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regarding this matter and that they be instructed to ascertain that each and every person hired in the field is a citizen of the United States before allowing such person to enter on duty."

The affidavit signed by Mr. Webb stated, “I am not a citizen of, but owe allegiance to, the United States;” but Mr. Fenimore, who was designated by the Engineering Division as the employing officer in this case, hired Mr. Webb on July 14, 1942. The appointment papers were forwarded through channels and were received in the Personnel Division on July 24. Upon checking the papers, it was noted that Mr. Webb was not a citizen, and the Engineering Division was notified by telephone that he was ineligible for employment because he was an alien. His services were terminated at the close of business on July 28, 1942, and the time sheets subsequently submitted indicate that he earned a total of $79.20, no part of which has been paid.

It is believed that Mr. Webb was unaware of the restriction against the Bonneville Power Administration hiring aliens and that he rendered these services in good faith. Shortly after learning it was mandatory that only citizens be hired, Webb called at the office of the Personnel Division and stated he had previously signed his first papers and expected to become a citizen almost any day. It was explained to him, however, that his acquisition of citizenship at a subsequent date would still preclude payment for services rendered prior to the date of his naturalization. Mr. Webb then took up the matter of securing payment with the Oregon Bureau of Labor, and reference is made to its letter of August 4,

1942, and to the reply of Mr. Willard on September 9, 1942, both of which are in Webb's personnel file.

Your attention is also called to the memo in the file signed by Mr. Fenimore under date of June 2, 1943, in which he states that Mr. Webb was not informed at the time of his employment that he might not be paid because he was a noncitizen. In discussing this matter with Mr. Frank Moore, the supervisor of Mr. Fenimore, the Personnel Division was advised that Fenimore was aware of the restriction against the hiring of aliens and it was presumed it was merely an oversight in failing to note the statement on the affidavit and in permitting Mr. Webb to enter on duty.

From all the information we can gather, it would appear that although the Oregon State Employment Service and the various division heads had been advised noncitizens could not be employed, a careful check was not made of the affidavit to ascertain whether or not Webb was a citizen before he was referred for employment or before he was actually employed and that Webb entered on duty in good faith and with the full expectation of being paid for his services. Consequently, it is our opinion that the only equitable course open is for this Administration to render all possible aid in obtaining relief from Congress and in securing authority to make payment to Webb for his services in the amount of $79.20.

It is requested that the attached personnel file of George Webb be returned to the Personnel Division after it has served its purpose.

C. E. LAMSON,

Director of Personnel. O

AMENDING THE CIVIL SERVICE RETIREMENT ACT

FEBRUARY 28, 1945.-Committed to the Committee of the Whole House on the

state of the Union and ordered to be printed

Mr. RAMSPECK, from the Committee on Civil Service, submitted the

following

REPORT

[To accompany H. R. 577]

The Committee on the Civil Service, to whom was referred the bill (H. R. 577) to amend the Civil Service Retirement Act, approved May 29, 1930, so as to exempt annuity payments under such act from taxation having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass.

The amendment is as follows: On line 4, after the word “amended”, strike out the remainder of the line and all of lines 5, 6, and 7 and insert in lieu thereof the following:

Sec. 18. None of the moneys mentioned in this Act shall be assignable, either in law or equity, or be subject to execution, levy, or attachment, garnishment, taxation, or other legal process.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes made by the bill, as introduced, in existing law are shown as follows (new matter proposed to be inserted is printed in italic):

SECTION 18 OF CIVIL SERVICE RETIREMENT ACT

Sec. 18. None of the moneys mentioned in this Act shall be assignable, either in law or equity, or be subject to execution, lefy, or attachment, garnishment, or other legal process, and no annuity payment under this Act shall be subject to any tax.

For the information of the House, changes made by the bill, as reported, in existing law are shown as follows (new matter proposed to be inserted under the committee amendment is printed in italic):

SECTION 18 OF CIVIL SERVICE RETIREMENT ACT

Sec. 18. None of the moneys mentioned in this Act shall be assignable, either in law or equity, or be subject to execution, levy, or attachment, garnishment, tatation, or other legal process.

GENERAL STATEMENT

The purpose of this bill is to exempt retired civil-service employees from taxation of annuities payable under the Civil Service Retirement Act. In view of the fact that social security payments, railroadretirement annuities, and veterans' pensions are specifically exempted from income tax, the committee feel it inconsistent that Federal civilservice employees should be subject to taxation.

This bill has the approval of the Civil Service Commission as will be shown by the following letter:

UNITED STATES CIVIL SERVICE COMMISSION,

Washington, D. C., January 31, 1945. Hon. ROBERT RAMSPECK, Chairman, Committee on the Civil Service,

House of Representatives. DEAR MR. RAMSPECK: Further reference is made to your communication of January 9, 1945, relative to H. R. 577, a bill to amend the Civil Service Retirement Act, approved May 29, 1930, as amended, so as to exempt annuity payments under such act from taxation.

Section 18 of the Civil Service Retirement Act of May 29, 1930, reads as follows:

None of the moneys mentioned in this Act shall be assignable either in law or equity, or be subject to execution, levy, or attachment, garnishment, or other legal process."

Since the statute contains no specific exemption as regards taxation, the Treasury Department has consistently held

that Federal income-tax laws are applicable to annuities payable thereunder. However, credit is allowed for employees' contributions, and the annuity in a particular case is not subject to being reported for Federal income tax purposes until the annuity actually received exceeds the sum contributed by the individual to the retirement fund. Until this point is reached, the sum contributed by the employee to the fund is looked upon as a consideration or premium for such benefit, and 3 percent of such consideration or premium must be reported as income for the period involved. When the amount of annuity received and excluded from gross income equals the consideration or premium paid therefor, the subsequent annuity is subject to being reported in its entirety for income tax purposes.

The annuity received by a retired employee is subject to the Victory tax in the same manner and to the same extent that it is included for income-tax purposes. An annuity not being “wages” within the meaning of internal revenue laws, no withholding at the source is authorized to cover income tax and Victory tax, but retired employees must file the regular returns prescribed under Treasury Department procedure.

It may be observed that social security payments, railroad retirement annuities, and veterans' pensions are specifically exempted from income tax. It seems to be entirely inconsistent that this exclusion, which covers persons in outside industry as well as veterans, should not be equally applicable to retirement annuities.

The proposal as worded would exempt from taxes any annuity payment made under the act. This, however, would not protect refund and lump-sum death payments made thereunder. The Commission believes that these payments should also be tax-free. This result could be accomplished by inserting the word, “tax" or "taxation”, in the last clause of section 18, hereinbefore quoted, so this section would read:

“None of the moneys mentioned in this Act shall be assignable either in law or equity, or be subject to execution, levy, or attachment, garnishment, taxation, or other legal process.

With the change herein proposed the Commission recommends favorable consideration of this bill.

The Bureau of the Budget advises that the enactment of the proposed legislation, either in its present form or if amended as suggested in this report, should not be considered as being in accord with the program of the President. By direction of the Commission: Very sincerely yours,

HARRY B. MITCHELL, President.

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79TH CONGRESS | HOUSE OF REPRESENTATIVES 1st Session

COMPACT FOR DIVISION OF WATERS OF ARKANSAS

RIVER

FEBRUARY 28, 1945.-Referred to the House Calendar and ordered to be printed

Mr. MURDOCK, from the Committee on Irrigation and Reclamation,

submitted the following

REPORT

(To accompany H. R. 914)

The Committee on Irrigation and Reclamation to whom was referred the bill (H. R. 914) granting the consent of Congress to the States of Colorado and Kansas to negotiate and enter into a compact for the division of the waters of the Arkansas River, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

In that part of our country lying west of the ninety-seventh meridian controversies frequently arise between two or more States over the most beneficial use of the waters of those rivers which cross or form the State boundary lines. The experience of those States throughout the semiarid West where such controversies have arisen has shown that it is most desirable for the States involved in the controversies to get together in a compact whereby agreement is reached concerning the uses of the water. The Constitution of the United States requires the consent of Congress for all such compacts and agreements between States. Congress has heretofore given its consent in several cases similar to the one covered by H. R. 914. The language of the bill is in the customary form, and therefore the Committee on Irrigation and Reclamation report the bill unanimously.

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