returns required to be made by persons liable to tax,8 may examine the books of such taxpayers, and on refusal to allow an examination, may summon such person or corporation to produce the books and to appear before them to give testimony or answer interrogatories under oath respecting the matter. Collectors and the Commissioner may make returns for taxpayers from their own knowledge and from such information as they can obtain through testimony or otherwise in cases where the taxpayer fails to file a return or makes a false or fraudulent return.10 Appeals from decisions of Collectors may be taken to the Commissioner.11

REVENUE AGENTS AND INSPECTORS. The duties of officers of this class are to ascertain and report the names of persons who in their opinion are liable to the income tax and who have failed to make the returns required by law; to inquire into income tax returns where there is any suspicion that the return made is erroneous; to examine the books and accounts of persons who have made returns, for the purpose of ascertaining the reporting as to whether or not the law has been complied with, when so ordered by the agent in charge of the division to which they are assigned, who in turn reports to the Commissioner, and to the collector of the proper district. In the discharge of their official duties officers of this class are expected to exercise sound discretion, treat all persons with due courtesy, and, while acting firmly and courageously, to avoid all contention or controversy that would give just ground for complaint.12

Advisory Tax Board. Because of the large number of difficult cases arising under the Internal Revenue laws by reason of their great scope and the amount of revenue in

8 Rev. Act of 1918, § 1305. See also U. S. v. Hodson, 14 Int. Rev. Rec. 100; 10 Wall 395, 406.

9 U. S. Rev. Stats., § 3173, as amended by Rev. Act of 1918. 10 U. S. Rev. Stats., § 3176, as amended by Rev. Act of 1918. 11 See Chap. 38, infra.

12 T. D. 1932.

volved in their collection, and to assure fair and adequate consideration of every case arising under such laws, an "Advisory Tax Board" has been created by the 1918 Law. The Commissioner may, and on the request of any taxpayer directly interested shall, submit to this Board any question relating to the interpretation or administration of the Internal Revenue laws and the Board reports its findings and recommendations to the Commissioner. The Board shall consist of not more than six members appointed by the Commissioner with the approval of the Secretary, and is to remain in existence until February 24, 1921, unless abolished before that time by the Commissioner with the approval of the Secretary. The Board has the power to summon witnesses, take testimony, administer oaths, and require any person to produce books, papers, documents, or other data relating to any matter under investigation. Any member may sign subpoenas, and members and employees of the Bureau of Internal Revenue designated to assist the Board, when authorized, may administer oaths, examine witnesses, take testimony, and receive evidence.13

Rulings and Regulations. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is expressly authorized to make all needful rules and regulations for the enforcement of the provisions of the law.14 Such rules and regulations are published under the caption of "Treasury Decisions" and are numbered serially for the purpose of reference.15 At intervals large compilations of rulings and regulations are published by the Bureau of Internal Revenue and these are designated as "Regulations" and given a serial number.16 As a gen

13 Rev. Act of 1918, § 1301.

14 Id. § 1309.

15 Treasury decisions contain rulings on all subjects over which the Bureau of Internal Revenue has jurisdiction. Those relating to the income tax are therefore not numbered in sequence. Reference to treasury decisions is usually made by abbreviation, thus T. D. 2476.''

16 The last general compilation of rulings on the income tax is known as Regulations No. 45 Revised, issued February, 1919. All

eral rule, it may be said that these regulations have the force and effect of law and are as binding as if incorporated in the statute.17 But they must be in execution of or supplementary to, and not in conflict with the provisions of the statute pursuant to which they are issued.18 It is also held that they must be reasonable and a regulation defeating the purpose or enlarging the scope of the statute is invalid.19 In determining whether a regulation is consistent with law the courts apply the same rule of decision which controls when an act of Congress is assailed as not being within the powers conferred upon it by the constitution, and it will not be held invalid unless it is plainly and palpably inconsistent with law and entirely inappropriate to the end specified in the Act of Congress.20 The promulgation of a regulation does not estop the Treasury Department from reassessing the tax on a different basis if the courts hold that the regulation was not authorized by the law.21 Regulations are admissible when pertinent to the issues, and as the courts take judicial notice of them as public records, it is unnecessary to introduce them formally in evidence.22 What has been said of regulations applies only to the express terms of the regulation itself regularly promulgated and not to printed headings on a form additional to the express terms.23 In ad

previous rulings and decisions or parts thereof, including Regulations No. 33 issued January 5, 1914, and Regulations No. 33, Revised, issued February 4, 1918, which are in conflict with those contained in this revised compilation are thereby superseded and revoked, but any former rulings, not inconsistent, remain in effect.

17 Ex parte Kollock, 165 U. S. 526; U. S. v. Eaton, 144 U. S. 677; Stegall v. Thurman, 175 Fed. 813.

18 Edwards v. Keith, 231 Fed. 110.

19 Campbell v. U. S., 107 U. S. 410; U. S. v. Two Hundred Barrels of Whiskey, 95 U. S. 571; Morrill v. Jones, 106 U. S. 467; U. S. v. Three Barrels, 77 Fed. 963.

20 Boske v. Comingore, 177 U. S. 459.

21 Goldfield Consolidated Mines Co. v. Scott, 247 U. S. 126.

22 Sprinkle v. U. S., 141 Fed. 811; Caha v. U. S., 152 U. S. 211; Dominici v. U. S., 72 Fed. 46; Wilkins v. U. S., 96 Fed. 837.

23 U. S. v. Lamson, 162 Fed. 165.

dition to the rulings and regulations the Department issues so-called mimeograph letters to collectors, more or less confidential in their character and not intended for general publication. Frequently such letters throw light on the administration of the law and such mimeograph letters as have been made public are referred to in this book. Mimeograph letters are addressed to collectors only and not also to others concerned" as are the official treasury decisions, and do not affect or give notice to taxpayers. Similarly, instructions to a particular collector do not affect collectors as a class.24

RETROACTIVE EFFECT OF RULINGS. Treasury Department decisions promulgating rulings of the Internal Revenue Bureau become effective upon the date of approval unless otherwise stated therein. Cases previously adjusted in contravention of law as pronounced in such decisions, are subject to readjustment in accordance with the decisions.25 Generally speaking any ruling or regulation made by the Treasury Department supersedes all prior rulings and regulations and is retroactive to the time the law was enacted, since a ruling or regulation is merely an interpretation of the meaning of the law, and in theory the meaning has been the same from the beginning. The Treasury Department recognizes, however, that in some instances it would be unjust or impracticable to reopen returns, adjustments or assessments which have been made in accordance with previous rulings, and where such rulings are superseded, an express limitation is made in the superseding ruling or regulation as to the retroactive effect thereof.26

United States. The term "United States" where used in a geographical sense in the law includes only the States,

24 Landram v. U. S., 16 Ct. Cls. 74.

25 Reg. 33 Rev., Art. 38.

26 See last paragraph of mimeograph letter to collectors dated August 14, 1914; I. T. S. 1918, ¶¶ 392 and 1344; also the last paragraph of T. D. 2313 and T. D. 2317.

the Territories of Alaska and Hawaii, and the District of Columbia.27

Possessions of the United States. The Revenue Act of 1918 does not extend to possessions of the United States. An individual who is a citizen of any possession of the United States, and who is not a resident of the United States, is taxable only on income derived from sources in the United States. In such cases the tax is computed and paid in the same manner and subject to the same conditions as in the case of non-resident alien.28

Porto Rico and the Philippines. The Revenue Act of 1918 does not apply to these possessions and the citizens thereof, who are not residents of the United States, are taxable only on income derived from sources within the United States. A local income tax, however, is provided for these possessions by making the Revenue Act of 1916, as amended, apply to them. Returns are required to be made and taxes to be paid to these respective possessions, under Title I of the Revenue Act of 1916, by (1) every individual who is a citizen or resident thereof or derives income from sources therein and (2) every corporation created or organized therein or deriving income from sources therein. An individual who is neither a citizen or resident of Porto Rico or the Philippines, but derives income from sources therein is taxed as a non-resident alien, and a corporation created or organized outside Porto Rico or the Philippines and deriving income from sources therein is taxed as a foreign corporation.29 Under the present law, therefore, a citizen or resident of the United States, and a domestic corporation in the United States, is primarily liable to pay a tax in Porto Rico or the Philippines on income derived therefrom and also to the United States on the same income, but is entitled to deduct the amount of income tax paid to those possessions from the amount

27 Rev. Act of 1918, § 1.

28 Id. § 260.

29 Id. § 261.