Taxable Years Beginning in 1940

Taxable Years Beginning before 1939

the partnership, computed as provided in section 183 (b).

Sec. 452. Specific exemption.

In the case of every individual there shall be allowed as a credit against the victory tax net income a specific exemption of $624. In the case of a husband and wife filing a joint return under section 51 (b), if the victory tax net income of one spouse is less than $624, the aggregate specific exemption of both spouses shall be limited to $624 plus the victory tax net income of such spouse.

Sec. 453. Credit against victory tax.

(a) ALLOWANCE OF CREDIT.-There shall be allowed as a credit against the victory tax for each taxable year: (1) The amount paid by the taxpayer during the tax able year as premiums on life insurance, in force on September 1, 1942, upon his own life, or upon the life of his spouse, or upon the life of any dependent of the taxpayer specified in section 25 (b) (2) (A), and the amount paid during the taxable year as premiums on life insurance which is a renewal or conversion of such life insurance in force on September 1, 1942, to the ex tent that such premiums do not exceed the premiums payable on such life insurance in foree on September 1, 1949.

(2) The amount by which the smallest amount of indebtedness of the taxpayer outstanding at any time during the period beginning September 1, 1942, and ending with the close of the preceding taxable year, ex ceeds the amount of indebtedness of the taxpayer outstanding at the close of the taxable year,

(3) The amount by which the amount of obligations of the United States owned by the taxpayer on the last day of the taxable year exceeds the greater of (A) the amount of such obligations owned by the taxpayer on December 31, 1942, or (B) the highest amount of such obligations owned by the taxpayer on the last day of any preceding taxable year ending after December 31, 1912. As used in this paragraph (i) the term "owned by the taxpayer" shall include the amount of the ob ligations owned solely by the taxpayer and one half of the amount of the obligations owned jointly by the tax payer with one other person, but shall not include such obligations acquired by the taxpayer by gift, or inheri tense, or otherwise than by purchase; (ii) the term

"obligations of the United States' means such obliga tions of the United States as the Secretary may by regu lations prescribe, and as are purchased in such manner and under such terms and conditions as he may specify and (iii) the term "amount of obligations of the United States" means the amount paid for such obligations.

(b) LIMITATION ON CREDIT. The amount of such eredit for the taxable year shall not exceed the amount of the post war eredit or refund allowed by section 454 for such taxable year,

(1) SINGLE PERSONS.-In case of a single person, married person not living with husband or wife, or an estate or trust, an amount equal to 25 per centum of the Victory tax or $500, whichever is the lesser.

(2) HEADS OF FAMILIES.-In the case of the head of a family, an amount equal to 40 per centum of the Victory tax or $1,000, whichever is the lesser.

(3) MARRIED PERSONS.-In the case of a married person living with husband or wife

(A) if separate returns are filed by each spouse an amount equal to 40 per centum of the Victory tax or $500, whichever is the lesser, or

(B) if a separate return is filed by one spouse and no return is filed by the other spouse, or if a joint return is filed under section 51 (b), only one credit not exceeding 40 per centum of the Victory tax or $1,000, whichever is the lesser.

(4) DEPENDENTS. For each dependent spécified in section 25 (b), excluding as a dependent, in the case of a head of a family, one who would be excluded under section 25 (b) (2) (B), an amount equal to 2 per centum of the Victory tax or $100, whichever is the lesser.

(b) CHANGE OF STATUS.-If for any taxable year the status of the taxpayer (other than a taxpayer who makes his return and pays his tax under Supplement T) with respect to his marital relationship or with respect to his dependents, changed during the taxable year, the amount of the credit provided by this section for such taxable year shall be apportioned, under rules and regu lations prescribed by the Commissioner with the approval of the Secretary, in accordance with the number of months before and after such change. For the purpose of such apportionment a fractional part of a month shall be disregarded unless it amounts to more than half a month in which case it shall be considered as a month. (c) STATUS OF SUPPLEMENT T TAXPAYER.-If for any taxable year a taxpayer makes his return and pays

Taxable Years Beginning in 1943

his tax under Supplement T, for the purpose of the credit provided by this section, his status for such year with respect to his marital relationship or with respect to his dependents shall be determined in accordance with the provisions of section 401.

Sec. 453, I. R. C., supra, amended by Sec. 1, H. R. 3381, of Oct. 28, 1943, by omitting language in stricken through type and adding language in italics. Sec. 3 of said H. R. 3381 provides that amendment shall be applicable to taxable years beginning after Dec. 31, 1942.

Sec. 454. Post war credit or refund of victory tax, (a) ALLOWANCE OF CREDIT. As soon as practicable after date of cessation of hostilities in the present war (as defined in section 475 (b)), the following amount of the victory tax paid for each taxable year beginning after December 31, 1942, shall be credited against any income tax or installment thereof then due from the taxpayer, and any balance shall be refunded immediately to the taxpayers

(1) In the case of a single person or a married per son not living with husband or wife, 25 per centum of the victory tax or $500, whichever is the lesser.

(2) In the case of the head of a family, 40 per eentum of the victory tax or $1,000, whichever is the lesser. In the case of a married person living with hus band or wife where separate returns are filed by each spouse, 40 per centum of the victory tax or $500, which ever is the lesser. In the case of a married person living with husband or wife where a separate return is filed by one spouse and no return is filed by the other spouse, er in the case of a husband and wife filing a joint return under section 51 (b), only one such credit shall be allowed and such credit shall not exceed 40 per centum of the victory tax or $1,000, whichever is the lesser

(3) For each dependent specified in section 25 (b), excluding as a dependent, in the ease of a head of a family, one who would be excluded under section 25 (b) (2) (B), 2 per centum of the victory tax or $100, whichever is the lesser.

(b) CHANGE OF STATUS. If for any taxable year the status of the taxpayer (other than a taxpayer who makes his return and pays his tax under Supplement T) with respect to his marital relationship or with spect to his dependents, changed during the taxable year, the amount of the credit or refund provided by this section for such taxable year shall be apportioned, under rules and regulations prescribed by the Commis sioner with the approval of the Secretary, in accordance with the number of months before and after such change. For the purpose of such apportionment a fractional part of a month shall be disregarded unless it amounts to more than half a month in which case it shall be con sidered as a month.

(e) STATUS OF SUPPLEMENT T TAXPAYER. If for any taxable year a taxpayer makes his return and pays his tax under Supplement T, for the purpose of the credit or refund provided by this section, his status for such year with respect to his marital relationship or with respect to his dependents shall be determined in cordance with the provisions of section 401.

(d) PERIOD OF LIMITATION. No post war credit or refund of any part of the victory tax provided in this section shall be allowed or made after 7 years from the date of cessation of hostilities in the present war, unless claim for credit or refund is filed before the expiration of such date. No interest shall be allowed on such eredits or refunds:

(e) LIMITATION OF CREDIT. The post war eredit or refund allowed by this section shall be reduced by the amount of any eredit allowed under section 459.

Sec. 454, I. R. C., supra, repealed by Sec. 2 (a), H. R. 3381, of Oct. 28, 1943. Sec. 3 of said H. R. provides that amendment shall be applicable to taxable years beginning after Dec. 31, 1942.

Taxable Years Beginning in 1943

Sec. 455. Returns.

(a) INDIVIDUAL RETURNS. Every individual having a gross income in excess of $624 for the taxable year, shall make, under regulations prescribed by the Commissioner with the approval of the Secretary, a return, which shall contain or be verified by a written declaration that it is made under the penalties of perjury, stating specifically the items of his gross income and the deductions and credits allowed under this subchapter.

(b) FIDUCIARY RETURNS.-Every fiduciary (except a receiver appointed by authority of law in possession of part only of the property of an individual) shall make, under regulations prescribed by the Commissioner with the approval of the Secretary, a return under oath, for any individual, estate, or trust for which he acts, if the gross income of such individual, estate, or trust is in excess of $624 for the taxable year, stating specifically the items of gross income and the deductions and credits allowed under this subchapter. The provisions of section 142 (b) shall be applicable with respect to any return required to be made under this subsection. Sec. 456. Limitation on tax.

The tax imposed by section 450 (victory tax), computed without regard to the credits provided in sections 453, 454, and 466 (e), shall not exceed the excess of 90 per centum of the net income of the taxpayer for the taxable year over the tax imposed by this chapter seetions 11 (normal tax) aud 12 (surtax), computed with out regard to section 450 and without regard to the credits provided in sections 31, 32, 35, and 466 (e).

Sec. 456, supra, amended by Sec. 2 (c), H. R. 3381, of Oct. 28, 1943, by omitting language in stricken through type and adding language in italics. Sec. 3 of said H. R. provides that amendment shall be applicable to taxable years beginning after Dec. 31, 1942.

PART II-COLLECTION OF TAX AT SOURCE ON WAGES

Sec. 465. Definitions. As used in this part

(a) PAY-ROLL PERIOD.-The term "pay-roll period" means a period for which a payment of wages is ordinarily made to the employee by his employer.

(b) WAGES.-The term means all remuner wages" ation (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include remuneration paid (1) for services performed as a member of the military or naval forces of the United States, other than pensions and retired pay, (2) for agricultural labor (as defined in section 1426 (h)), (3) for domestic service in a private home, local college club. or local chapter of a college fraternity or sorority, (4) for casual labor not in the course of the employer's trade or business, (5) for services as an employee of a nonresident alien individual, foreign partnership, or foreign corporation, if such individual, partnership, or corporation is not engaged in trade or business in the United States, (6) for services as an employee of a foreign government or any wholly owned instrumentality thereof, or (7) for services performed as an employee while outside the United States (as defined in section 3797 (a) (9)), unless the major part of the services performed during the calendar year by such employee for his employer are performed within the United States. (c) WITHHOLDING AGENT.-The term "withholding agent" means any person required to withhold, collect, and pay the tax under section 466.

(d) EMPLOYEE.-The term "employee" includes an officer, employee, or elected official of the United States. a State, Territory, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation.

Taxable Years Beginning in 1943

"employer" includes any (e) EMPLOYER.-The term person for whom an individual performs any service, of whatever nature, as the employee of such person.

Sec. 466. Tax collected at source.

(a) REQUIREMENT OF WITHHOLDING.-There shall be withheld, collected, and paid upon all wages of every person, to the extent that such wages are includible in gross income, a tax equal to 5 per centum of the excess of each payment of such wages over the withholding deduction allowable under this part. This subsection and subsection (c) shall not be applicable in any case provided for in section 143, except in the case of wages paid to residents of a contiguous country who enter and leave the United States at frequent intervals.

(b) WITHHOLDING DEDUCTION.—

(1) In computing the tax required to be withheld under subsection (a), there shall be allowed as a deduction against the wages paid for each pay-roll period an amount determined in accordance with the following schedule:

Taxable Years Beginning in 1943

tion allowed by this subsection for a weekly pay-roll period shall be used in computing the tax required to be withheld.

(3) If a pay-roll period in respect of any wages, or any other period with respect to which wages are paid, is not otherwise specifically provided for in this subsection, the deduction allowable against each payment of such wages shall be the deduction allowable in the case of an annual pay-roll period divided by 365 and multiplied by the number of days in such period, including Sundays and holidays.

(4) In any case in which wages are paid by an employer without regard to any pay-roll period or other period, the deduction allowable against each payment of such wages shall be the deduction allowable in the case of an annual pay-roll period divided by 365 and multiplied by the number of days (including Sundays and holidays) which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or the date of commencement of employment with such employer during such year, or January 1 of such year, whichever is the later.

(5) The deduction allowable under this subsection in respect of any individual for any calendar year shall not exceed the total deduction which would have been allowable under paragraph (1) if the only pay-roll period of such individual had been an annual pay-roll period.

(c) WAGE BRACKET WITHHOLDING.—

(1) At the election of the employer, if his pay-roll period with respect to an employee is weekly, biweekly, semimonthly, or monthly, there shall be withheld, collected, and paid upon the wages of such employee a tax determined in accordance with the following tables, which shall be in lieu of the tax required to be withheld under subsection (a):

For biweekly pay-roll period

The amount of tax to be withheld shall be

(d) TAX PAID BY RECIPIENT.-If any tax required under this part to be withheld and collected is paid by the recipient of the income, it shall not be re-collected from the withholding agent; but such payment shall in no case relieve the withholding agent from liability for interest or additions to the tax otherwise applicable in respect of the tax imposed by this chapter.

(e) CREDIT FOR TAX WITHHELD AT SOURCE.-The tax withheld and collected under this part shall not be allowed as a deduction either to the withholding agent or to the recipient of the income in computing net income; but the amount of the tax so withheld and collected shall be allowed as a credit against the tax imposed by this chapter upon the recipient of the income. Such credit shall be allowed first against the victory tax imposed by section 450. (adjusted for the credit allowed by section 453) and the excess of such credit, if any, over the victory tax, so adjusted, shall be allowed against the tax imposed by sections 11 and 12 or section 400, as the case may be.

(f) REFUNDS.-Where there has been an overpayment of tax under this part, any refund or credit made under the provisions of section 322 shall be made to the recipient of the income; but, in any case in which such tax was not so withheld by the withholding agent, such refund or credit shall be made to the withholding agent.

(g) INCLUDED AND EXCLUDED WAGES.-If the remuneration paid by an employer to an employee for services performed during one-half or more of any pay

roll period constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such pay-roll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.

Sec. 467. Withholding agent.

(a) COLLECTION OF TAX.-The tax required to be withheld by section 466 shall be collected by the person having control of the payment of such wages by deducting such amount from such wages as and when paid. As used in this subsection, the term "person" includes officers and employees of the United States, or of a State, Territory, or any political subdivision thereof, or of the District of Columbia, or any agency or instrumentality of any one or more of the foregoing.

(b) INDEMNIFICATION OF WITHHOLDING AGENT.Every person required to withhold and collect any tax under this part shall be liable for the payment of such tax, and shall not be liable to any person for the amount of any such payment.

(c) ADJUSTMENTS.-If more or less than the correct amount of tax is withheld or paid for any quarter in any calendar year, proper adjustments, with respect both to the tax withheld or the tax paid, may be made in any subsequent quarter of such calendar year, without

Taxable Years Beginning in 1943

interest, in such manner and at such times as may be prescribed by regulations made by the Commissioner, with the approval of the Secretary.

Sec. 468. Return and payment by withholding agent. In lieu of the time prescribed in sections 53 and 56 for the return and payment of the tax imposed by this chapter, every person required to withhold and collect any tax under section 466 shall make a return and pay such tax on or before the last day of the month following the close of each quarter of each calendar year. Every such person shall include with the final return for the calendar year a duplicate copy of each receipt required to be furnished under section 469. Every such person shall also keep such records and render under oath such statements with respect to the tax so withheld and collected as may be required under regulations prescribed by the Commissioner, with the approval of the Secretary.

Sec. 469. Receipts.

(a) WAGES.-Every employer required to withhold and collect a tax in respect of the wages of an employee shall furnish to each such employee in respect of his employment during the calendar year, on or before January 31 of the succeeding year, or, if his employment is terminated before the close of such calendar year, on the day on which the last payment of wages is made, a written statement showing the period covered by the statement, the wages paid by the employer to such employee during such period, and the amount of the tax withheld and collected under this part in respect of such wages.

(b) REGULATIONS.-The statements required to be furnished by this section shall be in lieu of the return required to be furnished by the employer with respect to his employee under section 147 and shall be furnished at such other times, shall contain such other information, and shall be in such form as the Commissioner, with the approval of the Secretary, may by regulations prescribe.

(e) EXTENSION OF TIME.-The Commissioner, under such regulations as he may prescribe with the approval of the Secretary, may grant to any employer a reasonable extension of time (not in excess of 30 days) with respect to the statements required to be furnished to employees on the day on which the last payment of wages is made.

Sec. 470. Penalties.

(a) PENALTIES FOR FRAUDULENT RECEIPT OR FAILURE TO FURNISH RECEIPT.-In lieu of any other penalty provided by law (except the penalty provided by subsection (b) of this section), any person required under the provisions of section 469 to furnish a receipt in respect of tax withheld pursuant to this part who wilfully furnishes a false or fraudulent receipt, or who wilfully fails to furnish a receipt in the manner, at the time, and showing the information required under section 469, or regulations prescribed thereunder, shall for each such failure, upon conviction thereof, be fined not more than

Taxable Years Beginning in 1943

$1,000, or imprisoned for not more than one year, or both.

(b) ADDITIONAL PENALTY.-In addition to the penalty provided by subsection (a) of this section, any person required under the provisions of section 469 to furnish a receipt in respect of tax withheld pursuant to this part who wilfully furnishes a false or fraudulent receipt, or who wilfully fails to furnish a receipt in the manner, at the time, and showing the information required under section 469, or regulations prescribed thereunder, shall for each such failure be subject to a civil penalty of not more than $50.

(c) FAILURE OF WITHHOLDING AGENT TO FILE RETURN. -In case of any failure to make and file return required by this part, within the time prescribed by law or prescribed by the Commissioner in pursuance of law, unless it is shown that such failure is due to reasonable cause and not due to wilful neglect, the addition to the tax provided for in section 291 shall not be less than $5.

PART III-EXPIRATION DATE AND DEFINITIONS

Sec. 475. Definitions.

(a) NET INCOME.-When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, the term "net income" shall be construed to mean "victory tax net income" for the purposes of this subchapter.

(b) DATE OF CESSATION OF HOSTILITIES IN THE PRESENT WAR.-As used in this subchapter, the term "date of cessation of hostilities in the present war" means the date on which hostilities in the present war between the United States and the governments of Germany, Japan, and Italy cease, as fixed by proclamation of the President or by concurrent resolution of the two Houses of Congress, whichever date is earlier, or in case the hostilities between the United States and such governments do not cease at the same time, such date as may be so fixed as an appropriate date for the purposes of this subchapter.

Sec. 476. Expiration date.

The taxes imposed by this subchapter shall not apply with respect to any taxable year commencing after the date of cessation of hostilities in the present war. The tax imposed by Part I of this subchapter shall not apply with respect to any taxable year commencing after the date of cessation of hostilities in the present war. The tax imposed by Part II of such subchapter shall not apply with respect to any wages paid after June 30, 1943, unless paid during the calendar year 1943 with respect to a payroll period beginning on or before such date.