cided, nothwithstanding that a claim for abatement has been filed.27b Penalty for Divulging Information. The penalty in the case of any collector, deputy collector, agent, clerk or other officer or employee of the United States who divulges information in his possession and acquired in the performance of his duties, is treated elsewhere in this book.28 Statute of Limitations. The Revised Statutes provide that no suit or prosecution for any penalty or forfeiture, pecuniary or otherwise, accruing under the laws of the United States, shall be maintained, except in cases where it is otherwise specially provided, unless the same is commenced within five years from the time when the penalty or forfeiture accrued. The statute does not run, however, if the person liable for the penalty is not to be found within the United States so that proper process may be instituted and served against him.29 The period of limitation applies whether the action is in personam or in rem.3 30 The courts have no power to engraft any exception on this statute in cases of concealed fraud which is not discovered until after the expiration of five years.30a The States cannot pass any statute of limitations which will bind the Federal Government, or which will furnish the rules for determining whether an action is brought in time, except as Congress has clearly manifested its intention that the United States shall be so bound.30b Compromise of Penalties. The Commissioner, with the advice and consent of the Secretary, may compromise any civil or criminal case arising under the internal revenue 27b Revenue Act of 1918, § 250 (d). See Chapter 35 on Assessment and Payment of the Tax. 28 R. S., § 3167, as amended by Revenue Act of 1918. See Chapter 34 on Returns. 29 R. S., § 1047. 30 Hatch v. The Boston, 3 Fed. 807, 810. 30a U. S. v. Maillard, 26 Fed. Cas. No. 15,709. 30b Arnson v. Murphy, 109 U. S. 238; U. S. v. Nashville Rd. Co., 118 U. S. 125. laws instead of commencing suit thereon; and, with the advice and consent of the said Secretary, and the recommendation of the Attorney General, he may compromise any case after a suit thereon has been commenced. Whenever a compromise is made in any case the opinion of the Solicitor of Internal Revenue or of the officer acting as such, with his reasons therefor, with a statement of the amount of tax assessed, the amount of additional tax or penalty imposed by law in consequence of the neglect or delinquency of the person against whom the tax is assessed, and the amount actually paid in accordance with the terms of the compromise, must be placed on file in the office of the Commissioner.31 The Commissioner has under this section no power to compromise a suit against the government,32 the power being limited to suits which the government may prosecute. A compromise operates for the protection of the offender against subsequent proceedings as fully as a formal conviction or acquittal, and is a bar to further action.33 Where an action is brought by the United States against a delinquent taxpayer, for having failed to file a return, the verdict must specifically state the amount of the penalty, after which the only remedy of the defendant (other than an appeal) is to apply for a compromise.34 Offers in compromise should include payments of cost.3 35 The amount of the offer should be deposited with the Commissioner, but cannot be held or set off against the tax due.36 Refunds cannot be made of offers in compromise where it is subsequently ascertained that no violation of law was involved.3 36a 31 R. S., § 3229; See § 3469, as to compromise of cases after judg ment. 32 23 Op. Atty. Gen. 507. 33 U. S. v. Chouteau, 102 U. S. 603. 34 U. S. v. Acorn Roofing Co., 204 Fed. 157. 35 T. D. 642, March 20, 1903. 36 Boughton v. U. S., 12 Ct. Cls. 330. 36a Reg. 45, Art. 1011. SPECIFIC PENALTIES. While the sections of the Revised Statutes relating to compromise 37 do not in express language refer to the compromise of the specific penalty for failure to file the return, neither are they restricted in terms, nor by any reason of public policy, to penalties for the non-payment of taxes. In the opinion of the Attorney General the application of these sections to the compromise of penalties for failure to file returns in time is proper, and, further, in such compromises the Commissioner is authorized to consider not only the pecuniary interests of the Treasury, but also general considerations of justice, equity and public policy.38 TWENTY-FIVE PER CENT. INCREASE OF TAX. A penalty (50%) corresponding to the penalty of 25% increase in tax for failure to file returns is found in practically all revenue laws relating to special taxes, and the uniform construction has been that no administrative officer is clothed with authority to compromise such increase in tax.39 The income tax law is explicit and mandatory in its provisions relative to the additional assessment of 25% of the tax otherwise due, in case of failure to file a return of income within the prescribed time except when a return is filed after such time and it is shown that the failure was due to reasonable cause and not to wilful neglect, and does not give discretionary authority for remission of these additional taxes to any officer of the government.40 Since the corresponding 50% penalty was not subject to compromise under the general revenue laws, Congress passed an act providing particularly for the refund of such additional taxes, assessed under the 1909 Law, for neglect to file returns,41 but no such statute has been passed with respect to penalties incurred under the 1913, 1916, or 1918 laws. 37 R. S., §§ 3229 and 3469. 38 29 Op. Atty. Gen. 217. 39 T. D. 1701. 40 T. D. 2135. 41 Act of March 3, 1913. Offers in Compromise. It has been the practice of the Treasury Department to accept, as a minimum offer, $5 from individuals and withholding agents, and $10 from corporations, in compromise of the specific penalty incurred for failure to file returns, in cases where the neglect was not intentional.42 Offers in compromise do not receive favorable consideration in cases where returns for the year in question have not been filed, but such offers are accepted "subject to the filing of the return." 43 No particular form is prescribed for use in making offers in compromise of the specific penalties, and such offer may be made in the form of a letter addressed to the local collector. Each offer in compromise should be accompanied by an affidavit in which the proponent should state briefly the facts which caused the delinquency. Where affidavits allege facts that no delinquency was incurred or recite circumstances which warrant relief from the specific penalty, the offer is returned, unless there are facts in the possession of the collector at variance with the contentions made by the proponents. All delinquents who do not compromise their liabilities to the specific penalty, after ample opportunity, are reported to the United States District Attorney for proceedings. It is the duty of every District Attorney to prosecute every case for the collection of a fine, penalty or forfeiture reported to him by any collector, unless, upon inquiry and examination, he decides that such proceedings cannot properly be sustained, or that the needs of public justice do not require that such proceedings be instituted; in which case he reports the facts to the Commissioner for his direction.4 45 Under the 1864 Law as amended in 1870 only one penalty was permitted to be recovered for all failures to make a return prior to the commencement of the action for the collection of a penalty.46 42 T. D. 2311; T. D. 2349. 43 T. D. 2311. 44 T. D. 2311. 45 R. S., § 838. 46 U. S. v. Brooklyn etc. Ry. Co., 14 Fed. 284; U. S. v. N. Y. Guaranty Co., 8 Ben. 269. CHAPTER 37 EXAMINATION OF TAXPAYERS' BOOKS The Revenue Act of 1918 and the Revised Statutes contain certain provisions for the examination of taxpayers' books by revenue agents or inspectors, the attendance of witnesses before the Commissioner and the production of books in suits or proceedings arising under the revenue laws which are set forth in the following paragraphs. Examination of Books. For the purpose of ascertaining the correctness of any return or making a return where none has been made, the Commissioner may, by any revenue agent or inspector designated by him for that purpose, examine any books, papers, records or memoranda bearing upon the matters required to be included in the return.1 Requiring Attendance of Witnesses. For the purpose stated in the previous paragraph the Commissioner of Internal Revenue may require the attendance of the person rendering a return or of any officer or employee of such person or the attendance of any other person having knowledge in the premises 2 and may take his testimony with 1 Revenue Act of 1918, § 1305. In relation to the income tax this provision seems to supplant R. S., § 3173, which as amended, omits the second case "in case of income tax on or before the first day of March in each year, or on or before the last day of the sixty day period next following the closing date of the fiscal year for which it makes a return of its income" and also omits the phrase "amount of annual income charged with a duty or tax." 2 The italicized words would seem to have been inserted to avoid the effect of such decisions as In re Chadwick, 5 Fed. Cas. No. 2,570, 11 Int. Rev. Rec. 126, 133, which held under a similar statute that the books which the assessor has the right to examine are those of the person whose assessment is in question and not those of |