experience of most European countries which have used liberalized depreciation as an investment stimulus throughout the post-World War II peiod also supports this view.81

Treasury expects, therefore, that the ADR system will provide a stimulus to modernization and expansion of productive facilities in the United States. This in turn will increase employment and encourage a higher rate of economic activity. ADR will result in greater productivity, thus providing a basis for higher wage levels for U.S. workers in the future, reducing inflationary pressures with consequent benefits to consumers, and making U.S. industry generally more competitive in world markets.

These general effects may be evaluated with reference to the revenue loss from adoption of ADR and the "feedback" effects on the economy. Without giving effect to any such feedback, the ADR system is estimated to result in a revenue loss of $2.8 billion for the calendar year 1971; the average revenue loss before feedback over the 10 year period ending December 31, 1980, will be $3.9 billion per year. The estimated 1971 pre-feedback loss constitutes 5.8 percent of business tax liabilities, which may be compared to a revenue increase of 11 percent estimated for the 1934 administrative action of the Treasury Department and a revenue loss of 5.5 percent estimated for the 1962 Guidelines. In this latter connection, it should be noted that prior to the 1962 depreciation revision, President Kennedy indicated that revenue considerations in the context of then-present budget considerations were the only limit on liberalizing depreciation allowances.82

81 Report of the President's Task Force on Business Taxation at 10 (Sept. 1970).

82 In this regard President Kennedy stated:

"I recognize that many of you would like, as I would, to have far more rapid depreciation schedules. I can assure you that we are limited only by the fact, which you must recognize, that these depreciation changes will, in their early years, mean a loss of governmental revenues. If we wish to bring out budget as closely as possible to balance as far as the economy permits, we do not feel able to relinquish at this time these sources of revenue in toto. But

These estimated revenue losses represent the amounts which would result from adoption of the ADR system if the basic levels of investment and income remain unchanged. However, as previously indicated, there will be favorable changes in investment and income from adoption of ADR, and the net revenue impact must be evaluated in the light of these feedback effects. Such effects were recognized by President Kennedy when the 1962 action was taken.83 President Nixon has anticipated similar benefits to the economy from the adoption of ADR.84

Estimates of the feedback effect as a result of adoption of the ADR system vary among economists. Some experts hold the view that there will be no revenue feedback from the ADR_system.85 One economists has calculated that the revenue feedback will be sufficient to ensure that the net result of the ADR system will be a net revenue gain by 1973, growing to about $2 billion in 1974.86 The response of investment levels to improved after tax rates of return is certainly not clear;

we should look ahead to the maximum extent possible, as we have already done in textiles, and as we are now examining in steel, and we are quite conscious of the competitive advantages which rapid depreciation gives to the Western European manufacturers. We are looking ahead now to make these depreciation schedules more realistic."

Address by the President before the United States Chamber of Commerce, April 30, 1962 Public Papers of the President (1962) 345, 347.

See text at page 507, supra. 84 When he announced the ADR proposal, President Nixon stated:

"I want to emphasize that these short-run revenue reductions announced today are not so large as to prevent us from maintaining balance, now and in fiscal year 1972, between budget spending and the revenues that would be generated in a full employment economy. Most importantly, they can be expected to have a substantial "feedback" effect. Past experience demonstrates that depreciation liberalization will stimulate the pace of spending on new plant and equipment, which has been levelling off, and thus create jobs. As a result, Federal tax collections in the long run will increase. The estimates of revenue loss may, therefore, be regarded as maximum estimates." Statement of the President, January 11, 1971, at 1-2.

85

See, e.g., ADR Hearings at 158-59, 161 (testimony of Robert Eisner).

ADR Hearings at 173 (testimony of Dale W. Jorgenson).

estimates in economic literature vary from an estimate that the 4.4 percent reduction in capital cost will in the long run increase investment by 4.4 percent, to an estimate that the increase will be only 1 percent.

Treasury studies suggest that as a result of its effects on capital cost alone, ADR will increase investment at least 2.5 percent above the amount that otherwise would be invested in qualified property.

Thus, in the several years immediately after adoption of ADR, the Treasury estimate suggests that business would want a capital stock of qualified property which is 2.5 percent higher. This means that not only would new investment be higher by this amount, but also there would be some catching up because in the light of the current capital cost, the existing stock of equipment should be too low. A rough estimate of this catching up process would suggest that over the first several years after adoption of ADR new investment will be higher by about 5 percent of what otherwise would have been invested in qualified property.

Without adoption of ADR, investment in qualified property would be about $80 billion a year. The analysis above suggests an increase in investment of about $4 billion a year. This will be lower in the first year and higher in the second, third, and following years. "Multiplier" effects representing the increased income and spending generated by an initial impulse of expenditure might well build the aggregate levels of response to higher figures.

As previously indicated, the foregoing analysis is entirely in terms of increased investment levels resulting from an increased after tax rate of return. There are related considerations, however, which also have a bearing on investment levels and which will be affected by ADR. ADR serves to increase cash flow or liquidity, providing an internal source of capital funds and thereby reducing dependence on borrowing. To the extent that investment is deterred by reluctance to borrow, or by capital market imperfections, ADR will raise investment levels.

The availability of shorter tax lives, the increased business certainty that specified tax lives once adopted may be used without reversal, and the assurances of stability in the determination of tax liabilities from other features of the ADR system-the treatment of repair and maintenance expenditures, salvage value, and retirements-all contribute in some measure to the stimulative effect in the investment equation.

ADR is being adopted at an appropriate time; sufficient supply resources exist and an accommodating monetary policy is in effect. Thus, the increased investment will be converted to increased GNP, increased employment, and higher tax revenues. The result of ADR in hastening the return to full employment will be that in this process, annual tax liabilities will rise because of the higher GNP (multiplier effects). While it is true that almost any tax cut undertaken in a period of unemployment will generate some feedback effects, the ADR change is unique in that: (1) it will generate immediate demands for particular resources--those engaged in producing capital goods that would otherwise not be utilized; and (2) it will provide additional machinery and equipment which will increase productivity and efficiency.

Questions have been raised whether the adoption of ADR at this time will have any effect in view of the fact that we are going through an economic readjustment and excess capacity already exists. It has been suggested that businesses have all the capital they need for the present condition of markets. This criticism does not stand up under analysis.

Much of the suggested excess capacity represents overage, obsolete facilities in the United States. This kind of "excess" capacity does not impede new investment if funds are available and if the after tax rate of return on such investment is improved. More importantly, surveys of business plans for investment in plant and equipment, taken before the ADR announcement, indicated that businessmen already considered about $83 billion of invest

ment to afford sufficiently good profit prospects to be worth undertaking. Clearly, there is implicit in this figure a number of projects which, prior to the adoption of ADR, were just below the margin of profitability. The increased rate of return implicit in the introduction of ADR will convert nearly profitable projects into profitable ones. It is the exploitation of these previously near-profitable projects which most clearly serves to raise investment expenditures.

If depreciation is be liberalized, the best time to do it is in a period of some economic slack, when resources are available to meet the increased investment demand. Increased investment in modern plant and equipment will, once new facilities are in operation, increase productivity and reduce inflationary pressures. This time is especially propitious for the introduction of the ADR system. Unemployment is still substantial; inflationary pressure has been reduced; and any additional spending generated by the ADR system will speed economic growth.

Conditions in the capit goods industries are especially favorable. Spending for capital goods has slowed greatly, and the industry is characterized by unemployed resources. The machine tool industry is operating at particularly low rates. Thus, as business firms proceed to increase their capital stock, there will be no need to bid resources away from other uses; the capital goods industry will be able to supply the additional capital required by reemploying currently unused resources. As a consequence, employment in the capital goods industry is likely to be affected directly, quickly, and favorably.

Moreover, the rate at which new inventive ideas and technological advances are put in use depends in part on the stimuli of producers' demands for better, more efficient machinery. ADR, in stimulating investment, will speed the process by which the newest technology is incorporated into productive facilities. This means both a more modern and efficient capital stock and a healthier state of the "technology" industries, which thrive on

vigorous, competitive capital goods markets.

In the long run, the increased stock of business capital associated with more equipment investment increases productivity and GNP. The essence of the long run adjustment is "capital deepening investment"-an increase in the ratio of capital to output-which is the key to higher productivity, greater output per capita, and higher living standards.

The modern economy depends heavily on an expansion of its productive facilities for continuing healthy economic growth. To achieve real growth as distinguished from mere replacement of plant and equipment, expenditures on new plant and equipment must exceed the erosion, attrition, and obsolescence of the existing stock of productive facilities. It is only the net excess of the gross investment over the wear and tear and deterioration that constitutes net accretion to our business capital stock. ADR will serve to increase the extent of this net accretion.

With a growing population and heavier demands on our output to deal with the variety of problems related to the environment, housing, health, and the quality of our national life in general, we need continuing growth in our productive capacity.87 Liberalized de

See statement of Paul W. McCracken, Chairman of the President's Council of Economic Advisers, January 11, 1971, where Mr. McCracken stated:

"It seems to me. the major significance of these moves is to be found in the fact that in the short run they will increase both the means and the incentives for capital expenditures of businesses. They will mean roughly a percentage point increase in rate of return although that will vary, depending on the situation, and of course the cash flow itself will thus be augmented.

"I think for the longer run, however, this change may have even greater significance. What these are going to do is to make for a more competitive and resilient and productive economy. They will increase the equilibrium amount of investment which it is appropriate for any company to make, thereby enhancing the productivity of labor and other productive resources. This is going to be very important in the period ahead, both because of the heavy demands on our productive facilities-they are going to be coming with new uses such as environment and so forth-but also because of the importance of our maintaining and strengthening our competitive position in the international markets."

preciation to encourage and stimulate investment is clearly consistent with present economic goals.88 Removal of present unrealistic restraints on capital investment, and investment of a greater portion of our current resources in productive capacity for the future, will be of longrun and lasting benefit to the United States.

CONCLUSION

The Treasury Department expects the promulgation of the ADR system to produce the following results:

The uncertainty and complexity of the application of the depreciation provisions of the Internal Revenue Code will be significantly reduced and substantial administrative benefits will be achieved;

The establishment of the Office of Industrial Economics in conjunction with the ADR system will, for the first time, permit useful lives for each asset class to be as current and as accurate a reflection of a "reasonable allowance" as possible, based upon a broad spectrum of up-to-date information reflecting both the trend of past experience and what may be anticipated for the shortrun future;

Increased investment resulting from. ADR will produce economic growth which will increase our Gross National Product and reduce unemployment;

Additional investment in more modern productive equipment stimulated by ADR will increase productivity and dampen inflation; and

The competitive position of American producers in world markets will be greatly strengthened.

Delegation Order No. 5 (Rev. 6) (Effective October 8, 1971)

Emergency Order of Succession and Delegation of Authority

1. By virtue of the authority vested in me by Treasury Department Order No. 129, Revision No. 2, dated April 22, 1955, the officials in the positions listed below are hereby author

See statement of the President, Janu

ary 11, 1971.

ized, in the event of an enemy attack on the United States, and the disability of the Commissioner, his absence from the main Treasury Relocation Site, or if there is a vacancy in the office, to succeed to the position of Acting Commissioner in the order listed, and are authorized to perform the functions of Commissioner to insure the continuity of the functions of that office:

Deputy Commissioner

Assistant Commissioner (Compliance) Assistant Commissioner (Technical) Assistant Commissioner (Accounts,

Collection, and Taxpayer Service) Assistant Commissioner (Inspection) Assistant Commissioner (Planning and Research)

Assistant Commissioner (Administration)

2. If none of these officials is available, the first available Regional Commissioner, in the order of appointment as Regional Commissioner, will become Acting Commissioner. Should any of the officials specified in Paragraphs 1 and 2 be required to act as Secretary of the Treasury under Treasury Order No. 183, as revised, he will be considered as not available to assume the position of Acting Commissioner.

3. If none of the officials listed in Paragraphs 1 and 2 is available, the first available District Director in the order shown on the list on file at each National Office Relocation Site (prepared on the basis of the higher GS grades first, date of promotion to the grade and alphabetical order where grade and promotion dates are identical) will assume the position of Acting Commissioner until relieved or further instructions are given by proper authority.

4. There is hereby delegated to Regional Commissioners and District Directors, or the officials acting in their stead, in the event of an enemy attack on the United States, all authority vested in the Commissioner of Internal Revenue by law or transfer from the Secretary of the Treasury to insure the continuous performance of Internal Revenue Service functions in their areas of jurisdiction. This delegation of authority will remain in effect until

notice is received from proper authority that it has been terminated.

5. This order supersedes Delegation Order No. 5 (Rev. 5), issued July 31, 1964 [C.B. 1964–2, 902].

JOHNNIE M. WALTERS,
Commissioner.

(Filed by the Office of the Federal Register on October 13, 1971, 8:47 a.m., and published in the issue of the Federal Register for October 14, 1971, 36 F.R. 19983)

Delegation Order No. 31 (Rev. 3)
(Effective September 10, 1971)
Administration and Enforcement of
Laws Relating to Distilled Spirits,
Wines, Beer, Tobacco, Firearms and
Explosives

1. (a) Pursuant to the authority vested in the Commissioner of Internal Revenue by the regulations in Title 26 of the Code of Federal Regulations implementing chapters 51, 52, and 53 of the Internal Revenue Code and by Treasury Department Order No. 150-37, dated March 17, 1955, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce chapters 51, 52, and 53 of the Internal Revenue Code relating, respectively, to distilled spirits, wines, and beer, tobacco, and firearms, including the authority to supervise and regulate the liquor and tobacco industries, and the determination of appeals in administrative proceedings involving the denial of applications for industrial alcohol and tobacco permits. and the annulment, revocation, and suspension of such permits.

(b) Pursuant to the authority vested in the Commissioner by Treasury Department Order No. 30, dated June 12, 1940, and No. 150-2, dated May 15, 1952, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce the Federal Alcohol Administration Act (27 U.S.C. chapter 8), including the authority to accept or reject offers in compromise

submitted pursuant to such Act, and the determination of appeals in administrative proceedings involving the denial of applications for beverage permits and the annulment, revocation, and suspension of such permits.

(c) Pursuant to the authority vested in the Commissioner by 26 CFR Part 178, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco. and Firearms Division, the authority to administer and enforce 18 U.S.C. chapter 44, relating to firearms and including the determination of appeals in administrative proceedings involv ing the denial of applications for firearms licenses and the revocation of such licenses; and Title VII of the Omnibus Crime Control and Safe Streets Act of 1968 (18 U.S.C. Appendix) [P.L. 90-351, C.B. 1968-2, 711], as amended, relating to unlawful possession or receipt of firearms.

(d) Pursuant to the authority vested in the Commissioner by Treasury Decision 4662, dated July 3, 1936 [C.B. XV-2, 527], and Treasury Department Order No. 150-2 dated May 15, 1952, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce 18 U.S.C. 1262-1265, 3615, relating to the liquor traffic.

(e) Pursuant to the authority vested in the Commissioner by Treasury Department Order No. 149, dated March 5, 1952, and No. 150-2, dated May 15, 1952, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to remit or mitigate forfeitures of

(i) personal property seized as subject to administrative forfeiture under internal revenue laws, and

(ii) vessels, vehicles, or aircraft seized as subject to administrative forfeiture under the customs laws for transporting or concealment therein in violation of the Act of August 9, 1939

(49 U.S.C. chapter 11), of firearms. in respect of which there have been violations of chapter 53 of the Internal Revenue Code.

(f) Pursuant to the authority vested in the Commissioner by Treasury Department Order No. 150-45 (Rev. No. 2) [C.B. 1970-2, 645], dated October 15, 1970, and 26 CFR Part 181, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce 18 U.S.C. chapter 40, relating to explosives and including the determination of appeals in administrative proceedings involving the denial of applications for explosive licenses and permits and the revocation of such licenses and permits.

Delegation Order No. 31 (Rev. 4) (Effective November 19, 1971) Administration and Enforcement of Laws Relating to Distilled Spirits, Wines, Beer, Tobacco, Firearms and Explosives

1. (a) Pursuant to the authority vested in the Commissioner of Internal Revenue by the regulations in Title 26 of the Code of Federal Regulations implementing chapters 51, 52, and 53 of the Internal Revenue Code and by Treasury Department Order No. 15037, dated March 17, 1955, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce chapters 51, 52, and 53 of the Internal Revenue Code relating, respectively, to distilled spirits, wines, and beer, tobacco, and firearms, in

disabilities filed under 18 U.S.C. 925(c) or 18 U.S.C. 845 (b), there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to take final action on such applications.

2. The authorities delegated under paragraph 1 (a)-(f) hereof may be redelegated but not below the position of Assistant Director (Criminal Enforcement), except that specified routine actions required in processing documents involving firearms actions may be further redelegated to the Chief, Firearms

and Explosives Branch (Criminal Enforcement) and to coordinators in that Section.

regulate the liquor and tobacco industries, and the determination of appeals in administrative proceedings involving the denial of applications for industrial alcohol and tobacco permits and the annulment, revocation, and suspension of such permits.

(b) Pursuant to the authority vested in the Commissioner by Treasury Department Order No. 30, dated June 12, 1940, and No. 150-2, dated May 15, 1952, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce the Federal Alcohol Administration Act (27 U.S.C. chapter 8), including the authority to accept or reject offers in compromise submitted pursuant to such Act, and the determination of appeals in administrative proceedings involving the denial of applications for beverage permits and the annulment, revocation, and suspension of such permits.

(c) Pursuant to the authority vested in the Commissioner by 26 CFR Part 178, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce 18 U.S.C.

chapter 44, relating to firearms and including the determination of appeals in administrative proceedings involving the denial of applications for firearms licenses and the revocation of such licenses; and Title VII of the Omnibus Crime Control and Safe Streets Act of 1968 (18 U.S.C. Appendix) [P.L. 90-351, C.B. 1968-2, 711], as amended, relating to unlawful possession or receipt of firearms; and pursuant to the authority so vested by 26 CFR Part 180, authority is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce section 414 of the Mutual Security Act of 1954, as amended (22 U.S.C. 1934), relating to the control of the importation of arms, ammunition and implements of war.

(d) Pursuant to the authority vested in the Commissioner by Treasury Decision 4662, dated July 3, 1936 [C.B. XV-2, 527], and Treasury Department Order No. 150-2, dated May 15, 1952, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce 18 U.S.C. 12621265, 3615, relating to the liquor traffic.

(e) Pursuant to the authority vested in the Commissioner by Treasury Department Order No. 149, dated March 5, 1952, and No. 150-2, dated May 15, 1952, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to remit or mitigate forfeitures of

(i) personal property seized as subject to administrative forfeiture under internal revenue laws, and

(ii) vessels, vehicles, or aircraft seized as subject to administrative forfeiture under the customs laws for transporting or concealment therein in violation of the Act of August 9, 1939 (49 U.S.C. chapter 11), of firearms in respect of which there have been violations of chapter 53 of the Internal Revenue Code.

(f) Pursuant to the authority vested

in the Commissioner by Treasury Department Order No. 150-45 (Rev. No. 2) [C.B. 1970-2, 645], dated October 15, 1970, and 26 CFR Part 181, there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to administer and enforce 18 U.S.C. chapter 40, relating to explosives and including the determination of appeals in administrative proceedings involving the denial of applications for explosive licenses and permits and the revocation of such licenses and permits.

(g) Pursuant to the authority vested in the Commissioner by 26 CFR Parts 178 and 181, relating to applications for relief from firearms or explosives disabilities filed under 18 U.S.C. 925 (c) or 18 U.S.C. 845 (b), there is hereby delegated to the Assistant Commissioner (Compliance) and the Director, Alcohol, Tobacco and Firearms Division, the authority to take final action on such applications.

2. The authorities delegated under paragraph 1(a)-(f) hereof may be redelegated but not below the position redelegated but not below the position of Assistant Director, except that specified routine actions required in processing documents involving firearms actions maybe further redelegated to the Chief, Firearms and Explosives Branch, and to coordinators in that Branch.

3. The authority delegated under paragraph 1(g) may not be redelegated.

4. This order supersedes Delegation Order No. 31 (Rev. 3) issued September 10, 1971 [page 524, this Bulletin]. JOHNNIE M. WALTERS,

Commissioner.

(Filed by the Office of the Federal Register on November 24, 1971, 8:51 a.m., and published in the issue of the Federal Register for November 25, 1971, 36 F.R. 22607)

Delegation Order No. 67 (Rev. 8)

(Effective June 23, 1971) Signing the Commissioner's Name or on His Behalf

Effective as of 12:01 a.m., June 23, 1971, all outstanding authorizations to

sign the name of, or on behalf of, Randolph W. Thrower, Commissioner of Internal Revenue, are hereby amended to authorize the signing of the name of, or on behalf of, Harold T. Swartz, Acting Commissioner of Internal Revenue.

This Order supersedes Delegation Order No. 67 (Rev. 7), [C.B. 1969– 1, 380] issued April 1, 1969.

HAROLD T. SWARTZ,

Acting Commissioner.

(Filed by the Office of the Federal Register on June 28, 1971, 8:48 a.m., and published in the issue of the Federal Register for June 29, 1971, 36 F.R. 12244)

Delegation Order No. 67 (Rev. 9) (Effective August 6, 1971) Signing the Commissioner's Name or on His Behalf

Effective as of 10:00 A.M. EDT, August 6, 1971, all outstanding authorizations to sign the name of, or on behalf of, Harold T. Swartz, Acting Commissioner of Internal Revenue, are hereby amended to authorize the signing of the name of, or on behalf of, Johnnie M. Walters, Commissioner of Internal Revenue.

This Order supersedes Delegation Order No. 67 (Rev. 8) issued June 23, 1971 [above, this Bulletin].

JOHNNIE M. Walters,
Commissioner.

(Filed by the Office of the Federal Register on August 12, 1971, 8:46 a.m., and published in the issue of the Federal Register for August 13, 1971, 36 F.R. 15133)

Delegation Order No. 116 (Effective August 6, 1971)

Delegation of Authority to Grant Extensions of Time to File Estate Tax Returns

Pursuant to the authority vested in the Commissioner of Internal Revenue by 26 CFR 20.6081-1 and 26 CFR 301.7701-9, it is hereby ordered:

1. District Directors, Assistant District Directors, the Director of International Operations, the Assistant Director of International Operations, Service Center Directors and Assistant