any industrial distillery shall be dena¬ tured, and all spirits so obtained at any fruit distillery shall be removed and used only for nonbeverage purposes or for denatura- tion. Tax Assessment Permissible Instead of Stamps on Imported Still Wines. Sec. 619. That the collection of the tax on imported still wines, including vermuth, and sparkling wines, including champagne, and on imported liqueurs, cordials, and sim¬ ilar compounds, may be made within the discretion of the Commissioner, with the ap¬ proval of the Secretary, by assessment in¬ stead of by stamps. Penalty. Sec. 620. That whoever evades or at¬ tempts to evade any tax imposed by sections 611 to 615, both inclusive, or any require¬ ment 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 whoever rectifies, mixes, or compounds with distilled spirits any domestic wines, other than in the manufacture of liqueurs, cordials, or similar compounds, shall, on con¬ viction, be punished for each such offense by a fine of not exceeding $5,000, or imprison¬ ment for not more than five years, or both, and in addition thereto by a penalty of *—109— double the tax evaded, or attempted to be evaded, to be assessed and collected in the same manner as taxes are assessed and col¬ lected, and all wines, spirits, liqueurs, cor¬ dials, or similar compounds as to which such violation occurs shall be forfeited to the United States. But the provisions of this section and the provisions of section 3244 of the Revised Statutes, as amended, relat¬ ing to rectification, or other internal-revenue laws of the United States, shall not be held to apply to or prohibit the mixing or blend¬ ing of wines subject to tax under the pro¬ visions of sections 611 to 615, both inclu¬ sive, with each other or with other wines for the sole purpose of perfecting such wines according to commercial standards: Pro¬ vided, That nothing herein contained shall be construed as prohibiting the use of tax- paid grain or other ethyl alcohol in the fortification of sweet wines as defined in section 610 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 October 1, 1890, as amended by this Act. Meters, Etc., Installed. Sec. 621. That the Commissioner, by regulations to be approved by the Secre¬ tary, may require the use at each fruit dis¬ tillery of such spirit meters, and such locks and seals to be affixed to fermenters, tanks, or other vessels and to such pipe connec¬ tions as may in his judgment be necessary or expedient, and is hereby authorized to as¬ sign to any such distillery and to each win¬ ery where wines are to be fortified such number of gaugers or storekeeper-gaugers in the capacity of gaugers as may be neces¬ sary for the proper supervision of the manu¬ facture of brandy or the making or fortify¬ ing of wines subject to tax imposed by this section; and the compensation of such offi¬ cers shall not exceed $5 per diem while so assigned, together with their actual and necessary traveling expenses, and also a reasonable 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. — 110 — Allowance for Loss. Sec. 622. That the Commissioner, with the approval of the Secretary, is hereby au¬ thorized to make such allowances for . avoidable loss of wines while on storage or during cellar treatment as in his judgment may be just and proper. Beer Formulae Process. Sec. 623. That the second paragraph of section 3264 of the Revised Statutes, as amended by section 5 of the Act of March 1, 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 molasses shall represent not less than one gallon of mo¬ lasses, except in distilleries operated on the sour-mash principle, in which distilleries sixty gallons of beer brewed or fermented from grain shall represent not less than one bushel of grain, and except that in distiller¬ ies 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 fermenting tub, and only the filtered liquor passes into the fermenting tub, there shall hereafter be no limitation upon the number of gallons of water which may be used in the process of mashing or filtration for fermentation; but the Commis¬ sioner of Internal Revenue, with the ap¬ proval 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 pro¬ visions hereof relating to filtration-aeration process shall apply only to sweet-mash dis¬ tilleries.” Transfer of Distilled Spirits. Sec. 624. That under such regulations as the Commissioner, with the approval of the — 111 — Secretary, may prescribe, alcohol or other distilled spirits of a proof strength of not less than one hundred and eighty degrees intended for export free of tax may be drawn from receiving cisterns at any dis¬ tillery, or from storage tanks in any distill¬ ery warehouse, for transfer to tanks or tank cars for export from the United States, and all provisions of existing law relating to the exportation of distilled spirits not inconsist¬ ent herewith shall apply to spirits removed for export under the provisions of this Act. Brandies Conditionally Exempt—Formulae. Sec. 625. That section 3255 of the Revised Statutes as amended by the Act of June 3, 1896, and as further amended by the Act of March 2, 1911, be further amended so as to read as follows: “Sec. 3255. The Commissioner of Inter¬ nal Revenue, with the approval of the Sec¬ retary of the Treasury, may exempt distill¬ ers of brandy made exclusively from apples, peaches, grapes, pears, pineapples, oranges, apricots, berries, plums, pawpaws, persim¬ mons, prunes, figs, or cherries from any pro¬ vision of this title relating to the manufac¬ ture of spirits, except as to the tax thereon, when in his judgment it may seem expe¬ dient to do so: Provided, That where, in the manufacture of wine, artificial sweeten¬ ing has been used the wine or the fruit pomace residuum may be used in the distil¬ lation of brandy, and such use shall not prevent the Commissioner of Internal Rev¬ enue, 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, w r hen 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 baii'els) of grape cheese not more than five hundred gallons of a sugar solution made from cane, beet, starch, or corn sugar, 95 per centum pure, such solution to have a saccharine strengthof not to exceed 10 per centum, and may fer¬ ment the resultant mixture on a winery or distillery premises, and such fermented — 112 — product shall be regarded as distilling ma¬ terial.” Gin. Sec. 626. That distilled spirits known commercially 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 ex¬ port without the payment of tax, under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe. Penalty. Sec. 627. That section 3354 of the Re¬ vised Statutes as amended by the Act ap¬ proved June 18, 189v\ be, and is hereby, amended to read as follows: “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 brewery or other place, in which fermented liquor is made, or upon any premises having com¬ munication with such brewery, or any ware¬ house, shall be liable to a fine of $500, and the property used in such bottling or busi¬ ness shall be liable to forfeiture: Provided, however, That this section shall not be con¬ strued to prevent the withdrawal and trans¬ fer 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 bottling the same, such pipe line or conduit to be constructed and oper¬ ated 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 — 113 — the Commissioner of Internal Revenue at the expense of the United States: Pro¬ vided further, That the tax imposed in sec¬ tion 3339 of the Revised Statutes shall be paid on all fermented liquor removed from a brewery to a bottling house by means of a pipe or conduit, at the time of such re¬ moval, by the cancellation and defacement, 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 fer¬ mented 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 Secretary of the Treasury. And any Violation of the rules and regulations hereafter prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treas¬ ury, m pursuance of these provisions, shall be subject to the penalties above provided by this section. Every owner, agent, or su¬ perintendent of any brewery or bottling house who removes, or connives at the re¬ moval 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 revenue as above, shall for¬ feit all the liquors made by and for him, and all the vessels, utensils, and apparatus used in making the same.” Soft Drinks. \ Sec. 628. That there shall be levied, as¬ sessed, collected, and paid in lieu of the taxes imposed by sections 313 and 315 of the Revenue Act of 1917— (a) Upon all beverages derived wholly or in part from cereals or substitutes there¬ for, and containing less than one-half of one per centum of alcohol, sold by the manu¬ facturer, producer, or importer, in bottles or other closed containers, a tax equivalent to 15 per centum of the price for which so sold; and upon all unfermented grape juice, ginger ale, root beer, sarsaparilla, pop, ar¬ tificial mineral waters (carbonated or not carbonated), other carbonated waters or beverages, and other soft drinks, sold by the manufacturer, producer, or importer, in bot- —114 ties or other closed containers, a tax equiv¬ alent to 10 per centum of the price for which so sold; and Waters. (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 gal¬ lon, a tax of 2 cents per gallon. Monthly Returns—Notice. Sec. 629. That each manufacturer, pro¬ ducer, bottler, or importer of any of the ar- ; tides enumerated 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 i place of business, containing such informa¬ tion necessary for the assessment of the tax, > and at such times and in such manner as | the Commissioner, with the approval of the | Secretary, may by regulation prescribe. The tax shall, without assessment by the ' Commissioner or notice from the collector, be due and payable to the collector at the time so fixed for filing the return. If the h tax is not paid when due, there shall be I added as part of the tax a penalty of 5 per [ centum, together with interest at the rate I of 1 per centum for each full month, from I the time when the tax became due. Soft Drinks, Ice Cream—Retail. |i Sec. 630. That on and after May 1, 1919, ft there shall be levied, assessed, collected, and paid a tax of 1 cent for each 10 cents or frac¬ tion thereof of the amount paid to any per¬ son conducting a soda fountain, ice-cream parlor, or other similar place of business, ifor drinks commonly known as soft drinks, I mpounded or mixed at such place of busi- ss, or for ice cream, ice cream sodas, sun- es, or other similar articles of food or ink, when any of the above are sold on after such date for consumption in or in oximity to such place of business. Such x shall be paid by the purchaser to the ndor at the time of the sale and shall be llected, returned, and paid to the United —115— States by such vendor in the same manner as provided in section 502. TITLE VII.—TAX ON CIGARS, TO¬ BACCO, AND MANUFACTURES THEREOF. Sec. 700. (a) That upon cigars and cigar¬ ettes 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¬ lowing taxes, to be paid by the manufac¬ turer or importer thereof— Cigars—Rates. 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 substi¬ tute therefor, and weighing more than three pounds per thousand, if manufactured or imported to retail 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; Cigarettes—Rates. 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. Retail Price. i j (b) Whenever in this section reference is made to cigars manufactured or imported to retail at net over a certain price each, —116— then in determining the tax to be paid re¬ gard shall be had to the ordinary retail price of a single cigar Cigars—Labeling. (c) The Commissioner may, by regula¬ tion, require the manufacturer or importer to affix to each box, package, or container a conspicuous label indicating 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, Cigarettes—Labeling. (d) Every manufacturer of cigarettes (including small cigars weighing not more than three pounds per thousand) shall put up all the cigarettes and such small cigars that he manufactures or has manufactured for him, and sells or removes for consump¬ tion or sale, in packages or parcels contain¬ ing five, eight, ten, twelve, fifteen, sixteen, twenty, twenty-four, forty, fifty, eighty, or one hundred cigarettes each, and shall se¬ curely affix to each of such packages or par¬ cels a suitable stamp denoting the tax there¬ on and shall properly cancel the same prior to such sale or removal for consumption or sale under such regulations as the Commis¬ sioner, 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 in¬ dicating inspection of the customhouse be¬ fore they are withdrawn therefrom. Tobacco and Snuff. Sec. 701. (a) That upon all tobacco and snuff 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. (b) Section 3362 of the Revised Statutes, as amended, is hereby amended to read as follows: — 117 — Preparation—Packages. “Sec. 3362. All manufactured tobacco shall be put up and prepared by the manu¬ facturer for sale, or removal for sale or con¬ sumption, in packages of the following de¬ scription and in no other manner: “All smoking tobacco, snuff, fine-cut chewing tobacco, all cut and granulated to¬ bacco, all shorts, the refuse of fine-cut chew¬ ing, 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 tobacco not otherwise provided for, in pack¬ ages containing one-eighth of an ounce, three-eighths of an ounce, and further pack¬ ages with a difference between each pack¬ age 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: Provided , That snuff may, at the option of the manu¬ facturer, be put up in bladders and in jars containing not exceeding twenty pounds. “All cavendish, plug, and twist tobacco, in wooden packages not exceeding two hundred pounds net weight. Labeling—Marking. “And every such wooden package shall have printed or marked thereon the manu¬ facturer’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 package: Pro¬ vided, That these limitations and descrip¬ tions of packages shall not apply to tobacco and snuff transported in bond for exporta¬ tion and actually exported: And provided further , That perique tobacco, snuff flour, fine-cut shorts, the refuse of fine-cut chew¬ ing tobacco, refuse scraps, clippings, cut¬ tings, and sweepings of tobacco, may be sold in bulk as material, and without the payment of tax, by one manufacturer di¬ rectly to another manufacturer, or for ex- —118— port, under such restrictions, rules, and regulations as the Commissioner of Inter¬ nal 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, under such regulations as the Com¬ missioner of Internal Revenue may estab¬ lish” Floor Tax. Sec. 702. That upon all the articles enu¬ merated in section 700 or 701, which were manufactured or imported, and removed from factory or customhouse on or prior to the date of the passage 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 arti¬ cles according to the class in which they are placed by this title and (b) the tax imposed upon such articles by existing law other than section 403 of the Revenue Act of 1917. Cigarette Papers and Tubes. Sec. 703. That there shall be levied, col¬ lected, and paid, in lieu of the taxes im¬ posed by section 404 of the Revenue Act of 1917, upon cigarette paper made up into packages, books, sets, or tubes, made up in or imported into the United States and here¬ after sold by the manufacturer or importer to any person (other than to a manufacturer of cigarettes for use by him in the manufac¬ ture of cigarettes) the following taxes, to be paid by the manufacturer or importer: On each package, book, or set, containing more than twenty-five but not more than fifty papers, / 2 cent; containing more than fifty but not more than one hundred papers, 1 cent; containing more than one hundred papers, y 2 cent for each fifty papers or frac¬ tional part thereof; and upon tubes, 1 cent for each fifty tubes or fractional part there¬ of. Every manufacturer of cigarettes pur¬ chasing any cigarette paper made up into tubes (a) shall give bond in an amount and —119— with sureties satisfactory to the Commis¬ sioner 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 Com¬ missioner finds necessary to show the dis¬ position of all tubes purchased or imported by such manufacturer of cigarettes. Dealers in Leaf Tobacco— Requirements. Sec. 704. That section 35 of the Act en¬ titled “An Act to provide revenue, equalize duties and encourage the industries of the United States, and for other purposes/’ ap¬ proved August 5, 1909, be, and is hereby, repealed, to take effect April 1, 1919. That section 3360 of the Revised Statutes be, and is hereby, amended to read as fol¬ lows : “Sec. 3360. (a) Every dealer in leaf to¬ bacco shall file with the collector of the dis¬ trict in which his business is carried on, a statement in duplicate, 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 to¬ bacco is held by him on storage, and, when¬ ever he adds to or discontinues any of his leaf tobacco storage places, he shall give immediate notice to the collector of the dis¬ trict in which he is registered. “Every such dealer shall give a bond with surety, 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 by the collector of the district, which number shall appear in every inven¬ tory, invoice and report rendered by the dealer, who shall also obtain certificates from the collector of the district setting forth the place where his business is car¬ ried on and the places designated by the dealer as the places of storage of his tobac¬ co, which certificates shall be posted con- — 120 — spicuously within the dealer’s registered place of business, and within each desig¬ nated place of storage. “(b) Every dealer in leaf tobacco shall make and deliver to the collector of the dis- trict 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 com¬ mencing and at the time of concluding busi¬ ness, if before or after the first day of Janu¬ ary, such inventory to be made under oath and rendered in such form as may be pre¬ scribed by the Commissioner. “Every dealer in leaf tobacco shall render such invoices and keep such records as shall be prescribed by the Commissioner, and shall enter therein, day by day, and upon the same day on which the circumstances, thing or act to be recorded is done or occurs, an accurate account of the number of hogs¬ heads, tierces, cases and bales, and quantity of leaf tobacco contained therein, purchased 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 con¬ tained therein, sold by him, with the name and residence in each instance of the person 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 collector 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 preceding, which report shall be verified and rendered in such form as the Commissioner, with the approv¬ al of the Secretary, shall prescribe. “(c) Sales or shipments of leaf tobacco by a dealer in leaf tobacco shall be in quan¬ tities of not less than a hogshead, tierce, case, or bale, except loose leaf tobacco com- — 121 — prising the breaks on warehouse floors, and except to a duly registered manufacturer of cigars for use in his own manufactory ex¬ clusively. “Dealers in leaf tobacco shall make ship¬ ments 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 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 manufactured tobacco, such tax to be as¬ sessed and collected in the same manner as the tax on manufactured tobacco. “(e) Every dealer in leaf tobacco Penalty. “(1) who neglects or refuses to furnish the statement, to give bond, to keep books, to file inventory or to render the invoices, returns or reports required by the Commis¬ sioner, or to notify the collector of the dis¬ trict 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 tobacco purchased, received, sold, or shipped; shall be fined not less than $100 or more than $500, 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 re¬ garded as a dealer in leaf tobacco in respect to the leaf tobacco produced by him.” TITLE VIII.—TAX ON ADMISSIONS AND DUES. Sec. 800. (a) That from and after April 1, 1919, there shall be levied, assessed, col¬ lected, and paid, in lieu of the taxes imposed by section 700 of the Revenue Act of 1917— (1) A tax of 1 cent for each 10 cents or fraction thereof of the amount paid for ad- — 122 — mission to any place on of after such date, including admission by season ticket or sub¬ scription, to be paid by the person paying for such admission; Passes or Free Admissions. (2) In the case of persons (except bona fide employees, municipal officers on official business, persons in the military or naval forces of the United States when in uni¬ form, and children under twelve years of age) admitted free or at reduced rates to any place at a time when and under circum¬ stances under which an admission charge is made to other persons, a tax of 1 cent for each 10 cents or fraction thereof of the price so charged to such other persons for the same or similar accommodations, to be paid by the person so admitted; Additional Tax on Ticket Brokers’ Excess Price on Ticket. (3) Upon tickets or cards of admission to theaters, operas, and other places of amuse¬ ment, 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 im¬ posed under paragraph (1), a tax equiv¬ alent 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 (1), a tax equivalent to 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 per¬ son selling such tickets; (4) A tax equivalent to 50 per centum of the amount for which the proprietors, man¬ agers, 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 established price or charge therefor, such tax to be returned and paid, in the manner provided in section 903, by the person selling such tickets; —123— Leased Boxes or Seats. (5) In the case of persons having the per¬ manent use of boxes or seats in 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 (1) ), a tax equivalent to 10 per centum of the amount for which a similar box or seat is sold for each performance 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 Roof Gardens, Cabarets. (6) A tax of \y 2 cents for each 10 cents or fraction thereof of the amount paid for ad¬ mission to any public performance for profit at any roof garden, cabaret, or other similar entertainment, to which the charge for ad¬ mission is wholly or in part included in the price paid for refreshment, service, or mer¬ chandise ; the amount paid for such admis¬ sion to be deemed to be 20 per centum of the amount paid for refreshment, service, and merchandise; such tax to be paid by the person paying for such refreshment, serv¬ ice, or merchandise. Admissions—When Exempt. (b) No tax shall be levied under this title in respect to any admissions all the pro¬ ceeds of which inure exclusively to the ben¬ efit of religious, educational, or charitable institutions, societies, or organizations, so¬ cieties for the prevention of cruelty to chil¬ dren or animals, or exclusively to the bene¬ fit of organizations conducted for the sole purpose of maintaining symphony orches¬ tras and receiving substantial support from voluntary contributions, none of the profits of which are distributed to members of such organizations, or exclusively to the benefit of persons in the military or naval forces of the United States, or admissions to agricul¬ tural fairs none of the profits of which are distributed to stockholders or members of the association conducting the same. —124 Admission Defined. (c) The term “admission” as used in this title includes seats and tables, reserved or otherwise, and other similar accommoda¬ tions, and the charges made therefor. Price of Ticket Printed Thereon—Name of Vendor—Penalty. (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 conspicuously 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 ven¬ dor 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 convic¬ tion thereof shall be fined not more than $ 100 . Club Dues or Membership Fees— Exemptions. Sec. 801. That from and after April 1, 1919, there shall be levied, assessed, collect¬ ed, and paid, 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 membership 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 annual 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 exempt¬ ed from the provisions of this section all amounts paid as dues or fees to a fraternal society, order, or association, operating un¬ der the lodge system. In the case of life memberships a life member shall pay an¬ nually, at the time for the payment of dues —125— 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. Collections—Returns. Sec. 802. That every person (a) receiving any payments for such admission, dues, or fees shall collect the amount of the tax im¬ posed 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 organization having life members, shall col¬ lect 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 same time and in the same manner as provided in sec¬ tion 502. TITLE IX.—EXCISE TAXES. Percentage Rates on Specific Articles. Sec. 900. That there shall be levied, as¬ sessed, collected, and paid, upon the follow¬ ing articles sold or leased by the manufac¬ turer, producer, or importer, a tax equiva¬ lent to the following percentages 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 con¬ nection therewith or with the sale thereof), 3 per centum; (2) Other automobiles and motorcycles, (including tires, inner tubes, parts, and ac¬ cessories therefor, sold on or in connection therewith or with the sale thereof), except tractors, 5 per centum; (3) Tires, inner tubes, parts, or accesso¬ ries 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 subdivi¬ sion (1) or (2), 5 per centum; (4) Pianos, organs (other than pipe or¬ gans), piano players, graphophones, phono¬ graphs, talking machines, music boxes, and records used in connection with any musi- —126— cal instrument, piano player, graphophone, phonograph, or talking machine, 5 per cen¬ tum ; (5) Tennis rackets, nets, racket covers and presses, skates, snowshoes, skis, tobog¬ gans, canoe paddles and cushions, polo mal¬ lets, baseball bats, gloves, masks, protect¬ ors, shoes and uniforms, football helmets, harness and goals, basket-ball goals and uni¬ forms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, foot¬ balls, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games (except playing cards and children’s toys and games), and all similar articles commonly or commercially known as sporting goods, 10 per centum; (6) Chewing gum or substitutes therefor, 3 per centum; (7) Cameras, weighing not more than 100 pounds, 10 per centum; (8) Photographic films and plates, other than moving-picture films, 5 per centum; (9) Candy, 5 per centum ; (10) Firearms, shells, and cartridges, ex¬ cept those sold for the use of the United States, any State, Territory, or possession, of the United States, any political subdivi¬ sion 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; (12) Dirk knives, daggers, sword canes, stillettos, and brass or metallic knuckles, 100 per centum; (13) Portable electric fan, 5 per centum; (14) Thermos and thermostatic bottles, carafes, jugs, or other thermostatic con¬ tainers, 5 per centum; (15) Cigar or cigarette holders and pipes, composed wholly or in part of meerschaum or amber, humidors, and smoking stands, 10 per centum; (16) Automatic slot-device vending ma¬ chines, 5 per centum, and automatic slot- device weighing machines, 10 per centum; . —127— if the manufacturer, producer, or importer of any such machine operates it for profit, he shall pay a tax in respect to each such ma¬ chine 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 weigh¬ ing machine; (17) Liveries and livery boots and hats, 10 per centum; (18) Hunting and shooting garments and riding habits, 10 per centum; (19) Articles fnade of fur on the hide or pelt, or of which any such fur is the com¬ ponent material of chief value, 10 per cen¬ tum ; (20) Yachts and motor boats not de¬ signed for trade, fishing, or national de¬ fense; and pleasure boats and pleasure canoes if sold for more than $15, 10 per centum; and (21) Toilet soaps and toilet soap pow¬ ders, 3 per centum. Wholesale Price May Apply to Retail Sale. If any manufacturer, producer, or import¬ er of any of the articles enumerated in this section customarily 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 ar¬ ticles are sold by him at wholesale. The taxes imposed by this section shall, in the case of any article in respect to which a corresponding tax is imposed by section 600 of the Revenue Act of 1917, be in lieu of such tax. Undervaluation Adjustment. Sec. 901. That if any person manufac¬ tures, produces or imports any article enumerated in section 900, or leases or li¬ censes for exhibition any positive motion- picture film containing a picture ready for projection, and, whether through any agree¬ ment, arrangement, or understanding, or otherwise, sells, leases or licenses such ar¬ ticle at less than the fair market price ob¬ tainable therefor, either (a) in such manner —128— as directly or indirectly to benefit such per¬ son or any person directly or indirectly in¬ terested in the business of such person, or E b) with intent to cause such benefit, the mount for which such article is sold, leased or licensed shall be taken to be the amount which would have been received from the psale, lease or license of such article if sold, pleased or licensed at the fair market price. Sculpture, Paintings, Etc. Sec. 902. That there shall be levied, as¬ sessed, collected, and paid upon sculpture, paintings, 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 hall not apply to the sale of any such ar- icle to an educational institution or public rt museum. Monthly Returns—Penalty. Sec. 903. That every person liable for any tax imposed by section 900, 902, or 906, shall take monthly returns under oath in dupli- :ate and pay the taxes imposed by such sec¬ tions to the collector for the district in which is located the principal place of busi¬ ness. Such returns shall contain such in¬ formation and be made at such times and in such manner as the Commissioner, with the lapproval of the Secretary, may by regula- gtions prescribe. The tax shall, without assessment by the jCommissioner 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 add¬ ed as part of the tax a penalty of 5 per cen¬ tum, together with interest at the rate of 1 per centum for each full month, from the time when the tax became due. Rates on Excess Value—Miscellaneous. Sec. 904. (a) That on and after May 1, 1919, there shall be levied, assessed, col¬ lected, 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 — 129 — such article, when such article is sold by or for a dealer or his estate on or after such date for consumption or use— (1) Carpets and rugs, including fiber, ex¬ cept 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 ex¬ cess 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) Purses, 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; (7) Umbrellas, parasols, and sun shades, on the amount in excess of $4 each; (8) Fans, on the amount in excess of $1 each; (9) House or smoking coats or jackets, and bath or lounging robes, on the amount in excess of $7.50 each; (10) Men’s waistcoats, sold separately from suits, on the amount in excess of $5 each; (11) 'Women’s and misses’ hats, bonnets, and hoods, on the amount in excess of $15 each; (12) Men’s and boys’ hats, on the amount in excess of $5 each; (13) Men’s and boys’ caps, on the amount in excess of $2 each; (14) Men’s, women’s, misses’, and boys’ boots, shoes, pumps, and slippers, not in¬ cluding shoes or appliances made to order for any person having a crippled or de¬ formed foot or ankle, on the amount in ex¬ cess of $10 per pair; (15) Men’s and boys’ neckties and neck¬ wear, on the amount in excess of $2 each; (16) Men’s and boys’ silk stockings or hose, on the amount in excess of $1 per rair; —130— (17) Women’s and misses’ silk stockings or hose, on the amount in excess of $2 per pair; (18) Men’s shirts, on the amount in ex¬ cess of $3 each ; (19) Men’s, women’s, misses’, and boys’ pajamas, night gowns, and underwear, on the amount in excess of $5 each; and (20) Kimonos, petticoats, and waists, on the amount in excess of $15 each. Exceptions. (b) The tax imposed by this section shall not apply (1) 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, pre¬ cious 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. Vendor to Collect and Make Return. (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 provid¬ ed in section 502. Jewelry. Sec. 905. That on and after April T, 1919, there shall be levied, assessed, collected, and paid (in lieu of the tax imposed by subdi¬ vision (e) of section 600 of the Revenue Act of 1917) upon all articles commonly or com¬ mercially known as jewelry, whether real or imitation; pearls, precious and semi-pre¬ cious stones, and imitations thereof; articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof i or ivory (not including surgical instru¬ ments); 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. —131— Returns—Penalty. Every person selling any of the articles enumerated in this section shall make re- turns under oath in duplicate (monthly or ; quarterly as the Commissioner, with the ap¬ proval of the Secretary, may prescribe) and pay the taxes imposed in respect to such ar¬ ticles by this section to the collector for the district in which is located the principal place of business. Such returns shall con¬ tain such information and be made at such times and in such manner as the Commis¬ sioner, with the approval of the Secretary, may by regulations prescribe. The tax shall, without assessment by the Commissioner 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 1 per centum for each full month, from the time when the tax became due. Positive Motion-Picture Films. Sec. 906. That on and after the 1st day of May, 1919, any person engaged in the busi¬ ness of leasing or licensing for exhibition positive motion-picture films containing pic¬ tures ready for projection shall pay month¬ ly 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 during 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 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 Act of 1917. Toilet Articles—Proprietary Medicines. Sec. 907. (a) That on and after May 1, 1919, there shall be levied, assessed, col¬ lected 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 1 cent for each 25 cents or fraction thereof of the amount paid for any of the following ar¬ ticles when sold by or for a dealer or his es¬ tate on or after such date for consumption or use: (1) Perfumes, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair dressings, hair restora¬ tives, hair dyes, tooth and mouth washes, dentifrices, tooth pastes, aromatic cachous, toilet powders (other than soap powders), or any similar substance, article, or prepara¬ tion by whatsoever name known or distin¬ guished, 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 cor¬ dials or bitters, anodynes, tonics, plasters, liniments, salves, ointments, 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 antitoxins), upon the amount paid for any of the above as to which the manufacturer or producer claims to have any private for¬ mula, secret, or occult art for making or pre¬ paring the same, or has or claims to have any exclusive right or title to the making or preparing the same, or which are pre¬ pared, uttered, vended, or exposed for sale under any letters patent, or trade-mark, or which (if prepared by any formula, pub¬ lished or unpublished) are held out or rec¬ ommended to the public by the makers, ven¬ dors, or proprietors thereof as proprietary medicines or medicinal proprietary articles or preparations, or as remedies or specifics —133— for any disease, diseases, or affection what¬ ever affecting the human or animal body: Provided, That the provisions of this sec¬ tion 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 physician in personal attendance upon a pa¬ tient of medicinal preparations not so ad¬ vertised. Method of Collection Optional With Commissioner. (b) The taxes imposed by this section shall be collected by whichever of the fol¬ lowing methods the Commissioner may deem expedient: (1) 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 collected being returned and paid to the United States by such ven¬ dor in the same manner as provided in sec¬ tion 502. TITLE X.—SPECIAL TAXES CAPITAL TAX. Sec. 1000. (a) That on and after July 1, 1918, in lieu of the tax imposed by the first subdivision of section 407 of the Revenue Act of 1916—- Domestic Corporation. (1) Every domestic corporation shall pay annually a special excise tax with respect to carrying on or doing business, equivalent to $1 for each $1,000 of so much of the fair average value of its capital stock for the pre¬ ceding year ending June thirtieth as is in ex¬ cess of $5,000. In estimating the value of capital stock the surplus and undivided prof¬ its shall be included; Foreign Corooration. (2) Every foreign corporation shall pay annually a special excise tax with respect to carrying on or doing business in the United States, equivalent to $1 for each $1,000 of the average amount of capital em- —134— ployed in the transaction of its business in the United States during the preceding year ending June thirtieth. Insurance Companies. (b) In computing the tax in the case of insurance companies such deposits and re¬ serve funds as they are required by law or contract to maintain or hold for the pro¬ tection of or payment to or apportionment among policyholders shall not be included. When Tax Not Applicable. (c) The taxes imposed by this section shall not apply in any year to any corpora¬ tion which was not engaged in business (or in the case of a foreign corporation not en¬ gaged in business in the United States) dur¬ ing 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 reserves main¬ tained for the general use of the business and anv reserves the net additions to which are included in net income under the pro¬ visions of Title II, as of the close of the pre¬ ceding accounting period used by such com¬ pany for purposes of making its income tax return: Provided, That in the case of a for¬ eign mutual insurance company the tax shall be equivalent to $1 for each $1,000 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 re¬ turn. (d) Section 257 shall apply to all returns filed with the Commissioner for purposes of the tax imposed by this section. Brokers, Pawnbrokers, Shipbrokers and Customhouse Brokers Defined— Taxes Assessed. Sec. 1001. That on and after January —135— 1, 1919, there shall be levied, collected, and paid annually, the following special taxes— (1) Brokers shall pay $50. Every person whose business it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, | coined money, bank notes, promissory notes, other securities, produce 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 ex¬ change, board of trade, or similar organiza¬ tion, where produce or merchandise is sold, he shall pay an additional amount as fol¬ lows : If the average value, during the pre¬ ceding year ending June 30, of a seat or membership in such exchange or organiza¬ tion 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 person 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 personal property whatever, as security for the repayment of money loaned thereon, shall be regarded as a pawn broker. (3) Ship brokers 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 others, to arrange entries and other customhouse papers, or transact business at any port of entry relating to the importa¬ tion or exportation of goods, wares, or mer¬ chandise, shall be regarded as a custom¬ house broker. Theatres, Museums and Concert Halls— Schedule of Taxes—When Exempt— Less in Smaller Towns. (5) Proprietors of theatres, museums, and concert 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 —136— two hundred and fifty and not exceeding five hundred, shall pay $100; having a seating, capacity exceeding five hundred and not ex¬ ceeding eight hundred, shall pay $150; hav¬ ing 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 perform¬ ances, 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 charitable institutions, socie¬ ties 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 in the military or naval forces of the CJnited States, shall be regarded as a theatre: Provided, That in cities, towns, or villages of five thousand inhabitants 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 stipu¬ lated between the parties to the lease. Circuses. (6) The proprietor or proprietors of cir¬ cuses shall pay $100. 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 Colum¬ bia shall exempt exhibitions from the tax in another State, Territory, or the District of Columbia, and but one special tax shall be imposed for exhibitions within any one State, Territory, or District. Other Public Exhibitions—Exemptions. (7) Proprietors or agents of all other pub' lie exhibitions or shows for money not enumerated in this section shall pay $15: Proznded, That a special tax paid in one State, Territory, or the District of Columbia shall not exempt exhibitions from the tax in —137— 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 Colum¬ bia : Provided further, That this paragraph shall not apply to Chautauquas, lecture lyceums, agricultural or industrial fairs, or exhibitions held under the auspices of re¬ ligious or charitable associations: Provided further, That an aggregation of entertain¬ ments, known as a street fair, shall not pay a larger tax than $100 in any State, Terri¬ tory, or in the District of Columbia. Bowling Alleys and Billiard Rooms. (8) Proprietors of bowling alleys and bil¬ liard rooms shall pay $10 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. Shooting Galleries. charge of firearms at any form of target shall pay $20. Every building, space, tent, or area, where a charge is made for the dis¬ charge of firearms at any form of target shall be regarded as a shooting gallery. Riding Academies. (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 prac¬ tice of horsemanship shall be regarded as a riding academy. Autos for Hire. (11) Persons carrying on the business of operating or renting passenger automobiles for hire shall pay $10 for each such auto¬ mobile 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. Brewer, Distiller, Dealer—Additional Tax in Dry States. (12) Every person carrying on the busi¬ ness of a brewer, distiller, wholesale liquor dealer, retail liquor dealer, wholesale dealer in malt liquor, retail dealer in malt liquor, —138— or manufacturer of stills, as defined in sec¬ tion 3244 as amended and section 3247 of the Revised Statutes, in any State, Territory, 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 business is prohibited by local or mu¬ nicipal law, shall pay, in addition to all other taxes, special or otherwise, imposed by ex¬ isting law or by this Act, $1,000. Payment of Tax No Exemption from State Penalties. The payment of the tax imposed by this subdivision shall not be held to exempt any person from any penalty or punishment pro¬ vided for by the laws of any State, Terri¬ tory, or District for carrying on such busi¬ ness in such State, Territory, or District, or in any manner to authorize the commence¬ ment or continuance of such business con¬ trary to the laws of such State, Territory, or District, or in places prohibited by local or municipal law. The taxes imposed by this section shall, in the case of persons upon whom a corre¬ sponding tax is imposed by section 407 of the Revenue Act of 1916, be in lieu of such tax. Manufacturers of Tobacco. Sec. 1002. That on and after January 1, 1919, there shall be levied, collected, and paid annually, 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 [une 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 ex¬ ceed one hundred 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; — 139 — Manufacturers of tobacco whose annual sales exceed two hundred thousand pounds shall each 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; Cigars, Manufacturers of cigars whose annual sales do not exceed fifty thousand cigars shall each pay $4; Manufacturers of cigars whose annual sales exceed fifty thousand and do not ex¬ ceed one hundred thousand cigars shall each pay $6; Manufacturers of cigars whose annual sales exceed one hundred thousand and do not exceed two hundred thousand cigars shall each pay $12; Manufacturers of cigars whose annual sales exceed two hundred thousand and do not exceed four hundred thousand cigars shall each pay $24; Manufacturers of cigars whose annual sales exceed 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; Cigarettes. ••• : 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 ciga¬ rettes, or fraction thereof. Manufacturer Within Each Class. In arriving at the amount of special tax to be paid under this section, and in the levy and collection of such tax, each person engaged in the manufacture of more than one of the classes of articles specified in this section shall be considered and deemed a manufacturer of each class separately. Yachts, Pleasure, Power and Sailing Boats —Schedule. < Sec. 1003. That sixty days after the pas¬ sage of this Act, and thereafter on July 1 in each year, and also at the time of the —140— original purchase of a new boat by a user, if on any other date than July 1, there shall be levied assessed, collected, and paid in lieu of the tax imposed by section 603 of the Revenue Act of 1917, upon the use of yachts, pleasure 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 specifications ap¬ proved by the Navy Department, a special 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 hun¬ dred 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 . Tn determining the length of such yachts, pleasure boats, power boats, motor boats with fixed engines, and sailing boats, the measurement of over-all length shall govern. Apportionment of Tax. In the case of a tax imposed at the time of the original purchase of a new boat on any other date than July 1, 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 1. Taxes Paid, a Credit. If the tax imposed by section 603 of the Revenue Act of 1917, for the fiscal year end¬ ing June 30, 1919, has been paid in respect to the use of any boat, the amount so paid shall under such regulations as the Commis¬ sioner, with the approval of the 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. —141— Use of Receipts. Sec. 1004. That if the tax imposed by sec¬ tion 407 or 408 of the Revenue Act of 1916, for the fiscal year ending June 30, 1919, has been paid by any person subject to the cor¬ responding tax imposed by this title, col¬ lectors 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 Revenue Act of 1916. Such receipt shall be posted as in the case of the special tax stamp, as provided by law, and with it, with¬ in the place of business of the taxpayer. Credit. If the corresponding tax imposed by sec¬ tion 407 of the Revenue Act of 1916 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. Penalty. Sec. 1005. That any person who carries on any business or occupation for which a special tax is imposed by sections 1000, 1001, or 1002, without having paid the special tax therein provided, shall, besides being liable for the payment of such special tax, be sub¬ ject to a penalty of not more than $1,000 or to imprisonment for not more than one year, or both. Opium, Coca Leaves—Registration of Per¬ sons Engaged, and Place of Business. Sec. 1006. That section 1 of the Act of Congress approved December 17, 1914, is hereby amended to read as follows: “Section 1. That on or before July 1 of each year every person who imports, manu¬ factures, produces, 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 reve¬ nue 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 hereinafter provided; “Every person who on January 1, 1919, is en R a g e d in any of the activities above enum- —142— erated, 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 registra¬ tion, and shall pay the proportionate part of the tax for the period ending Tune 30, 1919; and “Every person who first engages in any of such activities after the passage of this Act shall immediately make like registration and pay the proportionate part of the tax for the period ending on the following Tune 30th; Schedule. “Importers, manufacturers, producers, or compounders, $24 per annum; wholesale dealers, $12 per annum; retail dealers, $6 per annum ; physicians, dentist, veterinary sur¬ geons, and other practitioners lawfully en¬ titled to distribute, dispense, give away, or administer any of the aforesaid drugs to pa¬ tients upon whom they in the course of their professional practice are in attendance, shall pay $3 per annum. Definitions of Terms. “Every person who imports, manufac¬ tures, compounds, or otherwise produces for sale or distribution any of the aforesaid drugs shall be deemed to be an importer, manufacturer, or producer. “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. Registration Exceptions. “Every person who sells or dispenses from original stamped packages, as hereinafter provided, shall be deemed a retail-dealer: Provided, That the office, or if none, the resi¬ dence, 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 re¬ quired, acting within the scope of his em¬ ployment, shall be required to register and pay special tax provided by this section: Provided further, That officials of the United States, Territorial, District of Columbia, or insular possessions, State or municipal gov- — 143 — ernments, who in the exercise of their offi¬ cial 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 Commis¬ sioner of Internal Revenue, with the ap¬ proval of the Secretary of the Treasury, may by regulations prescribe. Unlawful Operation. “It shall be unlawful for any person re¬ quired 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 afore¬ said drugs without having registered and paid the special tax as imposed by this sec¬ tion. Person Defined. “That the word ‘person’ as used in this Act shall be construed to mean and include a partnership, association, company, or cor¬ poration, as well as a natural person; and all provisions of existing law relating to special taxes, as far as necessary, are hereby ex¬ tended and made applicable to this section. Tax on Products. “That there shall be levied, assessed, col¬ lected, and paid upon opium, coca leaves, any compound, salt, derivative, or prepara¬ tion thereof, produced in or imported into the United States, and sold, or removed for consumption or sale, an internal-revenue tax at the rate of 1 cent per ounce, and any frac¬ tion of an ounce in apackage shall be taxed as an ounce, such tax to be paid by the im¬ porter, manufacturer, producer, or com¬ pounder thereof, and to be represented by appropriate stamps, to be provided by the Commissioner of Internal Revenue, with 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 securely seal the stopper, covering, or wrap¬ per thereof. 144 Additional to Import Duty. ‘‘The tax imposed by this section shall be in addition to any import duty imposed on the aforesaid drugs. Unlawful Acts—Prima Facie Evidence— Exceptions. “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 absence of appro¬ priate 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 lia¬ bility to such special tax: Provided, That the provisions of this paragraph shall not apply to any person having 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 physi- 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 pa¬ tient, and name, address, and registry num¬ ber of the person writing said prescription; or to the dispensing, or administration or giving away of any of the aforesaid 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 adminis¬ tered to the patient for legitimate medical purposes, and the record kept as required by this Act of the drugs so dispensed, adminis¬ tered. distributed, or given away. Disposition of Stamps. “And all the provisions of existing laws relating to the engraving, issuance, sale, ac¬ countability, cancellation, and destruction of tax-paid stamps provided for in the internal- —145— revenue laws are, in so far as necessary, hereby extended and made to apply to stamps provided by this section. Unstamped Packages Forfeited. “That all unstamped packages of the aforesaid drugs found in the possession of any person, except as herein provided, shall be subject to seizure and forfeiture, and all the provisions of existing internal-revenue laws relating to searches, seizures, and for¬ feitures of unstamped articles are hereby ex¬ tended to and made to apply to the articles taxed under this Act and the persons upon whom these taxes are imposed. Records Kept and Monthly Returns Rendered. “Importers, manufacturers, and wholesale dealers shall keep such books and records and render such monthly returns in relation to the transactions in the aforesaid drugs as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treas¬ ury, may by regulations require. “The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make all needful rules and regulations for carrying the provisions of this Act into effect.” Provisions Not Applicable to Preparations Containing Minute Quantities, or for External Use—Evasion. Sec. 1007. That section 6 of such Act of December 17, 1914, is hereby amended to read as follows: “Sec. 6. That the provisions of this Act shall not be construed to apply to the manu¬ facture, sale, distribution, giving away, dis¬ pensing, 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 deriva¬ tive of any of them in one fluid ounce, or, if a solid or semisolid preparation, in one avoirdupois ounce; or to liniments, oint¬ ments, or other preparations which are pre¬ pared for external use,only, except liniments, ointments, and other preparations which contain cocaine or any of its salts or alpha —146— or beta eucaine or any of their salts or any synthetic substitute for them: Provided, That such remedies and preparations are manufactured, sold, distributed, given away, dispensed, or possessed as medicines and not for the purpose of evading the intentions and provisions of this act: Provided further, That any manufacturer, producer, com¬ pounder, or vendor (including dispensing physicians) of the preparations and reme¬ dies 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 accessible to inspec¬ tion by any officer, agent or employee of the Treasury Department duly authorized for that purpose, and the State, Territorial, Dis¬ trict, Municipal, and Insular officers named in section 5 of this Act, and every such per¬ son so possessing or disposing of such preparations and remedies shall register as required in section 1 of this Act and, if he is not paying a tax under this Act, he shall pay a special tax of $1 for each year, or frac¬ tional 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 provisions of this Act as amended shall not aply to decocainized coca leaves or preparations made therefrom, or to other preparations of coca leaves which do not contain cocaine.” Drugs Seized—Disposition. Sec. 1008. That all opium, its salts, de¬ rivatives, and 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 persons charged with any violation of the Act of Oc¬ tober 1, 1890, as amended bv the Acts of March 3, 1897, February 9, 1909, and Jan¬ uary 17. 1914, or the Act of December 17, 1914, shall upon conviction of the person or persons from whom seized be confiscated by and forfeited to the United States: and the —147— 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 forfeited 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 enforcement 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 Secretary, that they are of no value for medical or scientific pur¬ poses. Former Provisions Repealed. Sec. 1009. That the Act approved Oc¬ tober 22, 1914, entitled “An Act to increase the internal revenue, and for other pur¬ poses,” and the joint resolution approved December 17, 1915, entitled “Joint resolu¬ tion extending the provisions of the Act en¬ titled ‘An Act to increase the internal reve¬ nue, and for other purposes/ approved Oc¬ tober twenty-second, 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 col¬ lection of all special taxes imposed by sec¬ tions 3 and 4 thereof, or by such sections as extended by such joint resolution, for any year or part thereof ending prior to January 1, 1917, and of all other taxes imposed by such Act, or by such Act as so extended, ac¬ crued prior to September 8, 1916, and for the imposition and collection of all penalties or forfeitures which have accrued or may ac¬ crue in relation to any of such taxes. TITLE XI.—STAMP TAXES Instruments Requiring Stamps—In Lieu of Other Tax. Sec. 1100. That on and after April 1. —148— 1919, there shall be levied, collected, and paid, for and in respect of the several bonds, debentures, or certificates of stock and of indebtedness, and other documents, instru¬ ments, matters, and things mentioned 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, removed, con¬ signed, or shipped, the several taxes speci¬ fied in such schedule. The taxes imposed by this section shall, in the case of any ar¬ ticle upon which a corresponding stamp tax is now imposed by law, be in lieu of such tax. Instruments Exempt from Tax. Sec. 1101. That there shall not be taxed under this title any bond, note, or other in¬ strument, issued by the United States, or by any foreign Government, or by any State, Territory, or the District of Columbia, or lo¬ cal subdivision thereof, or municipal or other corporation exercising the taxing power; or any bond of indemnity required to be filed by any person to secure payment of any pension, allowance, allotment, relief, or in¬ surance 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 irrigat¬ ing companies. Fraudulent Acts—Penalty. Sec. 1102. That whoever— (a) Makes, signs, issues, or accepts, or causes to be made, signed, issued, or accept¬ ed, any instrument, document, or paper of any kind or description 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; —149— (c) Manufactures or imports and sells, or offers for sale, or causes to be manufac¬ tured 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 with¬ out canceling or obliterating such stamp as prescribed in section 1104; Is guilty of a misdemeanor and upon con¬ viction thereof shall pay a fine of not more than $100 for each offense. Sec. 1103. That whoever— (a) Fraudulently cuts, tears, or removes from any vellum, parchment, paper, instru¬ ment, writing, package, or article, upon which any tax is imposed 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 place to, with, or upon any vellum, parch¬ ment, paper, instrument, writing, package, or article, upon which any tax is imposed by this title, (1) 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 ar¬ ticle, upon which any tax is imposed by this title; or (2) any adhesive stamp or the im¬ pression of any stamp, die, plate, or other article of insufficient value; or (3) any forged or counterfeit stamp, or the impres¬ sion of any forged or counterfeited stamp, die, plate, or other article; (c) Willfully removes, or alters the can¬ cellation, 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 will¬ fully 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 ex¬ cuse (the burden of proof of such excuse be¬ ing on the accused) has in possession any washed, restored, or altered stamp, which —150— has been removed from any vellum, parch¬ ment, 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 re-used, canceled, or counterfeit stamp and the vellum, parchment, document, paper, package, or article upon which it is placed or impressed shall be forfeited to the United States. Method of Stamp Cancellation. Sec. 1104. That whenever an adhesive stamp is 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 Com¬ missioner may prescribe such other method for the cancellation of such stamps as he may deem expedient. Preparation and Distribution. Sec. 1105. (a) That the Commissioner shall cause to be prepared and distributed for the payment 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 ap¬ proval of the Secretary, is authorized to procure any of the stamps provided for in this title by contract whenever such stamps can not be speedily prepared by the Bureau of Engraving and Printing; but this au¬ thority shall expire on January 1, 1920, ex¬ cept 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 extended to and made a part of this —151— title, so far as applicable, for the purpose of collecting stamp taxes omitted through mis¬ take or fraud from any instrument, docu¬ ment, paper, writing, parcel, package, or ar¬ ticle named herein. Quantity Furnished to Postmaster General. Sec. 1106. That the Commissioner shall furnish to the Postmaster General without prepayment a suitable quantity of adhesive stamps to be distributed to and kept on sale by the various postmasters in the United States. The Postmaster General may re¬ quire each such postmaster to give addi¬ tional or increased bond as postmaster for the value of the stamps so furnished, and each such postmaster shall deposit the re¬ ceipts from the sale of such stamps to the credit of and render accounts to the Post¬ master 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-revenue collections. To Assistant Treasurers. Sec. 1107. That the collectors of the sev¬ eral districts shall furnish without prepay¬ ment to any assistant treasurer or designa¬ ted depositary of the United States located in their respective collection districts a suit¬ able 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 re¬ turn, whenever so required, of all quantities or amounts undisposed of, and for the pay¬ ment monthly of all quantities or amounts sold or not remaining on hand. The Secre¬ tary may from time to time make such reg¬ ulations as he may find necessary to insure the safekeeping or prevent the illegal use of all such adhesive stamps. Schedule A.—Stamp Taxes. Bonds of Indebtedness. 1. Bonds of indebtedness: On all bonds, debentures, or certificates of indebtedness —152— 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 $100 of face value or fraction thereof, 5 cents: Provided, That every renewal of the foregoing shall be taxed as a new issue: Provided further, That when a bond condi¬ tioned 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. Bonds, Indemnity and Surety. 2. Bonds, indemnity and surety: On all bonds executed for indemnifying any person who shall have become bound or engaged as surety, and on all bonds executed for the due execution or performance of any con¬ tract, obligation, or requirement, or the duties of any office or position, and to ac¬ count 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 de¬ scription, made, issued, or executed, not otherwise provided for in this schedule, ex¬ cept such as may be required in legal pro¬ ceedings, 50 cents: Provided, That where a premium is charged for the issuance, exe¬ cution, renewal or continuance of such bond the tax shall be 1 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 subdivision. Capital Stock, Issued. 3. Capital stock, issued. On each original issue, whether on organization or reorgan¬ ization, of certificates of stock, or of profits, or of interest in property or accumulations, by any corporation, on each $100 of face value or fraction thereof, 5 cents: Provided, That where a certificate is issued without 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. — 153 — Stamps Attached to Stock Books. The stamps representing the tax imposed by this subdivision shall be attached to the stock books and not to the certificates is¬ sued. Capital Stock, Sales or Transfers —Exceptions. 4. Capital stock, sales or transfers: On all sales, or agreements to sell, or memor¬ anda 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 accu¬ mulations 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 agreement or memorandum or other evidence of transfer or sale, wheth¬ er 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 certificates as col¬ lateral security for money loaned thereon, which certificates are not actually sold, nor upon the delivery or transfer for such pur¬ pose 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 accom¬ panied 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 corporation the stamp shall be placed upon such books; and where the change of ownership is by trans¬ fer of the certificate the stamp shall be —154 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 mat¬ ter 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 pursuance of any such sale delivers any certificate or evidence 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 mis- lemeanor, and upon conviction thereof shall pay a fine of not exceeding $1,000, or be im- * prisoned not more than six months, or both. Produce, Sales of, On Exchange. 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 merchan¬ dise at, or under the rules or usages of, any exchange, or board of trade, or other simi¬ lar 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 agreement to sell as aforesaid there shall be made and delivered by the seller to the buyer a bill, memoran¬ dum, 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 provid¬ ed by this subdivision, may transfer such contracts to a clearing-house corporation or association, and such transfer shall not be —155— deemed to be a sale, or agreement of sale, or an agreement to sell within the provisions of this Act, provided that such transfer shall not vest any beneficial interest in such clearing-house association but shall be made for the sole purpose of enabling such clear¬ ing-house association to adjust and balance the accounts of the members of such clear¬ ing-house association on their several con¬ tracts. 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 mat¬ ter or thing to which it refers; and any per¬ son 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 agreement of sale, or agreement 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, memorandum, or other evi¬ dence thereof as herein required, or who de¬ livers such bill, memorandum, or other evi¬ dence of sale, or agreement to sell, without having the proper stamps affixed thereto, with intent to evade the foregoing provi¬ sions, shall be deemed guilty of a misde¬ meanor, and upon conviction thereof shall pay a fine of not exceeding $1,000 or be im¬ prisoned not more than six months, or both. Cash Sales. No bill, memorandum, agreement, or other evidence of such sale, or agreement of sale, or agreement to sell, in case of cash sales of products or merchandise for imme¬ diate or prompt delivery which in good faith are actually intended to be delivered shall be subject to this tax. Drafts and Checks. 6. Drafts or checks (payable otherwise than at sight or on demand) upon their ac¬ ceptance or delivery within the United States whichever is prior, promissory notes, except bank notes issued for circulation, and for each renewal of the same, for a sum not exceeding $100, 2 cents; and for each additional $100 or fractional part thereof, 2 cents. — 156 — When Not Applicable to Promissory Notes. This subdivision shall not apply to a promissory 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. Conveyances. 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 purchasers, 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 encum¬ brance remaining thereon at the time of sale, exceeds $100 and does not exceed $500, 50 cents; and for each additional $500 or frac¬ tional part thereof, 50 cents. This subdivi¬ sion shall not apply to any instrument or writing given to secure a debt. Entry or Withdrawal of Goods, at Customhouse. 8. Entry of any goods, wares, or mer¬ chandise at any customhouse, either for con¬ sumption or warehousing, not exceeding $100 in value, 25 cents; exceeding $100 and not exceeding $500 in value, 50 cents; ex¬ ceeding $500 in value, $1. 9. Entry for the withdrawal of any goods or merchandise from customs bonded ware¬ house, 50 cents. Passenger Tickets. 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, Can¬ ada, 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. —157— Proxies. 11. Proxy for voting at any election for officers, or meeting for the transaction of business, of any corporation, except relig¬ ious, educational, charitable, fraternal, or literary societies, or public cemeteries, 10 cents. Powers of Attorney. 12. Power of attorney granting authority to do or perform some act for or in behalf of the grantor, which authority is not other¬ wise 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 serv¬ ice, or to powers of attorney required in bankruptcy cases. Playing Cards. 13. Playing cards: Upon every pack of playing 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. Parcel-post Packages. 14. Parcel-post packages: Upon every parcel or package transported from one point in the United States to another by parcel post on which the postage amounts to 25 cents or more, a tax of 1 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 trans¬ ported until a stamp or stamps representing the tax due shall have 'been affixed thereto. Insurance on Property—Re-insurance. 15. On each policy of insurance, or cer¬ tificate, binder, covering note, memorandum, cablegram, letter, or other instrument by whatever named called whereby insurance is made or renewed upon property within the United States (including rents and prof¬ its) against peril by sea or on inland waters or in transit on land (including transship- 158 ments and storage at termini or way points) or by fire, lightning, tornado, wind-storm, bombardment, invasion, insurrection or riot, issued to or for or in the name of a domes¬ tic corporation or partnership or an indi¬ vidual resident of the United States by any foreign corporation or partnership or any individual not a resident of the United States, when such policy or other instru¬ ment is not signed or countersigned 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 fractional part thereof of the premium charged: Provided, That policies of re¬ insurance shall be exempt from the tax im¬ posed by this subdivision. Person or Agent Receiving Insurance to Affix Stamps—Penalty. 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 procure¬ ment 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. TITLE XII.—TAX ON EMPLOYMENT OF CHILD LABOR. Regulations and Limitations. Sec. 1200. That every person (other than a bona fide boys' or girls’ canning club recognized by the Agricultural Department of a State and of the United States) oper¬ ating (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, can¬ nery, 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, or children between the ages of four¬ teen and sixteen have been employed or per¬ mitted to work more than eight hours in —159— any day or more than six days in any week, or after the hour of seven o’clock post merid¬ ian, or before the hour of six o’clock ante meridian, during any portion of the taxable year, shall pay for each taxable year, in ad¬ dition to all other taxes imposed by law, an excise tax equivalent to 10 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, can¬ nery, workshop, factory, or manufacturing establishment. Method of Computation. Sec. 1201. That in computing net profits under 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 taxable year from the sale or disposition of such products manufac¬ tured within the United States the follow¬ ing items: (a) The cost of raw materials entering into the production ; (b) Running expenses, including rentals, cost of repairs, and maintenance, heat, power, insurance, management, and a rea¬ sonable allowance for salaries or other com¬ pensations 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 relating to the production; and (e) Losses actually sustained within the taxable year in connection with the busi¬ ness of producing such products, including losses from fire, flood, storm, or other cas¬ ualties, and not compensated for by insur¬ ance or otherwise. Sales at Less Than Market Price. Sec. 1202. That if any such person dur¬ ing any taxable year or part thereof, whether under any agreement, arrange¬ ment, or understanding or otherwise, sells or disposes of any product of such mine, quarry, mill, cannery, workshop, factory, or — 160 — % manufacturing establishment at less than the fair market price obtainable therefor either (a) in such manner as directly or in¬ directly to benefit such person or any per¬ son directly or indirectly interested 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 product shall be taken to be the amount which would have been received or accrued from the sale or disposition of such prod¬ uct if sold at the fair market price. Mistake as to Age—Penalty for False Statement. Sec. 1203. (a) That no person subject to the provisions of this title shall be liable for the tax herein imposed if the only employ¬ ment or permission to work which but for this section would subject 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 prescribed by a board consisting of the Secretary, the Com¬ missioner. and the Secretary of Labor, showing the child to be of such age as not to subject such person to the tax imposed by this title. Any person who knowingly makes a false statement or presents false evidence in or in relation to any such cer¬ tificate or application therefor shall be pun¬ ished by a fine of not less than $100, nor more than $1,000, or by imprisonment for not more than three months, or bv both such fine and imprisonment, in the discretion of the court. In any State designated by such Board an employment certificate or other similar paper as to the age of the child, issued un¬ der the laws of that State, and not incon¬ sistent with the provisions of this title, shall have the same force and effect as a certifi¬ cate herein provided for. (b) The tax imposed by this title shall not be imposed in the case of any person who proves to the satisfaction of the Sec¬ retary that the only employment or permis- — 161 — sion 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 mistake of fact as to the age of such child, and without intention to evade the tax. Returns—When Made. Sec. 1204. That on or before the first day of the third month following the close of each taxable year, a true and accurate re¬ turn 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 Commis¬ sioner, with the approval of the Secretary, shall prescribe, setting forth specifically the gross amount of income received or accrued during such year from the sale or disposi¬ tion of the product of any mine, quarry, mill, cannery, workshop, factory, or manu¬ facturing establishment, in which children have been employed subjecting him to the tax imposed by this title, and from the total thereof deducting the aggregate items of allowance authorized by this title, and such other particulars as to the gross receipts and items of allowance as the Commis¬ sioner, with the approval of the Secretary, may require. Assessment—Notice. Sec. 1205. That all such returns shall be transmitted forthwith by the collector to the Commissioner, 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. Inspection of Premises—Penalty for Obstructing. Sec. 1206. That tor the purposes of this Act the Commissioner, or any other person duly authorized by him, shall have au¬ thority to enter and inspect at any time any mine, quarry, mill, cannery, workshop, fac¬ tory, or manufacturing establishment. The Secretary of Labor, or any person duly au¬ thorized by him, shall, for the purpose of —162— complying with a request of the Commis¬ sioner to make such an inspection, have like authority, and shall make report to the Commissioner of inspections 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 en¬ try or inspection authorized by this section shall be punished by a fine of not more than $1,000, or by imprisonment for not more than one year, or both such fine and im¬ prisonment. Taxable Year and First Taxable Year Defined. 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 tax¬ able year for the purposes of this title shall be the period between sixty days after the : passage of this Act and December 31, 1919, both inclusive, or such portion of such pe¬ riod as is included within the fiscal year (as defined in section 200) of the taxpayer. TITLE XIII.—GENERAL ADMINIS¬ TRATIVE PROVISIONS. Salaries: Commissioner. Sec. 1300. That hereafter the salary of the Commissioner shall be $10,000 a year. The difference between the amount appro¬ priated under existing law and the salary herein established shall, for the period be¬ tween the passage of this Act and July 1, 1919, be paid out of the appropriations for collecting internal revenue. Assistant Commissioner | Sec. 1301. (a) That hereafter there may be employed in the Bureau of Internal Rev¬ enue, in 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 authorized by the Commissioner to perform any duties which the deputy commissioners may perform under existing law. —163— Collectors. (b) The salaries of collectors may be re¬ adjusted and increased under such regula¬ tions as may be prescribed by the Commis¬ sioner, subject to the approval of the Secre¬ tary, but no collector shall receive a salary in excess of $6,000 a year. Appropriation Distribution. (c) There is hereby appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending June 30, 1919, the sum of $7,500,000 for the expenses of assessing and collecting the in¬ ternal-revenue taxes as provided in this Act, including the employment of necessary offi¬ cers, attorneys, experts, agents, inspectors, deputy collectors, clerks, janitors, and mes¬ sengers, in the District of Columbia and the several collection districts, to be appointed as provided by law, telegraph and telephone service, rental and repair of quarters, post¬ age, and the purchase 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 sev¬ eral collection districts: Provided , That not more than $2,750,000 of the total amount appropriated by this section may be ex¬ pended in the Bureau of Internal Revenue, in the District of Columbia. Advisory Tax Board Membership— V acancies—Salaries. (d) (1) There is hereby created a Board to be known as the “Advisory Tax Board,” hereinafter called the Board, and to be com¬ posed of not to exceed six members to be appointed by the Commissioner with the ap¬ proval 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. Vacancies in the membership of the Board shall be filled in the same manner as an original appointment. Any member shall be subject to removal by the Commis- —164— sioner with the approval of the Secretary. The Commissioner with the approval of the Secretary shall designate the chairman of the Board. Each member shall receive an annual salary of $9,000, payable monthly, to¬ gether with actual necessary expenses when absent from the District of Columbia on official business. Board to Interpret Tax Laws. (2) The Commissioner may, and on the request of any taxpayer directly interested shall, submit to the Board any question re¬ lating to the interpretation or administra¬ tion of the income, war-profits or excess- profits tax laws, and the Board shall report its findings and recommendations to the Commissioner. Office in Washington, D. C. (3) The Board shall have its office in the Bureau of Internal Revenue in the District of Columbia. The expenses and salaries of members of the Board shall be audited, al¬ lowed, 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. Other Authorities of Board. (4) The Board shall have the power to summon witnesses, take testimony, admin¬ ister oaths, and to require any person to produce books, papers, documents, or other data relating to any matter under investi¬ gation 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 admin¬ ister oaths, examine witnesses, take testi¬ mony and receive evidence. Leave of Absence. Sec. 1302. That all internal-revenue agents and inspectors shall be granted leave of absence with pay, which shall not be cumulative, not to exceed thirty days in any calendar year, under such regulations as the Commissioner, with the approval of the Secretary, may prescribe. —165— Legislative Drafting Service—Duties. Sec. 1303. (a) That there is hereby cre¬ ated a Legislative Drafting Service under the direction of two draftsmen, one of whom shall be appointed 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, subject 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 em¬ ployees, and purchase such furniture, office equipment, books, stationery, and other sup¬ plies, as may be necessary for the proper performance of the duties of the service and as may be appropriated for by Congress. (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 Representatives, respectively, may deter¬ mine the preference, if any, to be given to such requests of the committees of either House, respectively. The draftsmen shall, from time to time, prescribe rules and regu¬ lations for the conduct of the work of the service for the committees of each House, subject to the approval of the Library Com¬ mittee of each House, respectively. Appropriation. (c) For the remainder of the current fis¬ cal 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 pur¬ pose of defraying the expenses of the es¬ tablishment and maintenance of the serv¬ ice, including the payment of salaries herein authorized. 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 Representatives. — 166 — Imports from Virgin Islands. Sec. 1304. That there shall be levied, col¬ lected, and paid in the United States, upon articles coming into the United States from the Virgin Islands, a tax equal to the inter¬ nal-revenue tax imposed in the United States upon like articles of domestic manu¬ facture; such articles shipped from such islands to the United States shall be ex¬ empt from the payment of any tax imposed by the internal-revenue laws of such islands: Provided, That there shall be levied, col¬ lected, and paid in such islands, upon ar¬ ticles imported from the United States, a tax equal to the internal-revenue tax im¬ posed in such islands upon like articles there manufactured; and such articles going into such islands from the United States shall be exempt from payment of any tax imposed by the internal-revenue laws of the United States. Administrative and Other Provisions Extended to This Act. Sec. 1305. That all administrative, spe¬ cial, or stamp provisions of law, including the law relating to the assessment cl 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 regulations as the Commissioner, with the approval of the Secretary, may from time to time prescribe. Whenever in the judgment of the Com¬ missioner necessary he may require any person, by notice served upon him, to make a return or such statements as he deems sufficient to show whether or not such per¬ son is liable to tax. Examination of Returns. The Commissioner, for the purpose of as¬ certaining 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 inspector desig¬ nated by him for that purpose, to examine —167— any books, papers, records or memoranda bearing upon the matters required to be in¬ cluded in the return, and may require the attendance of the person rendering the re¬ turn or of any ofificer or employee of such person, or the attendance of any other per¬ son having knowledge in the premises, 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. Floor Tax Requires Sworn Returns. Sec. 1306. That where floor taxes are im¬ posed 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 passage, make return under oath in such form and under such regulations as the Commis¬ sioner, with the approval of the Secretary, shall prescribe. Payment of the tax shown to be due may be extended 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 approval of the Secretary, may prescribe. Method of Tax Collection. 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 man¬ ner as the Commissioner, with the approval of the Secretary, may prescribe. All ad¬ ministrative and penalty provisions of Title XI of this Act, in so far as applicable, shall apply to the collection of any tax which the Commissioner determines or prescribes shall be paid by stamp. Evasion—Penalty. Sec. 1308. (a) That any person required under Titles V, VI, VII, VIII, IX, X, or XII, to pay, or to collect, account for and pay over any tax, or required by law or regulations made under authority thereof to — 168 — make a return or supply any information for the purposes of the computation, assess¬ ment 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 penalties 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 prosecu¬ tion. (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 manner as taxes are assessed and collected: Provided, however , That no penalty shall be assessed under this subdi¬ vision for any offense for which a penalty may be assessed under authority of section 3176 of the Revised Statutes, as amended, or of section 605 or 620 of this Act, or for any offense for which a penalty has been recov¬ ered under section 3256 of the Revised Statutes. Person Defined. (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 officer, em¬ ployee, or member is under a duty to per¬ form the act in respect of which the vio¬ lation occurs. Rules and Regulations by Commissioner. Sec. 1309. That the Commissioner, with the approval of the Secretary, is hereby au- —169— thorized to make all needful rules and regu¬ lations for the enforcement 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 before two witnesses instead of under oath. Overpayment. Sec. 1310. (a) That in the case of any overpayment 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 en¬ titled thereto. Credit Sales—Right of Vendor to Recover. (b) Wherever in this Act a tax is re¬ quired to be paid by the purchaser to the vendor at the time of 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 purchaser 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. Tax Not Applicable to Exports—Refunds. (c) Under such rules and regulations as the Commissioner with the approval of the Secretary may prescribe, the taxes imposed under the provisions of Titles VI, VII or IX shall not apply in respect to articles sold or leased for export and in due course so ex¬ ported. Under such rules and regulations the amount of any internal-revenue tax er¬ roneously or illegally collected in respect to exported articles may be refunded to the — 170 — exporter of the article, instead of to the manufacturer, if the manufacturer waives any claim for the amount so to be refunded. Increased Rates Paid by Stamps on Hand. Sec. 1311. That where the rate of tax im¬ posed 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 con¬ tinue 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 effect for the difference between the amount paid for such stamps and the tax due at the rates provided by this Act. Contracts Made Prior to May 9, 1917. Sec. 1312. (1) That (a) if any person has prior to May 9, 1917, 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 (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 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 May 9, 1917. Prior to September 3, 1918. (2) If (a) any person has prior to Sep¬ tember 3, 1918, 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 TitleXI, or under this subdi¬ vision, and in respect to which no corre¬ sponding tax was imposed by the Revenue Act of 1917, and (b) such contract does not permit the adding, to the amount to be paid —171— 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 char¬ acter 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 Sep¬ tember 3, 1918, 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 a corresponding tax was imposed by the Revenue Act of 1917, and (b) such contract does not permit the add¬ ing, to the amount to be paid under such contract, of the whole of the difference be¬ tween such tax and the corresponding tax imposed by the Revenue Act of 1917, then the vendee or lessee shall, in lieu of the vendor or lessor, pay so much of such differ¬ ence 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 collected under this Act shall be the tax in force on September 3, 1918. Taxes to Vendor. (4) The taxes payable by the vendee or lessee under this section shall be paid to the vendor or lessor at the time the sale or lease is consummated, and collected, re¬ turned, and paid to the United States by such vendor or lessor in the same manner as provided in section 502. Dealer Defined. (5) The term “dealer” as used in this sec¬ tion includes a vendee who purchases any article with intent to use it in the manu¬ facture or production of another article in¬ tended for sale. (6) This section shall not apply to any tax imposed by section 906. Fraction of Cent. Sec. 1313. That in the payment of any tax under this Act not payable by stamp a —172— 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 1 cent. United States Certificates of Indebtedness —Checks—Accepted at Par. Sec. 1314. That collectors may receive, at par with an adjustment for accrued interest, certificates of indebtedness issued by the United States and uncertified checks in pay¬ ment 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 Commis¬ sioner, 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. Stamps Issued for Restamping Packages. Sec. 1315. That section 3315 of the Re¬ vised Statutes, as amended, is hereby amended to read as follows: “Sec. 3315. The Commissioner of Inter¬ nal Revenue may, under regulations pre¬ scribed by him with the approval of the Secretary of the Treasury, issue stamps for restamping packages of distilled spirits, to¬ bacco, cigars, snuff, cigarettes, fermented liquors, and wines which have been duly stamped but from which the stamps have been lost or destroved by unavoidable ac¬ cident.” Refunds. Sec. 1316. (a) That section 3220 of the Revised Statutes is hereby amended to read as follows: “Sec. 3220. The Commissioner of Inter¬ nal Revenue, subject to regulations pre¬ scribed by the Secretary of the Treasury, is authorized to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be un¬ justly assessed or excessive in amount, or in any manner wrongfully collected; also to repay to any collector or deputy collector —173— the full amount of such sums of money as may be recovered against him in any court, for any internal revenue taxes col¬ lected by him, with the cost and expenses of suit; also all damages and costs recov¬ ered against any assessor, assistant assessor, collector, deputy collector, agent, or in¬ spector, in any suit brought against him by reason of anything done in the due per¬ formance of his official duty, and shall make report to Congress at the beginning of each regular session of Congress of all transac¬ tions under this section.” (b) Section 3225 of the Revised Statutes of the United States is hereby amended to read as follows: No Refund on Second Assessment— Exception. “Sec. 3225. When a second assessment is made in case of any list, statement, or re¬ turn, which in the opinion of the collector or deputy collector was false or fraudulent, or contained any understatement or under¬ valuation, such assessment shall not be re¬ mitted, nor shall taxes collected under such assessment be refunded, or paid back, or re¬ covered by any suit, unless it is proved that such list, statement, or return was not will¬ fully false or fraudulent and did not con¬ tain any willful understatement or under¬ valuation.” Sections Amended. (c) That the paragraph of section 3689 of the Revised Statutes, as amended, read¬ ing as follows: “Refunding taxes illegally collected (in¬ ternal revenue) : To refund and pay back duties erroneously or illegally assessed or collected under the internal-revenue laws,” is repealed from and after June 30, 1920; and the Secretary of the Treasury shall sub¬ mit for the fiscal year 1921, and annually thereafter, an estimate of appropriations to refund and pay back duties or taxes erron¬ eously or illegally assessed or collected un¬ der the internal-revenue laws, and to pav judgments, including interest and costs, rendered for taxes or penalties erroneously —174 or illegally assessed or collected under the internal-revenue laws. Collectors to Report Violations. Sec. 1317. 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 collector of internal revenue having knowl¬ edge of any willful violation of any law of the United States relating to the revenue, within thirty days after coming into pos¬ session of such knowledge, to file with the district attorney of the district in which any fine, penalty, or forfeiture may be in¬ curred, a statement of all the facts and cir¬ cumstances of the case within his knowl¬ edge, together with the names of the wit¬ nesses, setting forth the provisions of law believed to be so violated on which reliance may be had for condemnation or conviction. Administer Oaths. “Sec. 3165. Every collector, deputy col¬ lector, internal-revenue agent, and internal- revenue officer assigned to duty under an internal-revenue agent, is authorized to ad¬ minister oaths and to take evidence touch¬ ing any part of the administration of the internal-revenue laws with which he is charged, or where such oaths and evidence are authorized by law or regulation au¬ thorized by law to be taken. Unlawful to Divulge Information—Penalty. “Sec. 3167. It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer visited by him in the discharge of his official duties, or the amount or source of income, profits, losses, expenditures, or any partic¬ ular thereof, set forth or disclosed in any income return, or to permit any income re¬ turn or copy thereof or any book contain¬ ing any abstract or particulars thereof —175— to be seen or examined by any person except as provided by law; and it shall be unlawful for any person to print or pub¬ lish in any manner whatever not provided by law any income return, or any part there¬ of or source of income, profits, losses, or expenditures appearing in any income re¬ turn ; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding $1,000 or by imprisonment not exceeding 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. All Persons Subject to Tax, Listed. “Sec. 3172. Every collector shall, from time to time, cause his deputies to proceed through every part of his district and in¬ quire after and concerning all persons there¬ in who are liable to pay any internal-rev¬ enue 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. Returns—Particulars—Penalty. “Sec. 3173. It shall be the duty of any per¬ son, partnership, firm, association, or cor¬ poration, made liable to any duty, special tax, or other tax imposed by law, when not otherwise provided for, (1) in case of a spe¬ cial tax, on or before the thirty-first 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 dis¬ trict where located, of the articles or ob¬ jects, 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 Treas¬ ury, for which such person, partnership, firm, association, or corporation is liable: Provided, 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 merchandise, article or —176— objects liable to pay any duty, tax, or li¬ cense, shall fail to make and exhibit a list or return required by law, but shall consent to disclose the particulars of any and all the property, goods, wares, and merchan¬ dise, articles, and objects liable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid, then, and in that case, it shall be the duty of the col¬ lector or deputy collector to make such list or return, which, being distinctly read, con¬ sented to, and signed and verified by oath by the person so owning, possessing, or hav¬ ing the care and management 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 per¬ son to the collector or deputy collector as required 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 an¬ nual list or return, it shall be the duty of such collector or deputy collector to leave at such place of residence or business, with some one of suitable age and discre¬ tion, 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 collector 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 re¬ quired as aforesaid, shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any per¬ son who is required to deliver a monthly or other return of objects subject to tax fails to do so at the time required, or delivers any return which, in the opinion of the col¬ lector, is erroneous, false, or fraudulent, or contains any undervaluation or understate¬ ment, or refuses to allow any regularly au¬ thorized Government officer to examine the books of such person, firm, or corporation, it shall be lawful for the collector to sum¬ mon such person, or any other person hav¬ ing 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 —177— and produce such books at a time and place named in the summons, and to give testi¬ mony or answer interrogatories, 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 collection district where such person may be found and there make the examination herein authorized. And to this end he may there exercise all the authority which he might lawfully exercise in the district for which he was commis¬ sioned : Provided, That ‘person/ as used in this section, shall be construed to include any corporation, joint-stock company or as¬ sociation, or insurance company when such construction is necessary to carry out its provisions. Failure to File. “Sec. 3176. If any person, corporation, company, or association fails to make and file a return or list at the time prescribed by law or by regulation made under au¬ thority of law, or makes, willfully or other¬ wise, 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 testimony or otherwise. In any such case the Commissioner may, from his own knowledge and from such information as he can obtain through testimony or otherwise, make a return or amend any re¬ turn made by a collector or deputy col¬ lector. Any return or list so made and sub¬ scribed by the Commissioner, or by a col¬ lector 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 al¬ low such further time, not exceeding thirty days, for making and filing the return or list as he deems proper. Procedure—Additional Tax. “The Commissioner of Internal Revenue shall determine and assess all taxes, other —178— than stamp taxes, as to which returns or lists are so made under 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 Commissioner of Internal Revenue or the collector in pursuance of law, the Commis¬ sioner 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 neg¬ lect, no such addition shall be made to the tax. In case a false or fraudulent return or list is willfully made, the Commissioner of Internal Revenue shall add to the tax 50 per centum of its amount. “The amount so added to any tax shall be collected 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.” Jurisdiction of District Courts. Sec. 1318. That if any person is sum¬ moned under this Act to appear, to testify, or to produce 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 proc¬ ess to compel such attendance, testimony, or production of books, papers, or other data. 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 injunc¬ tion, and of ne exeat republica, orders ap¬ pointing 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 enforce¬ ment 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. —179— False Statement, at Time of Sale, as to Tax Paid—Penalty. Sec. 1319. That 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 state¬ ment, written or oral, (1) intended or cal¬ culated 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 author¬ ity of the United States, or (2) ascribing a particular part of such price to a tax im¬ posed 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 convic¬ tion thereof shall be punished by a fine of not more than $1,000 or by imprisonment not exceeding one year, or both. Penal Bonds—U. S. Bonds as Security at Par—Return of Bonds—Limitations. Sec. 1320. That wherever by the laws of the United States or regulations made pur¬ suant thereto, any person is required to fur¬ nish any recognizance, stipulation, bond, guaranty, or undertaking, hereinafter called, “penal bond,” with surety or sureties, such person may, in lieu of such surety or sure¬ ties, deposit as security with the official hav¬ ing 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 authorizing such official to collect or sell such bonds so deposited in case of any default in the performance of any of the conditions or stipulations of such penal bond. The ac¬ ceptance of such United States bonds in lieu of surety or sureties required by law shall have the same force and effect as individ¬ ual 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 hereun¬ der, and such other United States bonds as — 180 — may be substituted therefor from time to time as such security, may be deposited with the Treasurer, or an Assistant Treas¬ urer of the United States, a Government de¬ pository, Federal 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 no longer necessary, such bonds so deposited, shall be returned to the depositor: Provided, That in case a per¬ son or persons 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, eigh¬ teen hundred and ninety-four, 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 affi¬ davit 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 per¬ son 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: Pro¬ vided further, That nothing herein con¬ tained shall affect or impair the priority of the claim of the United States against the bonds deposited or any right or remedy granted by said Acts or by this section to the United States for default upon any ob¬ ligation of said penal bond: Provided fur¬ ther, That all laws inconsistent with this sec¬ tion 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 se¬ curity, where such bonds are taken as se¬ curity in judicial proceedings, or the au¬ thority of any administrative officer of the United States to receive United States bonds for security in cases authorized by existing laws. The Secretary may pre¬ scribe rules and regulations necessary and proper for carrying this section into effect. —181— TITLE XIV.—GENERAL PROVISIONS. Parts of Acts Repealed. Sec. L400. (a) That the following parts of Acts are hereby 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 Manufac¬ turers’ Tax”), as amended; Title IV (called “Miscellaneous Taxes”). (2) The following parts of the Act en¬ titled “An Act to provide increased revenue to defray the expenses of the increased ap¬ propriations for the Army and Navy and the extensions of fortifications, and for other purposes,” approved March 3, 1917: Title III (called “Estate Tax”); Section 402 (called “Returns of Divi¬ dends”). (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 Bever- ages”); Title IV (called “War Tax on Cigars, To- bacqo, and Manufactures Thereof”) ; Title V (called “War Tax on Facilities Furnished by Public Utilities, and Insur¬ ance”) ; Title VI (called “War Excise Taxes”) ; Title VII (called “War Tax on Admis¬ sions and Dues”); Title VIII (called “War Stamp Taxes”) ; Title IX (called “War Estate Tax”) ; Title X (called “Administrative Provi¬ sions”) ; Title XII (called “Income-Tax Amend¬ ments”). Acts Conditionally Remain in Force. (b) Such parts of Acts shall remain in force for the assessment and collection of all taxes which have accrued thereunder, and for the imposition and collection of all pen¬ alties 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 corre¬ sponding provision thereof: Provided, That, except as otherwise provided in 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 Revenue Act of 1917, 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 forfeitures,, which have accrued under Title II of the Revenue Act of 1916 as amended by the Act entitled “An Act to provide increased rev¬ enue to defray the expenses of the increased appropriations 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 1917, shall be ac¬ cording 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 corresponding tax under this Act takes effect under the provisions of this Act. Porto Rico and Philippines. Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917 shall remain in force for the assessment and col¬ lection of the income tax in Porto Rico and the Philippine Islands, except as may be otherwise provided by their respective legis¬ latures. First Class Mail. Sec. 1401. That section 1100 of the Rev¬ enue Act of 1917 is hereby repealed, to take effect on July 1, 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 coun¬ try engaged in the present war may be — 183 — 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 re¬ pealed, to take effect July 11, 1919. Parts Ruled as Invalid Do Not Affect the Remainder. Sec. 1402. That if any clause, sentence, paragraph, or part of this Act shall for any reason be adjudged by any court of compe¬ tent jurisdiction to be invalid, such judg¬ ment shall not affect, impair, or invalidate the remainder of this Act, but shall be con¬ fined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment has been rendered. Further Acts Amended. Sec. 1403. That the Revenue Act of 1916 is hereby amended by adding at the end thereof a 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 19177 ” Sec. 1405. That this Act may be cited as the “Revenue Act of 1918.” Additional Compensation for Military and Naval Forces—Limitations. Sec. 1406. That all persons serving in the military or naval forces of the United States during the present war who have, since April 6, 1917, resigned or been discharged under honorable conditions (or, in the case of reservists, been placed on inactive duty), or who at any time hereafter (but 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 re¬ sign or be discharged under honorable con¬ ditions (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. 184 This amount shall not be paid (1) to any person who though appointed or inducted into the military or naval forces on or prior to November 11, 1918, had not reported for duty at his station on or prior to such date; or (2) to any person who has already re¬ ceived one month’s pay under the provisions of section 9 of the act entitled “An Act to authorize the President to increase tempor¬ arily the military establishment of the United States,” approved May 18, 1917; or (3) to any person who is entitled to retired pay; or (4) to the heirs or legal representa¬ tives 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 payment of $60 shall be made. The above amount, in the case of separa¬ tion 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 serv¬ ice after the passage of this Act shall be paid at the time of such separation. The amounts herein provided for shall be paid out of the appropriations for “pay of the army” and “pay of the navy,” respec¬ tively, by such disbursing officers as may be designated by the Secretary of War and the Secretary of the Navy. The Secretary of War and the Secretary of the Navy respectively shall make all reg¬ ulations necessary for the enforcement of the provisions of this section. Intoxicating Liquors in Interstate Commerce—Applicable to District of Columbia. Sec. 1407. That the provisions of section 5 of the Act entitled “An Act making ap¬ propriations for the service of the Post Office Department for the fiscal year ending June 30, 1918, and for other purposes,” ap¬ proved March 3, 1917, relating to intoxicat¬ ing liquors in interstate commerce, as amended by section 1110 of an Act entitled —185— “An Act to provide revenue to defray war expenses, and for other purposes,” ap¬ proved October 3, 1917, be, and the same are hereby, made applicable to the District of Columbia. Contracts With U. S. Government—Copies Filed—Penalty. Sec. 1408. That every person who on or after April 6, 1917, has entered into any con¬ tract, undertaking-, 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 contract relations with the United States, for the performance of any work or the supplying of any materials or property for the use of or for the account of. the United States, shall, within thirty days after a re¬ quest of the Commissioner therefor, file with the Commissioner a true and correct copy of every such contract, undertaking, or agreement. Whoever fails to comply with such re¬ quest of the Commissioner shall be guilty of a misdemeanor and shall be punished by a fine of not more than $1,000, or by imprison¬ ment for not more than one year, or both. Commissioner to Have Access to Informa¬ tion on Contracts. The Commissioner shall (when not vio¬ lative of the technical military or naval se¬ crets of the Government) have access to all information and data relating to any such contract, undertaking, or agreement, in the possession, control or custody of any de¬ partment, 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 allow¬ ance for amortization, obsolescence, depre¬ ciation or loss, or of any valuation, appraisal, adjustment or final settlement, made in pur¬ suance of any such contract, undertaking, or agreement. g ecomes Effective. Sec. 1409. That unless otherwise herein specially provided, this Act shall take effect on the day following its passage. Approved, February 24, 1919. —186— INDEX Pages . 1 Title I.—General Definitions. “Person” — “Corporation” — “Domes¬ tic” — “Foreign” — “United States” — “Secretary” — “Commissioner”— “Collector” — “Revenue Act of 1916” — “Revenue Act of 1917” — “Tax¬ payer” — “Government Contract” — “Military or Naval Forces of the United States” — “Present War”...Sec. 1 Title II.—Income Tax 2 Part I.—General Provisions. Definitions: “Taxable Year”— “Fiduciary” — “Withholding Agent”—“Personal Service Cor¬ poration”—“Paid” . Dividends—Distribution of. Stock Dividends. When Distribution Considered from Profits of Pre¬ ceding Taxable Year. Basis for Determining Gain or Loss—Value of Property Deter¬ mined. Exchange of Property Loss or Gain Determined—Con- ' solidation, Merger — Exchange of Similar Values . Inventories . Net Losses. Excess Payments—De¬ ductible Succeeding Year. Fiscal Year with Different Rates— Method of Determining and Ap¬ plying the Different Rates. Parts of Income Subject to Rates for Different Years—Method of Determining Same . Sec. 200 ” 201 ” 202 ” 203 ” 204 ” 205 ” 206 Part II.—Individuals. Normal Tax . ” 210 Surtax. Sale of Mines, Oil or Gas Wells—How Valued—How Taxed ” 211 Net Income Defined—Basis of Com¬ putations—Accounting Methods— Fiscal or Calendar Year. ” 212 Gross Income Defined. Items Not Taxable—Exemptions. Income of Foreign Governments from In¬ vestments in the United States. Nonresident Alien Individuals— Gross Income Defined. ” 213 Deductions Allowed. Necessary Expenses of Business. Interest— When Deductible. Taxes, Paid or Accrued, When Allowed as a Credit. Losses Sustained. Worth¬ less Debts. Exhaustion, Wear and Tear. Contributions or Gifts. Claim in Abatement. Deductions Not Allowed Nonresident Aliens ” 214 — 187 — INDEX—Continued. Items Not Deductible. Credits Allowed. Amounts Pre¬ viously Taxed. Interest on Obliga¬ tions of United States. Specific Personal Exemptions. Credits to Nonresident Aliens, Conditional. Nonresident Aliens—Allowance of Deductions and Credits. Partnerships and Personal Service Corporations—Exempt as Such— Individual Liability . Estates and Trusts. Periodical Dis¬ tributions—Income for Future Distribution—Fiduciary Responsi¬ bility. Deductions—Credits—Do¬ nations, When Exempt. Profits of Corporations Taxable to Stockholders—When Formed to Evade Tax . Payment of Tax at Source. De¬ ductions Allowed—Claims Filed. Returns — Payment. Payments Not Re-collectible from With- holding Agent . Credits for Taxes. Citizens. Alien Residents. Members of Partner¬ ships—Estates. Credits—Differ¬ ences Arising—Penal Bonds. Sat¬ isfactory Evidence . Individual Returns. Single and Married Persons. Returns by Agent .. Partnership Returns . Fiduciary Returns . Returns When Accounting Period Changed. Basis of Computation Time and Place for Filing Returns. Extensions by Commissioner.... Understatement in Returns. Appeal from Increased Return. Part III.—Corporations. Tax on Corporations. Year 1918. Succeeding Years. Transporta¬ tion Systems . Conditional and Other Exemptions. Fraternal Beneficiary Societies. Building and Loan Associations —Co-operative Banks. Cemetery Companies. Religious, Charitable, Scientific, Educational Corpora¬ tions. Business Leagues—Cham¬ bers of Commerce—Boards of Trade, Clubs. Mutual Hail, Cy¬ clone, Fire Insurance or Other Like Companies. Title Holding Companies for Exempt Corpora¬ tions. Federal Land Banks—Na¬ tional Farm Loan Associations.. Net Income Defined. Gross Income Defined, Life Insur¬ ance Companies. Foreign Cor¬ porations . Pages Sec. 215 ” 216 ” 217 ” 218 ” 219 ” 220 ” 221 ” 222 ” 223 ” 224 ” 225 ” 226 ” 227 ” 228 ” 230 ” 231 ” 232 ” 233 —188— INDEX—Continued. Pagrea Deductions Allowed. Expenses. In¬ terest. Taxes—Exceptions. Losses Sustained — Worthless Debts. Dividends Previously Taxed. Ex¬ haustion, Wear and Tear—Amor¬ tization. Mines, Oil and Gas Wells — Depletion — Deprecia¬ tion. Insurance Companies — Reserve Funds. Mutual Marine Insurance Companies. Other Mu¬ tual Insurance Companies. Losses —Claim in Abatement—Disallow¬ ance of Claim .Sec. 234 Items Not Deductible.. ” 235 Credits Allowed. Interest on U. S. Obligations. Other Credits. Spe¬ cific Credits . ” 236 Payment of Tax at Source. Foreign Corporations . ” 237 Credit for Taxes. Domestic Cor¬ poration Foreign Payments. Evi¬ dence of Payment. ” 238 Corporation Returns. Requirements for Trustees, Receivers, and Agents for Foreign Corporations ” 239 Consolidated Returns, How Consid¬ ered—Computed. Specific Credits. Corporations — When Deemed Affiliated. Domestic Corporation Controlling Foreign Corporation ” 240 Time and Place for Filing Returns ” 241 Part IV.—Administrative Provisions. Payment of Taxes. Four Install¬ ments—Extension of Time—In¬ terest—Non-payment Matures All Installments. One Payment Op¬ tional. Errors in Payments—Ad¬ justments—Interest. Fraudulent Statements. Additional Tax' and Interest on Unpaid Taxes. Re¬ turns, Sufficient Notice. War¬ rant of Distraint, $5.00. Depar¬ ture or Removal from United States to Avoid Tax—Security for Payment of Tax. ” 250 Receipts for Taxes . ” 251 Refunds . ” 252 Penalties . ” 253 Returns of Payments of Dividends ” 254 Returns of Brokers—List of Cus¬ tomers and Transactions. ” 255 Information at Source. Interest on Obligations of Foreign Corpora¬ tions . ” 256 Returns to Be Public Records. Open Only on Presidential Or¬ der — Returns Accessible to Stockholders—Penalty for Dis¬ closure. List of Income-Tax Payers Available . ” 257 Publication of Statistics, Annually. ” 258 —189— INDEX—Continued. Pages Collection of Foreign Items. Li¬ cense Necessary .Sec. 259 Citizens of United States Posses¬ sions. Tax on Income from United States . ” 260 Porto Rico and Philippine Islands.. ” 261 Title III.—War-Profits and Excess- Profits Tax . Part I.—General Definitions. “Taxable Year” — “Fiscal Year” — “Personal Service Corporation” — “Paid or Accrued” — “Divi¬ dends” .Sec. 300 Part II.—Imposition of Tax. Rates—Year 1918. Year 1919 and Succeeding Years. Income, Ex¬ cess of $10,000, on Government Contracts. Transportation Sys¬ tems . ” 301 Basis of Computation. ” 302 Income Partly Derived from Per¬ sonal Service Corporation. ” 303 Corporations—When Exempt. Gold Mining- . ” 304 Apportionment of Exemption. ” 305 Part III.—Credits. Prewar Period Defined . ” 310 War-Profits Credits. Specific Ex¬ emptions. Method of Determina¬ tion. Foreign Corporations Not Entitled to Specific Exemption... ” 311 Excess-Profits Exemption. ” 312 Part IV.—Net Income. Method of Determination. ” 320 Part V.—Invested Capital. “Intangible Property” — “Tangible Property” — “Personal Capital” —“Inadmissible Assets” — “Ad¬ missible Assets.” Par Value of Stock . ” 325 “Invested Capital.” Cash Value of Tangible - Property. Surplus and Undivided Profits. Intangible Property Paid in for Stock. In¬ vested Capital Deductions. Av¬ erage Invested Capital . ” 326 Determination of Invested Capital.. ” 327 Computations—Conditions. Commis¬ sioner’s Record—Report to Con¬ gress . ” 328 Part VI.—Reorganizations. Sec. 330 and 331 59 —190— INDEX—Continued. Pages Part VII.—Miscellaneous. Corporations Other Than Personal Service Corporations. Tax Com¬ putation for Fiscal Year Begin¬ ning in 1918, Ending in 1919— Refunds .Sec. 335 Corporations Not Exempt, to Make Returns . ” 336 Sale of Mines, Oil or Gas Wells.. ” 337 Title IV.—Estate Tax. 75 Definitions : “Executor” — “Col¬ lector” .Sec. 400 Rates. Exemptions—Army or Navy Service .,... ” 401 Determination of Gross Estate. ” 402 Determination of Net Estate. Resi¬ dent Deductions—Gifts, Etc., When Exempt—Specific Deduc¬ tions. Nonresident Deductions— Gifts, Etc., When Exempt. Re¬ funds . ” 403 Duties of Executor. Returns— When Made—Inability to Make Complete Returns . ” 404 Administration Not Granted—No Return—False Return . ” 405 Tax—When Due . ” 406 Payments When Correct Amount Is Not Determinable—Refund. Receipts . ” 407 Failure to Pay—Proceedings. Prop¬ erty Passing to Person Other Than Executor—How Computed ” 408 Unpaid Taxes Lien on Gross Es¬ tate. Transfer by Decedent. ” 409 False Return—Penalty. Withhold¬ ing Records, Information, Prop¬ erty—Penalty . ” 410 Title V.—Tax on Transportation and Other Facilities, and on In¬ surance . 85 Transportation. Telephone, Tele¬ graph, Etc. Exemptions.Sec. 500 By Whom Paid. Mileage Books. When Applied. Transportation by Pipe Line . ” 501 By Whom Collected—Returns and Payments Monthly — Refunds. Delayed Payment Penalty . ” 502 Insurance—Rates. Exemptions- ” 503 Returns. Delayed Payment Penalty ” 504 Title VI.—Tax on Beverages. 92 Distilled Spirits. Taxes Not Due or Payable During Period of Pro¬ hibition. After Prohibition Pe¬ riod. Distilled Spirits, Etc., in Warehouse When Prohibition Takes Effect. Perfumes.Sec. 600 —191— INDEX—Continued. Pages Importation of Spirits from Vir¬ gin Islands, Porto Rico and Philippines .Sec. 601 Transfer of Spirits. Ethyl Al¬ cohol Excepted .. ” 602 Removal of Ethyl Alcohol. ” 603 Floor Tax on Distilled Spirits.... ” 604 Rectified Spirits. Floor Tax. Cordials or Liqueurs. Rectifier of Spirits. Penalty . ” 605 Stamps — Exchange of — Discon¬ tinuance of . ” 606 Installation of Meters and Other Apparatus for Protection of Revenue . ” 607 Fermented Liquor Tax . ” 608 Transfers Between Warehouse or Breweries Not Taxable. ” 609 Natural Wine Defined . ” 610 Still Wines—Rates . ; . ” 611 Grape Brandy or Wine Spirits for Fortification . ” 612 Other Domestic or Imported Spirits . ” 613 Floor Tax. ” 614-615 Removal for Sale—Stamp Tax— Inventory — Marking — Label¬ ing — Exceptions . ” 616 Preparation of Sweet Wines— Credits. Fortification of Wines. Withdrawal of Wine Spirits... ” 617 Removal of Domestic Wines. Production of Grape Wine.... ” 618 Tax Assessment Permissible In¬ stead of Stamps on Imported Still Wines . ” 619 Penalty . ” 620 Meters, Etc., Installed . ” 621 Allowance for Loss . ” 622 Beer Formulae Process . ” 623 Transfer of Distilled Spirits.... ” 624 Brandies Conditionally Exempt —Formulae . ” 625 Gin . ” 626 Penalty . ” 627 Soft Drinks. Waters . ” 628 Monthly Returns—Notice . ” 629 Soft Drinks. Ice Cream—Retail. ” 630 Title VII.—Tax on Cigars, Tobacco, and Manufactures Thereof ... 116 Cigars—Rates. Cigarettes—Rates. Retail Price. Cigars—Labeling. Cigarettes—Labeling .Sec. 700 Tobacco and Snuff. Preparation— Packages. Labeling—Marking. ” 701 Floor Tax. ” 702 Cigarette Papers and Tubes. ” 703 Dealers in Leaf Tobacco—Re¬ quirements. Penalty . ” 704 —192— INDEX—Continued. Pagres Title VIII.—Tax on Admissions and Dues . 122 Passes or Free Admissions. Ad¬ ditional Tax on Ticket Brokers’ Excess Price on Ticket. Leased Boxes or Seats. Roof Gardens, Cabarets. Admissions — When Exempt. “Admission” Defined. Price of Ticket Printed There¬ on—Name of Vendor—Penalty.Sec. 800 Club Dues or Membership Fees —Exemptions . ” 801 Collections—Returns . ” 802 Title IX.—Excise Taxes 126 Percentage Rates on Specific Articles. Wholesale Price May Apply to Retail Sale .Sec. 900 Undervaluation—Adjustment _ ” 901 Sculpture, Paintings, Works of Art . ” 902 Monthly Returns—Penalty . ” 903 Rates on Excess Value—Miscel¬ laneous, Exceptions. Vendor to Collect and Make Return. ” 904 Jewelry. Returns—Penalty. ” 905 Positive Motion-Picture Films... ” 906 Toilet Articles—Proprietary Med¬ icines. Method of Collection Optional With Commissioner.. ” 907 Title X.—Special Taxes . 134 Capital Tax. Domestic Corpo¬ ration. Foreign Corporation. Insurance Companies. When Tax Not Applicable .Sec. 1000 “Brokers” — “Pawnbrokers” — “Shipbrokers” and “Custom Brokers” Defined. Taxes As¬ sessed. Theatres, Museums and Concert Halls — Schedule of Taxes — When Exempt — Less in Smaller Towns. Circuses. Other Public Exhibitions.—Ex¬ emptions. Bowling Alleys and Billiard Rooms. Shooting Gal¬ leries. Riding Academies. Au¬ tos for Hire. Brewer, Distiller, Dealer—Additional Tax in Dry States. Payment of Tax No Ex¬ emption From State Penalties ” 1001 Manufacturers of Tobacco, Cigars, Cigarettes. Manufac¬ turers Within Each Class. ” 1002 Tax on Use of Yachts, Pleasure, Power and Sailing Boats— Schedule. Apportionment of Tax. Taxes Paid, A Credit... ” 1003 Use of Receipts. Credit. ” 1004 Penalty . ” 10Q5 —193— INDEX—Continued. Pages Opium, Coca Leaves—Registra¬ tion of Persons Engaged, and Place of Business. Schedule. Definitions of Terms. Registra¬ tion — Exceptions. Unlawful Operation. “Persons” Defined. Tax on Products. Additional to Import Duty. Unlawful Acts— Prima Facie Evidence—Excep¬ tions. Disposition of Stamps. Unstamped Packages Forfeited. Records Kept and Monthly Re¬ turns Rendered .Sec. 1006 Provisions Not Applicable to Preparations Containing Mi¬ nute Quantities or for External Use—Evasion . ” 1007 Drugs Seized—Disposition . ” 1008 Former Provisions Repealed.... ” 1009 Title XI.—Stamp Taxes. 148 Instruments Requiring Stamps —In Lieu of Other Tax. ” 1100 Instruments Exempt from Tax.. ” 1101 Fraudulent Acts—Penalty.1102-1103 Method of Stamp Cancellation.. ” 1104 Preparation and Distribution.... ” 1105 Quantity Furnished — To Post¬ master-General. To Assistant Treasurers . ” 1106 SCHEDULE A. Stamp Taxes on Bonds of In¬ debtedness ; Bonds, Indemnity and Surety; Capital Stock, Is¬ sued. Stamps Attached to Stock Books. Capital Stock, Sales or Transfers — Exemp¬ tions. Produce, Sales of, On Exchange. Cash Sales. Drafts and Checks. When Not Ap¬ plicable to Promissory Notes. Conveyances. Entry or With¬ drawal of Goods at Custom¬ house. Passenger Tickets. Proxies. Powers of Attorney. Playing Cards. Parcel Post Packages. Insurance on Prop¬ erty—Re-insurance. Person or Agent Receiving Insurance to Affix Stamps—Penalty . ” 1107 Title XII.—Tax on Employment of Child Labor . 159 Regulations and Limitations_Sec. 1200 Method of Computation. ” 1201 Sale at Less Than Market Price ” 1202 Mistake as to Age—Penalty for False Statement . ” 1203 Returns—When Made . ” 1204 —194 INDEX—Continued. Pages Assessment—Notice .Sec. 1205 Inspection of Premises—Penalty for Obstructing. ” 1206 Taxable Year and First Taxable Year Defined . ” 1207 Title XIII.—General Administrative Provisions . 163 Salaries: Commissioner .Sec. 1300 Assistant Commissioner. Col¬ lectors. Appropriation Distri¬ bution. Advisory Tax Board Membership—Vacancies — Sal¬ aries. Board to Interpret Tax Laws. Office in Washington, D. C. Other Authorities of Board . ” 1301 Leave of Absence . ” 1302 Legislative Drafting Service — Duties. Appropriation. Im¬ ports From Virgin Islands_ ” 1304 Administrative and Other Pro¬ visions Extended to This Act. Examination of Returns. ” 1305 Floor Tax Requires Sworn Re¬ turns . ” 1306 Method of Tax Collection. ” 1307 Evasion — Penalty. Person De¬ fined . ” 1308 Rules and Regulations by Com¬ missioner . ” 1309 Overpayment. Credit Sales. Right of Vendor to Recover. Tax Not Applicable to Exports—Re¬ funds . ” 1310 Increased Rates Paid by Stamps on Hand . ” 1311 Contracts Made Prior to May 9, 1917. Prior to September 3, 1918. Taxes to Vendor. Dealer Defined. Fraction of Cent .... ” 1313 United States Certificates of In¬ debtedness—Checks— Accepted at Par . ” 1314 Stamps Issued for Restamping Packages . ” 1315 Refunds. No Refund on Second Assessment — Exception. Sec¬ tions Amended. ” 1316 Collectors to Report Violations. Administer Oaths. Unlawful to Divulge Information—Penalty. All Persons Subject to Tax, Listed. Returns—Particulars— Penalty. Failure to File. Proce¬ dure—Additional Tax . ” 1317 Jurisdiction of District Courts.. ” 1318 False Statement, at Time of Sale, as to Tax Paid. ” 1319 Penal Bonds—U. S. Bonds as Security at Par—Return of Bonds—Limitations . ” 1320 —195— 196—