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is properly deductible from the income of the foreign corporation.

TAXES. A foreign corporation may deduct taxes paid within the year imposd by the authority of the United States (except income and excess profits taxes) or its territories or possessions or under the authority of any state, county, school district or municipality or other subdivision of any state, paid within the United States, not including those assessed against local benefits. This allowance for taxes is the same as that allowed to domestic corporations and to individuals except that it is expressly limited to cases where the tax is assessed by a governmental authority within the jurisdiction of the United States and the tax paid within the United States. For a general discussion of the extent to which taxes may be deducted see the Chapter on Deduction of Taxes.25

Duty of Foreign Corporations in Paying Out Income. Where a resident alien 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. For a further discussion of this subject see the Chapter on Collection at the Source and the Chapter on Information at the Source. Non-resident alien corporations are under no duty in paying out net income to others whether or not such payees are citizens or residents of this country.

Return of Annual Net Income. Foreign corporations deriving income from sources within this country are required to file a return of annual net income in the same manner as required of domestic corporations, and the Chapter on Corporations should be read in this connection.2

25 See Chapter 30.

26

WHEN FILED. A foreign corporation may file its return for the calendar year, on or before March 1 of the year following, or may duly designate a fiscal year in the manner indicated in the Chapter on Corporations, and file its return within sixty days after the close of such fiscal year. The time for filing returns of foreign corporations may be extended as stated in the chapter containing the general provisions relating to returns.27

WHERE FILED. The return is filed in the case of a foreign corporation in the office of the collector of the district in which is located its principal place of business in the United States, or if it has no principal place of business, office, or agency in the United States, then in the office of the Collector of Internal Revenue at Baltimore, Maryland. Where returns for a foreign corporation are filed by an agent in this country, the place of filing is the office of the collector of the district in which the agent has his place of business or residence.

BY WHOM FILED. The responsibility for filing the return rests in some cases on the agent of the foreign corporation in this country as indicated in the Chapter on Agents for Non-resident Aliens and Foreign Corporations. When the return is filed by the officers of the corporation the agent of the corporation in this country is relieved of responsibility: As to the filing of returns in the case of bankruptcy or dissolution see the Chapter on Corporations. Foreign corporations having several branch offices in the United States should designate one of such branches as the principal office and should also designate the proper officer to make the required return.28 Agents for foreign steamship companies may sign the required returns if so authorized by their companies.

26 See Chapter 12. 27 See Chapter 35.

How PREPARED. The return is prepared in the same manner as returns by domestic corporations except that the statements should relate to income from sources within this country and the deduction should be limited as above indicated. As to the general requirements to be observed in preparing the return see the Chapter on Corporations.

How SIGNED AND SWORN To. In case the return is filed by the home office of the corporation 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 required in the case of domestic corporations. As to the general provisions respecting the oath or affirmation see the Chapter on Reports.29 Where the return is signed by the agent for the corporation, resident in this country, the affidavit on the form should be changed to show that the 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.

Special Returns by Corporations. Resident alien corporations are required to make the same special returns as domestic corporations. 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 within this country.

28 Reg. 33, Art. 83. 29 See Chapter 35.

CHAPTER 15

EXEMPT CORPORATIONS

Section 11 of the 1916 Law expressly exempts fourteen classes of corporations from the tax. The first eight of these classes were exempt under the 1913 Law, the last six classes were added by the 1916 Law. 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. The exemption of the 1916 Law is limited to the tax and to the making of the return of annual net income.1 Exempt corporations are now 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 Corporations exempt under the 1916 Law are also exempt to the same extent under the 1917 Law.

Foreign Corporations. The provisions of Section 11 of the 1916 Law are held to apply to foreign corporations as well as to domestic corporations, except as to building and loan associations and co-operative banks. In case a foreign organization desires to be held exempt from the law, and a doubt exists as to whether or not it comes within the class of organizations enumerated in Section 11, it will be required to file a copy of its

1 Act of September 8, 1916, § 13. 2 T. D. 2407.

F.I. Tax.-13

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