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210. This applies only to fixed periodical interest, payable at a stated time and at a stated rate to an individual. Where such interest is payable to a corporation or to a partnership, the debtor is not required to pay the tax. The tax must be paid, regardless of the amount of the payment and whether the interest is payable annually or at shorter or longer periods.

211. Short Term Obligations. Payment at the source is required only in the case of the interest upon bonds and mortgages, or deeds of trust, or other similar obligations. This is intended to cover only those long term or funded obligations which may be classified as securities and does not include ordinary bankable commercial paper of corporations, such as interest bearing promissory notes or interest bearing scrip certificates payable within a relatively short period.

212. Tax Free Obligations of Individuals. It is only upon the bonds of corporations and similar organizations that payment at the source is required. Coupon bonds and similar obligations containing tax free covenants are frequently issued by syndicates, partnerships, or individuals, but even though such bonds may in all other respects resemble corporate bonds, payment at the source is not required. Receiver's certificates are not obligations of the corporation for which the receiver is acting.

213. Exemption From Payment at the Source. In any case where the person receiving interest subject to payment at the source is not liable for an income tax upon such interest, for the reason that it comes within the exemption to which he is entitled, he may establish that fact by filing a certificate in the form prescribed by the Treasury Department. This certificate must be filed with the debtor corporation on or before February 1. Corporations, partnerships, and similar organizations not subject to the income tax should also file a certificate stating that fact. Before January 1, 1918, if the entire net income of the owner of the bonds, exclusive of dividends, does not exceed $3,000 or $4,000, no tax is to be paid by the corporation. After that date, one 2% tax is to be paid where the interest is payable to an individual with an income subject to the normal tax imposed by the 1917 law, whether more or less than $4,000.

Information at The Source.

214. Fixed and Determinable Payments. Information at the source is required as to all income which is paid to an individual, a partnership, or a corporation, annually or periodically, in fixed or determinable amounts, of $800 or more in any taxable year. This includes salaries, rents, interest, alimony, and similar income, but does not include the commissions of insurance agents, the fees of lawyers, the royalties of inventors and

authors, and other income which is indefinite as to amount or time of payment. But if a lawyer, for example, receives an annual retainer of $1,000 from a single client, the client must make a Return showing such payment. If the aggregate of all payments made during the year amounts to $800, the information must be given.

215. Brokers. Every person, partnership, or corporation doing business as a broker on any exchange, or board of trade, or other similar place of business is required to furnish information as to the profits of its customers, whenever required by the Commissioner of Internal Revenue. A Return under oath must be rendered when so required, under rulings and regulations to be prescribed, showing the names of the customers for whom such broker has acted and details as to profits and losses of each customer or such other information as may be required.

216. Dividends. Every corporation (except those which are exempt from the income tax) shall, whenever required by the Commissioner of Internal Revenue, render a Return under oath of its payments of dividends, whether paid in cash, or stock, or property, showing the names and addresses of the stockholders, the number of shares owned by each, and the tax years in which each part of the profits being distributed was earned.

217. Bond Interest. Regardless of the amount paid, information at the source is required as to the payment of interest upon the bonds of corporations and similar corporate obligations. This does not apply to the interest paid upon bonds of the United States, of the states, or political subdivisions thereof, or of an individual.

218. Foreign Items. In all cases of the collection of items not payable in the United States, representing interest upon bonds of foreign governments or corporations, or dividends on the stock of foreign corporations, when collected by persons, partnerships, or corporations, undertaking as a matter of business or for profit the collection of such foreign items, such person is required to make a Return showing all amounts collected, however small, and the name and address of the person, firm, or corporation, for whom the collection was made. If interest or dividends payable in foreign countries are also payable in this country by a resident fiscal agent, at the option of the owner of the securities, such items are not subject to this provision. The checks, coupons, or bills of exchange for such foreign items may not be received for collection by any bank, collection agent, or dealer in such coupons and bills, who is not licensed by the government. Any person who knowingly undertakes, as a matter of business or profit, to collect such foreign items without having first obtained a license, or without complying with the regulations as to information

at the source, shall be deemed guilty of a misdemeanor and fined not more than $5,000 or imprisoned for not more than one year, or both.

219. Certificates of Ownership. A person making payments of income for which he is required to pay a tax at the source, or to give information at the source is entitled to demand the necessary information from the recipient of such income. This information is furnished by means of certificates to be filed with the source of the income at the time payment is made.

220. Penalties. Any person, corporation, or partnership, required by law to give information at the source or to pay a tax at the source, which fails to render the Return or pay the tax when required shall be liable to a penalty of not less than $20 or more than $1,000. Any Return or statement which is falsely or fraudulently made, with intent to defeat or evade assessment of income tax, shall be a misdemeanor, punishable by fine of not more than $2,000, or imprisonment for not more than one year, or both. Where a taxpayer has duly paid the tax which should have been paid at the source, or shown in the Return of information at the source, no penalty shall be imposed for the failure to pay such tax at the source, or to render such Return, unless such failure was fraudulent and for the purpose of evading the payment.

221.

Other Payment at the Source Repealed. Under the 1916 Income Tax Law the system of payment at the source was much more extensive, but this was repealed by the new war tax law. In that law it is provided that any amount withheld from payments of income made during 1917 and prior to the passage of the War Tax Law, pursuant to the law as then in force, shall be released and paid over by the withholding agent to the individual who received the income.

IX. NON-RESIDENT ALIENS.

222. Individuals who reside in this country, whether citizens or aliens, and citizens who reside abroad, are taxed upon their entire net incomes. But an alien who does not reside in this country is taxed only upon the income which he receives from sources in this country. The same is true of a foreign corporation doing business in and receiving income from this country. This tax liability is not affected by the fact that some other country, as the country of his residence, for example, may also impose an income tax upon the same income. Non-resident alien individuals are not subject to the war normal tax imposed by the 1917 law, but are subject to the additional tax imposed by that law, and to both the normal

and additional tax imposed by the 1916 law. Foreign corporations are taxed under both laws at the same rates as domestic corporations. There is no tax on the income received by foreign governments from investments in the United States, in stock, bonds, or other domestic securities, or from deposits in banks in this country.

223. Exemptions and Deductions. The personal exemptions allowed to citizens or residents of this country are not allowed to non-resident aliens, but the normal tax to which they are subject is paid upon the entire amount of their net income from sources in this country, deducting dividends from domestic corporations. Non-resident aliens and foreign corporations are allowed the same General Deductions as residents, but the deductions must also have their source within the United States. For example, the expense deducted must be incurred in connection with the business conducted in this country, depreciation must be that of property in this country, etc. The interest on personal indebtedness which a nonresident alien may deduct is that proportion of all his interest which his income from this country bears to his entire income. The interest which a foreign corporation may deduct is the portion of the allowable deduction, ascertained as in the case of domestic corporations, which its income from this country bears to its entire income. The deductions are allowed to non-resident aliens or to a foreign corporation, only if the Return is filed which shows the amount of the entire income received from all sources during the year.

224. Withholding at the Source. The income received from sources in this country by non-resident alien individuals is subject to withholding at the source in the case of fixed and determinable gains, of the character described as subject to information at the source, but without limitation as to amount. This does not include dividends on stock of taxable domestic corporations. Withholding at the source is also required as to the dividends on stock and the interest upon bonds of domestic corporations when received by foreign corporations not engaged in any business within the United States, and not having any office or place of business in this country. If a foreign organization has a place of business in this country, it may secure an exemption from such withholding by filing with the person paying the income a certificate (on Form 1086). Unless such certificate is filed, the tax should be withheld from all income of the character described which is payable to foreign corporations. The payor, in such a case, is to withhold therefrom the amount of the normal tax. On or before March 1 of each year, such person is required to render a Return of the amounts withheld, and must pay such amounts to the United States on or before June 15, or within ten days after notice of assessment. The

law affords such person indemnity, against any demand by the recipient of the income, for the amounts withheld pursuant to this provision.

X. ASSESSMENT AND PAYMENT OF INCOME TAX.

225. When Payment Is Due. The income tax of a person or corporation is required by law to be paid on or before June 15 following the year for which the Return is made. Penalties do not attach, until there has been a failure to pay the tax within ten days after the notice of assessment and the demand for payment. Where a corporation computes its tax upon the fiscal year basis, payment of the tax is required within one hundred and five days from the date upon which it is required to file its Return.

226. Payment in Installments. The law authorizes the making of rules and regulations whereby tax payers will be permitted to pay income and excess profits taxes in advance. The whole tax, or any part not less than one-fourth, must be paid within thirty days after the end of the taxable year. Where part is paid, then another installment, amounting to at least one-fourth, must be paid within two months after the end of the taxable year, an additional amount of at least one-fourth within four months after the close of the taxable year, and the remainder of the tax on or before the time fixed by the law for the tax to be paid. Such advance payments may be made at a discount, to be fixed by rules and regulations of the department, not to exceed 3% per annum upon the amount paid, from the date of payment to the date when the entire tax is due. Payment in installments may not be made, unless the first installment of at least one-fourth of the tax is paid on or before January 30, and subsequent installments are paid as due. But payment of the entire amount due may be made in advance at any time, except that discount will be allowed only upon payments made within four and one-half months after the close of the fiscal year.

227. Payment by Check. The law authorizes the making of regulations which will permit collectors to receive the uncertified check of the taxpayer in payment of the tax, but if such check is dishonored by the bank upon which it is drawn, the taxpayer will remain liable for the tax and all penalties, the same as if the check had not been received. Regulations are also authorized under which the collectors may accept certificates of indebtedness of the United States, at par and accrued interest, in payment. Until such regulations are made, the tax must be paid with a certified check, a bank draft or cashier's check, or in currency.

228. Penalties. The penalty for failure to pay the tax when it is due,

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