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

4 U. 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.

be made by persons liable to tax,6 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 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

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.

acting firmly and courageously, to avoid all contention or controversy that would give just ground for complaint.10

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

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."

66

12 The last general compilation of rulings on the income tax is known as "Regulations No. 33" issued January 5, 1914.

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.13

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, ¶ 264; also the last paragraph of T. D. 2313 and T. D. 2317.

14 Wilkinson v. Deland, 2 Pet. 627; U. S. v. Union Pacific R. R. Co., 91 U. S. 72.

15 U. S. v. Stowell, 133 U. S. 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.