notes and other obligations calculated or intended to circulate or to be used as money, but not including that in the vault of the bank, or redeemed and on deposit for said bank; and an additional tax of onesixth of one per centum each month upon the average amount of such circulation, issued as aforesaid, beyond the amount of ninety per centum of the capital of any such bank, association, corporation, company, or person.

In the case of banks with branches, the tax herein provided shall be assessed upon the circulation of each branch severally, and the amount of capital of each branch shall be considered to be the amount allotted to it.

(c) Treasury Decisions. T. D. 199, August 15, 1900: Bank checks when used in circulation as money are taxable under section 1900 (a), I. R. C.

NOTE: This use of checks is a criminal offense.

§ 160.2 Tax on notes used in circulation. (a) Section 1900 (b) (1), I. R. C., provides:

Every person, firm, association other than national bank associations, and every corporation, State bank, or State banking association shall pay a tax of 10 per centum on the amount of their own notes used for circulation and paid out by them.

(b) Section 1900 (b) (2), I. R. C., provides:

Every such person, firm, association, corporation, State bank, or State banking association, and also every national banking association, shall pay a like tax of 10 per centum on the amount of notes of any person, firm, association other than a national banking association, or of any corporation, State bank, or State banking association, or of any town, city, or municipal corporation, used for circulation and paid out by them.

(c) The tax upon notes used for circulation is limited to obligations payable in money and does not affect those payable in anything else than money. Hollister v. Zion's Cooperative Mercantile Insurance Company, 111 U. S. 62.

§ 160.3 Digest of Treasury Decisions. (a) T. D. 181, July 23, 1900: Canadian bank notes or other than national bank notes used for circulation in the United States are required to pay the 10 percent tax provided in section 1900 (b) (2), I. R. C.

(b) T. D. 242, November 9, 1900: A bank does not become subject to such tax of 10 percent for merely receiving on deposit Canadian bank notes that had been used for circulation. It is only when it pays out in the United States

these notes that it is required to pay the tax.

(c) See, also, T. D. 257, December 14, 1900, relative to Mexican bank notes deposited but not paid out.1

(d) T. D. 885, April 5, 1905. Certified checks; circulation: Certified checks of State banks are not notes within the meaning of section 1900 (b), I. R. C., imposing tax of 10 percent on circulation.

(e) T. D. 1041, September 24, 1906, Circulation; 10 percent tax: The tax of 10 percent under section 1900 (b) (2), I. R. C., is not required to be paid on notes of foreign banks and corporations, whether bought in foreign countries or in the United States, which are sold to tourists or others leaving the United States for foreign countries, and have not been used in this country for circulation in lieu of the money or currency of the United States.

(f) T. D. 1271, November 14, 1907. Tax on notés used for circulation: The 10 percent tax is not required on account of the issue of clearinghouse certificates. Notes used as circulating medium are liable.

§ 160.4 Estimate by Commissioner; penalties. (a) Section 1900 (a) (1) and (2), I. R. C., provides that:

(a) Circulation Outstanding.—

(1) Time for Making Return.-A true and complete return of the monthly amount of circulation as aforesaid for the previous six months shall be made and rendered in duplicate on the 1st day of December, and the 1st day of June, by each of such banks, associations, corporations, companies, or persons, with a declaration annexed thereto, under the oath of such person, or of the president or cashier of such bank, association, corporation, or company, in such form and manner as may be prescribed by the Commissioner, that the same contains a true and faithful statement of the amounts subject to tax, as aforesaid; and

(2) To Whom Return Made.-One copy shall be transmitted to the collector of the district in which any such bank, association, corporation, or company is situated, or in which such person has his place of business, and one copy to the Commissioner.

(b) Section 1903, I. R. C., provides that, in default of the returns provided

1 Banks in the United States receiving on deposit and paying out Mexican bank notes which have not been, nor are at any time, used for circulation in the United States, are not required to pay a tax of 10 percent thereon under section 20, act of February 8, 1875.

in section 1902, the amount of circulation and notes shall be estimated by the Commissioner of Internal Revenue upon the best information he can obtain; section 1904, I. R. C., provides that for any refusal or neglect to make return and payment, any such bank, association, corporation, company, or person so in default shall pay a penalty of two hundred dollars, besides the additional penalty and forfeitures provided in other

cases.

§ 160.5 Instructions. (a) Section 1902 (a) (3), I. R. C., provides that:

The taxes provided in section 1900 (a), I. R. C., shall be paid semiannually, on the first day of January and the first day of July; but the same shall be calculated at the rate per month as prescribed by said section, so that the tax for six months shall not be less than the aggregate would be if such taxes were collected monthly.

(b) Section 1902 (b), I. R. C., provides, as to the 10 percent tax on notes used for circulation and paid out:

The amount of circulating notes referred to in section 1900 (b), and of the tax due thereon, shall be returned, and the tax paid at the same time, and in the same manner, and with like penalties for failure to return and pay the same, as provided by law for the return and payment of taxes on circulation, imposed by subsection (a) of that section.

(c) The return must be made in duplicate, by the president or cashier, member of firm or banker, on the 1st day of June and the 1st day of December.

(d) The return must be sworn to before the collector or a deputy collector of the district in which the bank or banker is located, or before an officer with a seal, duly authorized to administer oaths.

(e) One copy of the return will be delivered to the collector, or his deputy, and one mailed to the Commissioner of Internal Revenue.

(f) The particulars relating to each subject of taxation must be stated for each month, opposite the name of that month.

(g) If there is nothing to report, the officer must indicate the fact by writing "0" in the proper place.

(h) If the person, firm, or corporation making the return commences or discontinues business during the period covered by the return, the date of such commencement or discontinuance must be stated in red ink across the face of the return.

(i) The first return will include the month in which business is commenced, and the last return will include the month in which business is discontinued. Liability continues as long as any business described in section 1905, I. R. C., is done. If the discontinuance in the case of a bank is in consequence of its insolvency or bankruptcy, and it is claimed that the collection of the tax shown to be due by the return will diminish the assets of the bank necessary for the full payment of all its depositors, the return should be accompanied by a sworn statement of the president, cashier, receiver, or assignee as to its assets and liabilities, in such form or manner as will clearly show what portion of the tax, if any, could be paid without diminishing the assets necessary for the full payment of the depositors.

(j) Taxable circulation is defined in section 1900 (a), I. R. C. The tax imposed on circulation by said section is a monthly tax on the average amount, ascertained from daily balances.

(k) The classes of notes subject to the tax of 10 percent, when paid out, are described in section 1900 (b) (1) and, (2), I. R. C. The tax upon notes used for circulation is limited to obligations payable in money.

(1) The exemption of 5 percent under section 1901 (a), I. R. C., is an exemption from the tax on circulation imposed by section 1900 (a), I. R. C., but under no circumstances is it an exemption from the tax imposed by section 1900 (b) (1) and (2), I. R. C.