POSTAL RATES. nineteen hundred and seventeen, during the existence of the present Additional clerk hire SEC. 1109. That where postmasters at offices of the third class at third class offices it have been since May first, nineteen hundred and seventeen, or here- postmaster in military after are granted leave without pay for military purposes, the Postmaster General may allow, in addition to the maximum amounts which may now be allowed such offices for clerk hire, in accordance with law, an amount not to exceed fifty per centum of the salary of the postmaster. by mail, etc. Vol. 39, p. 1069, Government use, etc., Intoxicating liquors Ethyl alcohol not prohibited. for SEC. 1110. That section five of the Act approved March third, nineteen hundred and seventeen, entitled "An Act making appropriations for the Post Office Department for the year ending June thirtieth, nineteen hundred and eighteen," shall not be construed to apply to ethyl alcohol for governmental, scientific, medicinal, mechanical, manufacturing, and industrial purposes, and the Postmaster General shall prescribe suitable rules and regulations to carry into effect this section in connection with the Act of which it is amendatory, nor shall said section be held to prohibit the use of the mails by regularly ordained ministers of religion, or by officers of regularly established churches, for ordering wines for sacramental uses, or by manufac- Wines for sacramental turers and dealers for quoting and billing such wines for such purposes only. TITLE XII.-INCOME TAX AMENDMENTS. use, allowed. INCOME TAX AMEND MENTS. SEC. 1200. That subdivision (a) of section two of such Act of Sep- Vol. 39, p. 757, amendtember eighth, nineteen hundred and sixteen, is hereby amended to read as follows: "(a) That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income, derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever." ed. Net income defined. Section four of such Act of September eighth, nineteen hundred Vol. 39, p. 758, amendand sixteen, is hereby amended to read as follows: "SEC. 4. The following income shall be exempt from the provisions of this title: Exemptions. Life insurance poli Gifts, etc. Interest on State, "The proceeds of life insurance policies paid to individual bene- cies. ficiaries upon the death of the insured; the amount received by the insured, as a return of premium or premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract; the value of property acquired by gift, bequest, devise, or descent (but the income from such property shall be included as income); interest upon the obligations of a State or Federal, etc., obligaany political subdivision thereof or upon the obligations of the tions. United States (but, in the case of obligations of the United States issued after September first, nineteen hundred and seventeen, only if and to the extent provided in the Act authorizing the issue thereof) or its possessions or securities issued under the provisions of the Federal Farm Loan Act of July seventeenth, nineteen hundred and sixteen; the compensation of the present President of the United States during the term for which he has been elected and the judges of the supreme and inferior courts of the United States now in office, Exception. Vol. 39, p. 360. President during present term. Judges, State cials, etc. offi MENTS. INCOME TAX AMEND and the compensation of all officers and employees of a State, or any political subdivision thereof, except when such compensation is paid by the United States Government." Exception. Deductions allowed citizens or residents. SEC. 1201. (1) That paragraphs second and third of subdivision Vol. 39, p. 759, amend (a) of section five of such Act of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: ed. Interest paid debts. Exception. on General taxes. Income and excess profits excepted. Vol. 39, p. 759, amended. Contributions to religious, charitable, etc., associations. Limit. "Second. All interest paid within the year on his indebtedness except on indebtedness incurred for the purchase of obligations or securities the interest upon which is exempt from taxation as income under this title; "Third. Taxes paid within the year imposed by the authority of the United States (except income and excess profits taxes) or of its Territories, or possessions, or any foreign country, or by the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, not including those assessed against local benefits:" (2) That section five of such Act of September eighth, nineteen hundred and sixteen, is hereby amended by adding at the end of subdivision (a) a further paragraph, numbered nine, to read as follows: "Ninth. Contributions or gifts actually made within the year to corporations or associations organized and operated exclusively for religious, charitable, scientific, or educational purposes, or to societies for the prevention of cruelty to children or animals, no part of the net income of which inures to the benefit of any private stockholder or individual, to an amount not in excess of fifteen per centum of the taxpayer's taxable net income as computed without the benefit of this paragraph. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Commissioner of Internal Revenue, with the approval of the Deductions allowed Secretary of the Treasury." Restriction. nonresident aliens. Vol. 39, p. 760, amended. Share of interest paid on debts. Exception. Condition. General taxes United States. profits excepted. in SEC. 1202. That (1) paragraphs second and third of subdivision (a) of section six of such Act of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: "Second. The proportion of all interest paid within the year by such person on his indebtedness (except on indebtedness incurred for the purchase of obligations or securities the interest upon which is exempt from taxation as income under this title) which the gross amount of his income for the year derived from sources within the United States bears to the gross amount of his income for the year derived from all sources within and without the United States, but this deduction shall be allowed only if such person includes in the return required by section eight all the information necessary for its calculation; "Third. Taxes paid within the year imposed by the authority of Income and excess the United States (except income and excess profits taxes), or of its Territories, or possessions, or by the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, paid within the United States, not including those assessed against local benefits;" New provision. Vol. 39, p. 761, amended. Complete returns of total United States income required. (2) Section six of such Act of September eighth, nineteen hundred and sixteen, is also further amended by adding a new subdivision to read as follows: "(c) A nonresident alien individual shall receive the benefit of the deductions and credits provided for in this section only by filing or causing to be filed with the collector of internal revenue a true and accurate return of his total income, received from all sources, corporate or otherwise, in the United States, in the manner prescribed by this title; and in case of his failure to file such return the collector Tax, etc., in case of shall collect the tax on such income, and all property belonging to such nonresident alien individual shall be liable to distraint for the tax." failure. MENTS. INCOME TAX AMEND- Vol. 39, p. 761, mal tax of $3,000 for Deductions for nor Additional $1,000 if Provisos. Allowance for minor SEC. 1203. (1) That section seven of such Act of September eighth, nineteen hundred and sixteen, is hereby amended to read as follows: "SEC. 7. That for the purpose of the normal tax only, there shall be amended. allowed as an exemption in the nature of a deduction from the amount of the net income of each citizen or resident of the United States, ascertained as provided herein, the sum of $3,000, plus $1,000 additional if the person making the return be a head of a family or a married man with a wife living with him, or plus the sum of $1,000 additional if the person making the return be a married woman with a husband living with her; but in no event shall this additional exemption of $1,000 be deducted by both a husband and a wife: Provided, That only one deduction of $4,000 shall be made from the aggregate income of both husband and wife when living together: Provided further, That if the person making the return is the head of a or dependent children. family there shall be an additional exemption of $200 for each child dependent upon such person, if under eighteen years of age, or if incapable of self-support because mentally or physically defective, but this provision shall operate only in the case of one parent in the same family: Provided further, That guardians or trustees shall be tees. allowed to make this personal exemption as to income derived from the property of which such guardian or trustee has charge in favor of each ward or cestui que trust: Provided further, That in no event shall a ward or cestui que trust be allowed a greater personal exemption than as provided in this section, from the amount of net income received from all sources. There shall also be allowed an exemption ministration. from the amount of the net income of estates of deceased citizens or residents of the United States during the period of administration or settlement, and of trust or other estates of citizens or residents of the United States the income of which is not distributed annually or regularly under the provisions of subdivision (b) of section two, the sum of $3,000, including such deductions as are allowed under section five." Guardians Restriction. or trus Trust estates. Allowance to nonresiVol 39, p. 761, repealed. (2) Subdivision (b) of section seven of such Act of September dent alien repealed. eighth, nineteen hundred and sixteen, is hereby repealed. SEC. 1204. (1) That subdivisions (c) and (e) of section eight of Returns to be made. such Act of September eighth, nineteen hundred and sixteen, are amended. hereby amended to read as follows: Vol. 39, p. 762, Guardians and other Affidavits required. "(c) Guardians, trustees, executors, administrators, receivers, con- fiduciaries. servators, and all persons, corporations, or associations, acting in any fiduciary capacity, shall make and render a return of the income of the person, trust, or estate for whom or which they act, and be subject to all the provisions of this title which apply to individuals. Such fiduciary shall make oath that he has sufficient knowledge of the affairs of such person, trust, or estate to enable him to make such return and that the same is, to the best of his knowledge and belief, true and correct, and be subject to all the provisions of this title which apply to individuals: Provided, That a return made by one of Joint fiduciaries. two or more joint fiduciaries filed in the district where such fiduciary resides, under such regulations as the Secretary of the Treasury may prescribe, shall be a sufficient compliance with the requirements of Provisos. Incomes not over this paragraph: Provided further, That no return of income not ex- $3,000 excepted. ceeding $3,000 shall be required except as in this title otherwise provided. Partnerships. "(e) Persons carrying on business in partnership shall be liable for Individual liability income tax only in their individual capacity, and the share of the only. profits of the partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxation and the tax paid under the provisions of this title: Provided, That from the net distributive interests on which the individual members shall be liable for tax, normal and additional, there shall be excluded their proportionate shares received from Provisos. Deductions allowed members. MENTS. dividends, etc. Vol. 39, p. 759. Returns required. Exception. INCOME TAX AMEND- interest on the obligations of a State or any political or taxing subdivision thereof, and upon the obligations of the United States (if and to the extent that it is provided in the Act authorizing the issue of such obligations of the United States that they are exempt from taxation), Credits for tax-paid and its possessions, and that for the purpose of computing the normal tax there shall be allowed a credit, as provided by section five, subdivision (b), for their proportionate share of the profits derived from dividends. Such partnership, when requested by the Commissioner of Internal Revenue or any district collector, shall render a correct return of the earnings, profits, and income of the partnership, except income exempt under section four of this Act, setting forth the item of the gross income and the deductions and credits allowed by this title, and the names and addresses of the individuals who would be Fiscal year returns. entitled to the net earnings, profits, and income, if distributed. A partnership shall have the same privilege of fixing and making returns upon the basis of its own fiscal year as is accorded to corporations Tax at rate for year in under this title. If a fiscal year ends during nineteen hundred and sixteen or a subsequent calendar year for which there is a rate of tax different from the rate for the preceding calendar year, then (1) the rate for such preceding calendar year shall apply to an amount of each partner's share of such partnership profits equal to the proportion which the part of such fiscal year falling within such calendar year bears to the full fiscal year, and (2) the rate for the calendar year during which such fiscal year ends shall apply to the remainder. (2) Subdivision (d) of section eight of such Act of September Vol. 39, p. 762, re- eighth, nineteen hundred and sixteen, is hereby repealed. which earned. Deduction of tax by corporations, repealed. pealed. Assessment and administration. Withholding normal tax on nonresidents at source of income. Vol. 39, p. amended. 763, Tax-paid dividends excepted. SEC. 1205. (1) That subdivisions (b), (c), (f), and (g) of section nine of such Act of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: "(b) All persons, corporations, partnerships, associations, and insurance companies, in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, receivers, conservators, employers, and all officers and employees of the United States, having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodical gains, profits, and income of any nonresident alien individual, other than income derived from dividends on capital stock, or from the net earnings of a corporation, joint-stock company or association, or insurance company, which is taxable upon its net income as provided in this title, are hereby authorized and required to deduct and withhold from such annual or periodical gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this title, and shall make return thereof on or before March first of each year and, on or before the time fixed by law for the payment of the tax, shall pay the amount withheld to the officer of the United Indemnity for paying States Government authorized to receive the same; and they are each hereby made personally liable for such tax, and they are each hereby indemnified against every person, corporation, partnership, association, or insurance company, or demand whatsoever for all payments which they shall make in pursuance and by virtue of this title. at source. Tax to be withheld etc. "(c) The amount of the normal tax hereinbefore imposed shall from interest on bonds, also be deducted and withheld from fixed or determinable annual or periodical gains, profits and income derived from interest upon bonds and mortgages, or deeds of trust or other similar obligations of corporations, joint-stock companies, associations, and insurance companies, (if such bonds, mortgages, or other obligations contain a contract or provision by which the obligor agrees to pay any portion Conditions. Unless MENTS. exemption of the tax imposed by this title upon the obligee or to reimburse the INCOME TAX AMENdobligee for any portion of the tax or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon or to retain therefrom under any law of the United States) whether payable annually or at shorter or longer periods and whether such interest is payable to a non-resident alien individual or to an individual citizen or resident of the United States, subject to the provisions of the foregoing subdivision (b) of this section requiring the tax to be withheld at the source and deducted from annual income and returned and paid to the Government, unless the notice filed. person entitled to receive such interest shall file with the withholding Ante, p. 331. agent, on or before February first, a signed notice in writing claiming the benefit of an exemption under section seven of this Title. “(f) All persons, corporations, partnerships, or associations, under- foreign coupons, etc. taking as a matter of business or for profit the collection of foreign payments of interest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner of Internal Revenue, and shall be subject to such regulations enabling the Government to obtain the information required under this title, as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe; and whoever knowingly lecting without license, undertakes to collect such payments as aforesaid without having etc. obtained a license therefor, or without complying with such regulations, shall be deemed guilty of a misdemeanor and for each offense be fined in a sum not exceeding $5,000, or imprisoned for a term not exceeding one year, or both, in the discretion of the court. Licenses for collecting Vol. 39, p. amended. 765, Punishment for col Personal returns of other incomes. Vol. 39, p. 765. No taxable liability (g) The tax herein imposed upon gains, profits, and incomes not falling under the foregoing and not returned and paid by virtue of the foregoing or as otherwise provided by law shall be assessed by personal return under rules and regulations to be prescribed by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. The intent and purpose of this title is that all of owner released. gains, profits, and income of a taxable class, as defined by this title, shall be charged and assessed with the corresponding tax, normal and additional, prescribed by this title, and said tax shall be paid by the owner of such income, or the proper representative having the receipt, custody, control, or disposal of the same. For the pur- mined. pose of this title ownership or liability shall be determined as of the year for which a return is required to be rendered. "The provisions of this section, except subdivision (c), relating to ducting tax at source. the deduction and payment of the tax at the source of income shall only apply to the normal tax herein before imposed upon nonresident alien individuals." Ownership deter Restriction de Other provisions re Vol. 39, pp. 764, 765. (2) Subdivisions (d) and (e) of section nine of such Act of Sep- pealed. tember eighth, nineteen hundred and sixteen, are hereby repealed. SEC. 1206. (1) That the first paragraph of section ten of such Act of September eighth, nineteen hundred and sixteen, is hereby amended amended. to read as follows: Normal tax on net incomes. Foreign, from United "SEC. 10. (a) That there shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding Domestic. calendar year from all sources by every corporation, joint-stock company or association, or insurance company, organized in the United States, no matter how created or organized, but not including partnerships, a tax of two per centum upon such income; and States sources. a like tax shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from all sources within the United States by every corporation, joint-stock company or association, or insurance company, organized, authorized, or existing under the laws of any foreign country, including interest on bonds, notes, or other interest-bearing obligations of |