provements or betterments made to increase the value of any property or estate or in restoring property or making good the exhaustion thereof for which allowance is or has been made. Foreign corporations are also not permitted to deduct any amount paid in premiums on any life insurance policy covering the life of any officer or employee or of any person financially interested in the trade or business carried on by the corporation, when it is directly or indirectly a beneficiary under such policy.57 This subject is more fully discussed in another chapter.

Credits. In addition to the above mentioned deductions foreign corporations are allowed the same credits as are allowed to domestic corporations, except the specific credit of $2,000 which is allowed only to domestic corporations.58 These credits are more fully discussed in another chapter.59

Returns. Every foreign corporation receiving income from sources within this country is required to make a return stating specifically the items of its gross income and the deductions and credits to which it may be entitled.60

WHEN FILED. The return of a foreign corporation, like that of a domestic corporation or individual, is filed on or before the 15th day of March, or the 15th day of the third month following the close of the fiscal year of the corporation, accordingly as the corporation reports on the basis of the calendar or a fiscal year. 61

WHERE FILED. The return of a foreign corporation should be made to the collector of the district in which is located the principal place of business or principal office or agency of the corporation, or if it has no principal

57 Revenue Act of 1918, §§ 235 and 215. See Page 435.

58 Revenue Act of 1918, § 236.

59 See Chapter 12 on Corporations.

60 Revenue Act of 1918, § 239. Reg. 45, Art. 625. Form 1120 is used.

61 Revenue Act of 1918, §§ 241 (a) and 227 (a).

place of business or principal office or agency in the United States, then to the collector at Baltimore, Maryland.62

BY WHOM FILED. The responsibility for filing the return of a foreign corporation rests in some cases on the agent of the foreign corporation in the United States,63 as indicated in another chapter.64 When the return is filed by the officers of the foreign corporation, the agent of the corporation in this country is relieved of the responsibility. A foreign corporation having several branch offices in the United States States was required, under the 1916 Law, to designate one of such branches as the principal office and to designate the proper officer to make the required return." Agents for foreign steamship companies may sign the required returns if so authorized by their companies. The subject of filing returns in the case of bankruptcy or dissolution is treated in another chapter.66

65

HOW PREPARED. The return of a foreign corporation is prepared in the same manner as the return of a domestic corporation, except that the statements contained therein should relate to income from sources within this country and the deductions should be limited as above indicated.67

HOW SIGNED AND SWORN TO. In case the return of a foreign corporation is filed by the home office, it should be sworn to by the president, vice president or other principal officer and by the treasurer or assistant treasurer, and be verified in the same manner as is required in the case of domestic corporations.68 In case the return is signed by the agent for the corporation resident in this country, the affidavit on the form should be changed to

62 Revenue Act of 1918, § 241 (b).

63 Revenue Act of 1918, § 239. Reg. 45, Art. 625.

64 See Chapter 6.

65 Reg. 33, Art. 83.

66 See Chapter 12 on Corporations.

67 See Page 221.

68 Revenue Act of 1918, § 239. As to the general provisions respecting the oath or affirmation, see Chapter 34 on returns.

show that report is made by such agent, and covers all the income coming into his hands or all the income of the corporation from sources within the United States, as the case may be.

Consolidated Returns. The Revenue Act of 1918 contains a new provision requiring the filing of consolidated returns by affiliated corporations, but this provision does not apply to foreign corporations.69

Special Returns. Resident foreign corporations are required to make the same special returns for the purpose of information at the source as are required of domestic corporations.70 Non-resident alien corporations are not required to make special returns by any express provision of the law, but may be called upon under general provisions of the law for information respecting their income from sources in this country.

Duty of Foreign Corporations in Paying Out Income. Where a resident foreign corporation pays out income to others subject to the tax, it is subject to all the duties and responsibilities imposed upon domestic corporations as to withholding the tax at the source or reporting the names of the persons to whom such income is paid.71 Non-resident foreign corporations are under no duty in paying out income to others, whether or not such payees are citizens or residents of this country.

Collection of Foreign Items. Resident foreign corporations undertaking as a matter of business or for profit the collection of foreign items are required to obtain a license in the same manner as domestic corporations.72

Penalties. Foreign corporations or their officers or employees are subject in certain cases to penalties, both specific and ad valorem, for failing or refusing to make

69 See Chapter 12 on Corporations.

70 Revenue Act of 1918, §§ 254, 255 and 256.

71 Revenue Act of 1918, §§ 221, 237 and 256. For a further discussion of this subject see Chapter 40 on Collection of the Tax at the Source and Chapter 39 on Information at the Source.

72 Revenue Act of 1918, § 259. See Chapter 12 on Corporations.

returns, supply information, pay or collect any tax or for wilfully attempting in any manner to defeat or evade the income tax. Such penalties are more particularly discussed in another chapter.73

73 See Chapter 36 on Penalties and Compromises.

CHAPTER 15

EXEMPT ORGANIZATIONS

The Revenue Act of 1918, with the exceptions noted below, exempts the same classes of corporations as the 1916 Law, and it is probable that most of the extant rulings under the 1916 and earlier laws will be continued in force and applied under the new law. Section 231 of the 1918 Law expressly exempts fourteen classes of organizations from taxation. The first eight of these classes were exempt under the 1913 Law; the next five classes were added by the 1916 Law. The 1918 Law discontinues the exemption granted by the 1916 Law to joint-stock land banks and adds an exemption in favor of personal-service corporations. Corporations exempt under the 1916 Law were also exempt to the same extent under the 1917 Law.1 Exempt corporations under the 1913 Law were exempt from all provisions of the law, and it was held that this included exemption from the duty of acting as withholding agent, but under the 1916 Law and the present law such corporations are required to withhold the tax at the source, and to report payments of income to others, in the same manner as is required of taxable corporations.3 Exemptions are of two kinds, (1) conditional and (2) unconditional. When the exemption of a corporation is unconditional, and the col

1 Reg. 33 Rev., Art. 68.

2 The 1913 Law provided that "nothing in this section" should apply to the corporations enumerated as exempt; the 1916 Law: there shall not be taxed under this title any income received by" such exempt corporations; the 1918 Law: "the following organizations shall be exempt from taxation under this title."

3 T. D. 2693; T. D. 2407; Reg. 33 Rev., Art. 81.