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At present the Federal Income Tax is imposed under two statutes prescribing separate and different rates, one additional to the other. The Act of Sept. 8, 1916 (referred to in this book as the 1916 Law) imposes a tax at comparatively low rates and with comparatively high exemptions. This Act was amended in many respects by the Act of October 3, 1917, but remains as a separate law imposing a general income tax in contradistinction to the “war income tax” which was also included in the Act of October 3, 1917 (and which is referred to in this book as the 1917 Law.) The 1917 Law contains no administrative provisions, but it provides that the tax it imposes shall be computed, levied, assessed, collected and paid upon the same basis and in the same manner as the similar taxes imposed by the 1916 Law. Generally speaking both laws are adminis

1 The purpose of this chapter is to describe briefly the salient provisions and requirements of the law and the system of administration, so that the reader may obtain a general understanding of the subject before the various provisions are taken up and discussed in detail.


F.I. Tax.-1

tered as one, and only one return of annual net income is required from each taxpayer, on the basis of which both taxes are assessed.?

Preceding Federal Laws. The 1916 Law was preceded by the Act of October 3, 1913, (referred to in this book as the 1913 Law.) This law remained in force without change or amendment up to September 9, 1916, when the 1916 Law went into effect. The 1916 Law contained several important amendments and effected an increase in rates of the normal and supertaxes, but the general provisions of both laws remained very much the same, and rulings and decisions under the 1913 Law are freely referred to in this book as they have direct application to the provisions of the laws now in force. While the 1913 Law was the first general income tax law enacted after the adoption of the Constitutional Amendment permitting the imposition of an income tax without apportionment and without regard to any census or enumeration, there was in effect in this country from August 5, 1909, to January 1, 1913, a corporation excise tax act (referred to in this book as the 1909 Law) which imposed a special excise tax on corporations with respect to the carrying on or doing business by such corporations. Though the 1909 Law was not intended to be and was not in any proper sense an income tax law 3 the tax was

2 The purpose of Congress in enacting a separate "war income tax” law instead of increasing the rates of the 1916 Law, was no doubt to facilitate a return to the lower rates when the present extraordinary demand for revenue has ceased. Thus, the present high rates and low exemptions are superimposed temporarily upon our general low rates and high exemptions, a return to which is made all the more easy by leaving the 1916 Law intact.

3 Justice Pitney in Stratton's Independence Limited v. Howbert, 231 U. S. 399, 34 Sup. Ct. 136, 58 L. Ed. 285.

measured by the net income of corporations and the language of the subsequent income tax laws is in many instances either verbatim or very similar. To that extent decisions and rulings under the 1909 Law throw light on the construction of the present laws and for that purpose are referred to in this book.

Administration of the Laws. The duty of administering the income tax laws and collecting the taxes thereunder is imposed on the Bureau of Internal Revenue, which is a part of the Federal Treasury Department. The bureau is in the charge of the Commissioner of Internal Revenue, who, under the direction of the Secretary of the Treasury, has general superintendence of the assessment and collection of all duties and taxes imposed by any law providing internal revenue. The states and territories are divided into some sixty-four collection districts, each under the charge of a collector of internal revenue, with one or more deputy collectors. Returns of net income are filed with the local collector and the tax is paid to him, although the assessments are made by the Commissioner of Internal Revenue at Washington. Collectors have supervisory power over, and authority to investigate, all accounts, lists or returns required to

4U. S. Rev. Stats., $ 321.

5 As a rule the boundaries of collection districts coincide with the boundaries of the states, but sometimes one collection district embraces two or three states, or one state is divided into two or more collection districts. Districts within a state are designated by number, as the first and sixth districts of California, being the two districts of that state. The lack of sequence in numbering is due to the consolidation of districts from time to time since the period immediately following the Civil War, when the country was divided into the maximum number of districts.

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