certificates of the owners of coupons. The purpose of making such substitution is to prevent disclosure of the actual owner to the various banks and collecting agents through which the coupon and its accompanying certificate might pass before being finally presented to the paying corporation. When the ownership certificates. were so detached they were required to be forwarded to the Commissioner of Internal Revenue, not later than the 20th day of the month succeeding that in which the coupons were thus received for collection.55 The substitution certificate 56 recited that the bank or collecting agent had detached the ownership certificate from the accompanying coupons, endorsed the same as required by the Treasury regulations, and would forward such certificate to the Commissioner of Internal Revenue at Washington, in accordance with the regulations. The substitute certificate was thereafter handled as the ownership certificate would have been handled, finally being transmitted to the local collector by the paying corporation, and by the local collector transmitted to Washington where the original ownership certificate, theretofore sent to the Commissioner, was finally matched up with the substitute. Banks availing themselves of the privilege of substituting their own certificates were required to keep a complete record of each transaction showing (a) the serial number of item received, (b) date received, (c) name and address of person from whom received, (d) name of debtor corporation, (e) class of bonds from which coupons were cut, (f) face amount of coupons, (g) exemption from tax, if any was claimed by the owner. Such substitute certificates 55 T. D. 1903. 56 Form 1058 was used when exemption was claimed and Form 1059 when exemption was not claimed. were required to be numbered consecutively and corresponding numbers given the original certificate detached from the coupons.57 When the certificate of the owner was removed it was required that an endorsement be made thereon, by the collecting agency removing the same, showing the number of the ownership certificate, the name of the collection agency, the date of the certificate and a statement that "the counterpart of the within certificate was attached to the coupons within mentioned for delivery to the debtor or withholding agent, by whom the coupons are payable."58 Substitute certificates could be signed by a fac-simile rubber stamp providing proper authority was given by the bank or collecting agent to the person using such fac-simile certificate and a notice of such authorization, bearing the real and fac-simile signature of the person so authorized, was duly filed with the Commissioner. The use of substitute certificates has been discontinued as to coupons. presented for collection on behalf of non-resident aliens, corporations and partnerships.59 Release of Amounts Withheld. Where amounts have been withheld by withholding agents in excess of the tax liability of the non-resident alien, such non-resident alien may obtain a release of the excess amounts withheld by following the procedure indicated in the chapter on non-resident aliens.60 Abatement and Refund. Where the withholding agent has reported the amounts withheld to the Govern ment and the tax has been assessed thereon abatement 57 Reg. 33, Art. 40. 58 T. D. 1903. 59 T. D. 2589. 60 See p. 56. may be claimed, in the manner indicated in the chapter on abatement and refund, either by the withholding agent against whom the assessment was made or by the person on account of whom such taxes were withheld.61 If the tax has been paid by the withholding agent refund may be claimed as indicated in the same chapter.62 By Whom the Tax Is Withheld. The tax is withheld by the one paying the income whether the payor be an individual, a partnership, or a corporation. Special rules applying to certain classes of withholding agents are briefly summarized below. BANKS. Banks, bankers and trust companies and other banking institutions receiving deposits of money are not required to withhold the normal tax on interest paid or accruing on such deposits, whether on open accounts or on certificates of deposit; but all such interest whether paid or accrued must be reported by the depositor.63 This ruling applies if the depositor is a nonresident alien or a foreign corporation having no office or place of business in the United States.64 CORPORATIONS. Corporations are required to withhold the tax on payment of any fixed or determinable income to non-resident aliens, on bond interest and dividends paid to foreign corporations not engaged in business or trade in the United States and not having an office or place of business therein, and on payments of interest on bonds containing covenants to pay the tax to any 61 Reg. 33, Art. 33. 62 See pp. 437 and 440. 63 Reg. 33, Art. 67. 64 Letter from Treasury Department dated June 29, 1917, I. T. S. 1917, ¶ 2256. individual bondholders. The amounts to be withheld and the duties with respect thereto are discussed elsewhere in this chapter. DEBTORS. Resident debtors whether individuals, partnerships or corporations, including mortgagors, are required to withhold the tax on all payments of interest to non-resident aliens. EMPLOYERS. Employers are required to withhold the tax on all salaries, wages or compensation paid to nonresident aliens except where the salary of the non-resident alien is not taxable under the law.65 FIDUCIARIES. Trustees, executors, administrators, conservators and other fiduciaries are required to withhold the tax on all payments of fixed or determinable annual or periodic income to non-resident aliens, including beneficiaries of the trust estate in their hands. For discussion of the special duties with respect to beneficiaries see the chapter on fiduciaries.66 LESSORS. Lessors and tenants paying rent to nonresident aliens, or their agents, are required to withhold the tax, as rent is fixed or determinable income within the meaning of the law. In computing the amount to be withheld the lessor should take into consideration such sums, if any, as are paid under the terms of the lease, as taxes, or other disbursements, for the landlord. Thus, if a tenant pays an annual rent of 10,000 in cash and in addition pays taxes of $1,000, the total amount on which 65 See Page 48 for discussion of salaries paid to non-resident aliens. 66 See Chapter 8. withholding should take place is $11,000. While the value of permanent improvements made on the property by the tenant is income to the landlord, no withholding need be made with respect thereto since such income is not fixed or determinable.67 OFFICERS AND EMPLOYEES OF THE UNITED STATES. Officers and employees of the United States are required to withhold the tax on amounts of fixed or determinable income paid to non-resident aliens. Duties of Withholding Agents. If the withholding agent knows that the one to whom he pays fixed or determinable incomes is a person or corporation against whom the tax is required to be withheld, an ownership certificate is not necessarily required from the payee, but the requisite amount is withheld without notice from or to the payee. Where payment is made to persons not known to the payee, as in the case of interest on bearer bonds, an ownership certificate is required from each payee disclosing his or its status and if the payee is one against whom withholding should take place the tax is withheld. If, in such cases, no ownership certificate is presented the payee is not required to make payment until the name and address of the recipient of the income is furnished.68 ON PAYMENT OF REGISTERED INTEREST. Corporations paying interest to registered owners of bonds are not required to obtain certificates of ownership, but will 67 See Page 459. 68 Act of September 8, 1916, § 28 added by Act of October 3, |