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be made by persons liable to tax, may send agents to 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 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.8 Appeals may be taken from decisions of Collectors to the Commissioner of Internal Revenue.9
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 return as 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 and reporting as to whether the law has been complied with, when so ordered by the agent in charge of the division to which they are assigned. Reports of these officers are made to the agent in charge of the division to which they are assigned who in turn reports to the Commissioner of Internal Revenue and 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.10
6 U. S. v. Hodson, 14 Int. Rev. Rec. 100. 7 U. S. Rev. Stats., § 3173. 8 U. S. Rev. Stats., $ 3176. 9 See Chap. 39, infra.
Rulings and Regulations. For the guidance of collectors and taxpayers the Commissioner of Internal Revenue issues from time to time rulings and regulations on questions which arise in the course of administering the law. They are published under the caption of "Treasury Decisions” and are numbered serially for purpose of reference.11 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 12 In addition 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.
RETROACTIVE EFFECT OF RULINGS. 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.18
10 T. D. 1932.
11 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 employing the abbreviation, thus, “T. D. 2476."
12 The last general compilation of rulings on the income tax is known as “Regulations No. 33" issued January 5, 1914.
Construction of the Law. A statute may be construed contrary to its literal meaning when a literal construction would result in an absurdity or inconsistency, and the words are susceptible of another construction which carries out the manifest intention, but it is a well settled rule of interpretation that a legislative act is to be interpreted according to the intention of the legislature apparent upon its face, 14 and consequently the statements made in debate at the time of the passage of the law have no particular value in construing the act. Revenue laws are not, like penal laws, to be construed strictly in favor of the defendants. They are rather to be regarded as remedial in their character and so construed as to carry out the intention of the legislature in passing them.15 As a general rule, the construction by the Treasury Department is such as is most favorable to the enforcement of the laws and no liberal interpretation in favor of the individual is indulged in.16 The courts construe such statutes with reasonable fairness to
13 See last paragraph of mimeograph letter to collectors dated August 14, 1914; I T S 1917, 9 264; also the 'ast paragraph of T. D. 2313 and T. D. 2317.
14 Wilkinson v. Deland, 2 Pet. 627; U. 8. v. Union Pacific R. R. Co., 91 U. S. 72.
16 U. S. v. Stowell, 133 U. 8. 1. 16 18 Op. Atty. Gen. 246.
the citizen, 17 an unjust or absurd construction is avoided 18 and laws of doubtful or double meaning are not too harshly construed. Courts are not at liberty, by construction or legal fiction to include subjects of taxation not within the terms of the law, and duties are never imposed on citizens upon vague or doubtful interpretation.19 Courts do not extend the provisions of taxing statutes, by implication, beyond the clear import of the language used, or enlarge their operations to embrace matters not specifically pointed out. In case of doubt the statute is construed most strongly against the Government, and in favor of the citizen. 19a Where the language is dubious and open to different interpretations the construction put upon it by the Treasury Department has a great, and generally a controlling, force with the court, but in order to be binding such construction of the Department must be long continued and unbroken, and the rule has no application where the statute is ambiguous, or where it will not bear the interpretation put upon it by the administrative officers.20
Porto Rico and the Philippines. In Porto Rico and the Philippine Islands the law is administered and the
17 U. S. v. Distilled Spirits, 10 Blatch. 428. 18 In re. Chapman, 166 U. S. 661.
19 Hartranft v. Weigmann, 121 U. S. 609, Mutual Benefit Insurance Company v. Herold, 198 Fed. 199.
19a United States v. Wigglesworth, 2 Story 369; American Net and Twine Co. v. Worthington, 141 U. S. 468; Benziger v. United States, 192 U. S. 38; Gould v. Gould, No. 41, Oct. Term, 1917, U. S. Supreme Court—not yet officially reported.
20 St. Paul, etc., Railway Co. v. Phelps, 137 U. S. 528; Merritt v. Cameron, 137 U. S. 542; U. S. v. Hill, 120 U. S. 169; Swift Company v. U. S., 105 U. S. 691; U. S. v. Graham, 110 U. S. 219; U. S. v. Tanner, 147 U. S. 661; U. S. v. Alger, 152 U. S. tax is collected by the appropriate internal revenue officers of those governments, and the tax so collected accrues intact to the general governments thereof respectively.21 This does not mean, however, that a separate tax is imposed on income arising in those jurisdictions. If a taxpayer is required under the law to make his return in a collection district located in any state or territory, he pays his tax there on income from all sources, including Porto Rico and the Philippines, and pays no tax in any other district or jurisdiction.22 The 1917 Law does not extend to Porto Rico and the Philippines, and the legislatures thereof are given power, under the 1917 Law, as amended, to alter, amend or repeal the income tax laws within their respective jurisdictions 28
Virgin Islands. The income tax laws have not expressly been made applicable to the islands recently acquired from Denmark. The words "United States' are defined in the 1916 Law to include any Territory, the District of Columbia, Porto Rico, and the Philippine Islands.24 Hence, the status of residents of our new possessions is uncertain under the present statutes, as is also the status of residents in other possessions not enumerated in the above definition.25
21 Act of September 8, 1916, § 23.
23 Act of October 3, 1917, Title I, $ 5. Since this power exists it is no longer safe to assume that the laws in those possessions are identical with the federal law.
24 Id., $ 15.
26 It seems the inhabitants of those possessions are "non-resident aliens” within the meaning of the term as used in the 1916 Law. See Sec. 1 (a) and Sec. 15.