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FEDERAL INCOME TAX

CHAPTER I

INTRODUCTION 1

At present the Federal Income Tax is imposed under two statutes prescribing separate and different rates, one additional to the other. The Act of Sept. 8, 1916 (referred to in this book as the 1916 Law) imposes a tax at comparatively low rates and with comparatively high exemptions. This Act was amended in many respects by the Act of October 3, 1917, but remains as a separate law imposing a general income tax in contradistinction to the war income tax” which was also included in the Act of October 3, 1917 (and which is referred to in this book as the 1917 Law.) The 1917 Law contains no administrative provisions, but it provides that the tax it imposes shall be computed, levied, assessed, collected and paid upon the same basis and in the same manner as the similar taxes imposed by the 1916 Law. Generally speaking both laws are adminis

1 The purpose of this chapter is to describe briefly the salient provisions and requirements of the law and the system of administration, so that the reader may obtain a general understanding of the subject before the various provisions are taken up and discussed in detail.

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tered as one, and only one return of annual net income is required from each taxpayer, on the basis of which both taxes are assessed.2

Preceding Federal Laws. The 1916 Law was preceded by the Act of October 3, 1913, (referred to in this book as the 1913 Law.) This law remained in force without change or amendment up to September 9, 1916, when the 1916 Law went into effect. The 1916 Law contained several important amendments and effected an increase in rates of the normal and supertaxes, but the general provisions of both laws remained very much the same, and rulings and decisions under the 1913 Law are freely referred to in this book as they have direct application to the provisions of the laws now in force. While the 1913 Law was the first general income tax law enacted after the adoption of the Constitutional Amendment permitting the imposition of an income tax without apportionment and without regard to any census or enumeration, there was in effect in this country from August 5, 1909, to January 1, 1913, a corporation excise tax act (referred to in this book as the 1909 Law) which imposed a special excise tax on corporations with respect to the carrying on or doing business by such corporations. Though the 1909 Law was not intended to be and was not in any proper sense an income tax law 3 the tax was

2 The purpose of Congress in enacting a separate “war income tax” law instead of increasing the rates of the 1916 Law, was no doubt to facilitate a return to the lower rates when the present extraordinary demand for revenue has ceased. Thus, the present high rates and low exemptions are superimposed temporarily upon our general low rates and high exemptions, a return to which is made all the more easy by leaving the 1916 Law intact.

3 Justice Pitney in Stratton's Independence Limited v. Howbert, 231 U. S. 399, 34 Sup. Ct. 136, 58 L. Ed. 285.

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