it is not paid within ten days after notice and demand therefor.49 If the return is not filed on time, the tax is due immediately upon assessment, and penalties accrue if not paid within ten days after notice and demand. Penalty and interest for delay in payment are added, as in the case of delinquent residents or citizens.50 As to the form in which to make payment see the chapter on assessment and payment of the tax.51

Abatement and Refund of the Tax. If upon the filing of the annual return, it appears that the nonresident alien is liable for less tax than the amount which has been withheld at the source, the Treasury Department will issue instructions to the withholding agents (whose names and addresses should be given by the nonresident alien on his return) to release at once the proper amounts.52 After the tax has been assessed against the withholding agents by the Government, abatement may be claimed, and after the tax has been paid, refund may be claimed, in the manner outlined in a later chapter.53

49 See Chapter 36.

50 Id.

51 Id.

52 Telegram from Treasury Department dated January 25, 1917; I. T. S. 1917, ¶ 1997.

53 See Chapter 39 on Abatement and Refund.

CHAPTER 6

RESIDENT AGENTS FOR NON-RESIDENT ALIENS, FOREIGN CORPORATIONS AND FOREIGN PARTNERSHIPS

As set forth in another chapter 1 the law expressly provides for the collection at the source of the tax on payment of certain specified forms of income to nonresident aliens and non-resident foreign corporations. The persons required to withhold and account for the tax are designated in the regulations as withholding agents. The Treasury Department has, in addition, evolved a method of collecting the tax on income which may pass out of its jurisdiction, by impressing upon residents, under certain circumstances, the duty of filing returns and accounting for the normal tax and the supertax on any and all income of non-resident aliens and nonresident foreign corporations over which they have custody or control.2 Such persons are held to be agents of the non-residents and to stand in the place of their principals.

One who is a withholding agent under the provisions for collecting the tax at the source may, or may not, (depending on the circumstances) also be an agent within the meaning of this chapter. Agents for foreign

1 See Chapter 41 on collection at the source.

2 The Department evidently bases its authority for this on § 9 (g), of the 1916 Law which provides that the tax shall be paid by the owner of the income "or the proper representative having the receipt, custody, control or disposal of the same." T. D. 2452. 3 T. D. 2135.

partnerships are not required to make any returns or pay any tax for the foreign partnership unless and until they are so instructed by the Commissioner of Internal Revenue.4

Definition. In order to simplify the discussion in the following pages of this chapter the term "non-residents' will be used to include non-resident aliens, foreign corporations having no office or place of business in this country, and foreign partnerships having no office or place of business in this country.5

Who are Resident Agents. A resident corporation, partnership or individual, may be an agent within the meaning of this chapter. Any residents acting by power of attorney for non-residents are such agents. Responsible heads or representatives who are in charge of property owned or business carried on by non-residents in this country are such agents. Resident nominal stockholders who hold stock in their names for non-resident actual owners are such agents." Residents having custody of securities of non-residents, on which they collect the income, are agents not only with respect to the income, but also with respect to any profits made from the sale of the securities of which they are custodians, and for the purpose of reporting the latter they are required to obtain all facts necessary to ascertain

4 T. D. 2401. This is because a partnership is not itself subject to a tax or required to make returns. See Chapter 11 on foreign partnerships.

5 For definition of "foreign corporations'' as used in this book see Chapter 14. For definition of foreign partnership as used in this book see Chapter 11.

6 Reg. 33, Art. 8; T. D. 2313.

7 See Chapter 7 on nominal stockholders.

the profit in any transaction.8 Residents, purchasing patent rights from non-residents and paying royalty thereon, are held to be agents. manage buildings owned by agents.10

Real-estate agents who non-residents are such

Who are Not Such Agents. Corporations paying interest on their own bonds, or dividends on their own stock, to non-residents, bondholders or stockholders, are not held to be agents within the meaning of this chapter, although they are withholding agents for the purpose of collection at the source. Resident debtors, individual or partnership, are not held to be agents, but are required to withhold to tax at the source on interest paid to nonresident aliens. Banks are not agents for their nonresident depositors, where the relation is merely that of bank and depositor 11 and the same has been held where a bank received interest and dividends direct from domestic corporations to be credited to the accounts of non-resident depositors.12 A bank holding, for account of foreign banks and bankers, securities on which it collects interest and disburses the same to the foreign banks and bankers, has not been held to be an agent,1 but where a bank acts as custodian of securities for non

13

8 Letter from Treasury Department dated May 31, 1916; I. T. S. 1917, ¶ 86.

9 T. D. 2137.

10 Letter from Treasury Department dated January 19, 1915; I. T. S. 1917, ¶ 80.

11 Banks are not held to be withholding agents with respect to interest paid on deposits. Reg. 33, Art. 67.

12 Letter from Treasury Department dated February 8, 1917; I. T. S. 1917, ¶ 2003.

13 Letter from Treasury Department dated April 10, 1916; 1. T. S. 1917, ¶ 120.

residents other than banks, the rule seems to be that it is an agent.14

Duties and Liabilities of Resident Agents. The duty of a resident agent for a non-resident alien individual or non-resident foreign corporation is to account for all income passing through his hands, in an annual return to the local collector, and to pay all taxes assessed thereon.14a He is under no duty to inquire into or report any income of the non-resident principal received from other sources in this country, but may, if authorized by the non-resident principal, make a complete return of all income from this country. Where the same nonresident has several agents, none of whom is authorized and enabled to make a return of all the principal's income, each agent reports separately the income coming into his hands, and the Treasury Department takes into consideration the aggregate amount of net income, covered by all of the returns, in assessing the tax, giving credit for the amount assessed on each return, and making a further assessment to cover the supertax which may be due on the aggregate income in the case of individuals.15 Of course, if the non-resident principal files a return of all his income from sources within this country, the agents are not also required to file returns. Resident agents should, therefore, ascertain in due time

14 The rulings are not clear or consistent on this point, but it seems that the rulings bear out the conclusions in the text.

14a It is uncertain under the language of the 1917 Law whether or not a resident agent can be required to file a return for a nonresident principal if the amount of income in his custody is less than $1,000 during any year. A ruling on this point will be

necessary.

15 Letter from Treasury Department dated March 6, 1917; I. T. S. 1917, ¶ 2112.