LETTER OF SUBMITTAL CONGRESS OF THE UNITED STATES, HON. JAMES W. COLLIER, Chairman Joint Committee on Internal Revenue Taxation, Washington, D. C. MY DEAR CHAIRMAN: The Joint Committee on Internal Revenue Taxation, at a meeting held on January 28, 1933, ordered the printing of a codification of the internal revenue laws of a general and permanent character in force on July 16, 1932, as prepared by its staff. This codification, which is submitted herewith, had been substituted for title 26 of the United States Code and, as contained in Supplement VI of that document, is prima facie evidence of the law. It represents exhaustive efforts to furnish the basis for simplification and improvement in classification of the internal revenue laws and it is the intention of the Committee on Revision of the Laws to seek its enactment into absolute law. Supplement VI of the United States Code is exceedingly large, the internal revenue title not being over one-tenth of the size of that supplement. In this document the internal revenue laws are printed separately, in order that they may be available in convenient form to the members of the committee and of the Congress. The codification has been undertaken with the cooperation of the Chairman of the Committee on Revision of the Laws of the House of Representatives and the Treasury Department. Its preparation has consumed a considerable portion of the time of the writer and Mr. L. L. Stratton of the staff. The first edition was published in 1930 and embraced the general and permanent internal revenue laws in force on December 1, 1930. There are approximately 350 statutes relating to internal revenue, and these have been carefully examined in their original form and context to determine whether any were improperly omitted from the United States Code. In a few instances this was found to be the case. The next step consisted in eliminating from the law the obsolete and temporary provisions, of which there were a large number. In this connection, a complete examination was made of court decisions and Treasury rulings, and each provision involved was discussed with the official charged with its administration. The final step was to arrange the code in a way that appeared best adapted to the needs of the practitioner and the layman. There are many laws of a general character which, though relating to internal revenue, also apply to other subjects. To codify such laws under internal revenue, however, would disrupt the entire title structure of the United States Code and render complete codification of Federal law impossible. In only a few instances has any provision been taken from any title of the United States Code other than the internal revenue title. The great value of the United States Code is thus preserved. Moreover, detailed cross references compensate for any deficiency due to such a procedure by acquainting the reader both with the general subject of the provision referred to and its location in the United States Code. A short introduction has been included to explain the method of preparation of the codification, and an appendix containing tables and other data relating to internal revenue has been added. It is hoped that the code will prove immediately useful to the Congress and to those concerned in any way with the internal revenue laws and that it will finally be enacted into absolute law. Very respectfully, Approved: L. H. PARKER, Chief of Staff. COLIN F. STAM, Counsel. V HISTORICAL NOTE The first internal revenue tax law was enacted on March 3, 1791, and imposed a tax on distilled spirits and stills. This was followed by legislation imposing taxes upon carriages, retail dealers in wines and foreign spirituous liquors, snuff, refined sugar, property sold at auction, legal instruments, real estate, and slaves. All of these taxes and the offices created for their enforcement were abolished in 1802. During this first era of taxation the internal revenue receipts amounted to only $6,758,764.26. Comparing this with the receipts for recent years, it will be noted that the Internal Revenue Service collects at the present time on an average more internal revenue taxes in 1 day than the original organization collected in 10 years. Due to the necessities occasioned by the War of 1812, internal revenue taxes were again imposed in 1813. These taxes were levied on refined sugar, carriages, distillers, sales at auction, distilled spirits, manufactured articles, household furniture, watches, gold, silver, plated ware, and jewelry. An officer known as the Commissioner of Revenues was in charge of the administration of such taxes. All these taxes and the office of Commissioner of Revenues were abolished by the end of 1817. The collections during this period amounted to $25,833,449.43. For a period of 44 years, namely, 1817 to 1861, no internal revenue taxes were imposed. On July 6, 1861, an act was passed imposing a tax on incomes and real property. No income tax was ever collected under this act, and all of the tax collected on real property was returned to the States under authority of the act of March 2, 1891. The act of July 1, 1862, is largely the basis of our present system of taxation. It contained the first law under which any income tax was collected, and it created the office of Commissioner of Internal Revenue. It taxed practically everything which Congress thought was susceptible of yielding revenue. The three sources of revenue which remained for a long time the backbone of the internal revenue system, namely, spirits, tobacco, and beer, received particular attention from the lawmakers. The internal revenue laws were first codified in the Revised Statutes of 1873, Title XXXV, which was made absolute law. A perfected edition of the Revised Statutes was prepared in 1878. From 1897 to 1907 a commission was engaged by Congress to codify the Federal laws, but the work was never completed. Subsequently Hon. Edward C. Little, former chairman of the Committee on the Revision of the Laws of the House of Representatives, prepared a codification of Federal laws which was embodied in a bill which passed the House of Representatives but failed of action in the Senate. The United States Code, which has been enacted by Congress as prima facie law, was prepared as a result of the cooperation of the Committee on the Revision of the Laws of the House of Representatives, and the Select Committee of the United States Senate, consisting of Hon. Richard P. Ernst, chairman, Hon. George Wharton Pepper, and Hon. William Cabell Bruce. Under the auspices of the committees of the House and Senate, the actual work of assembling and classifying the mass of material was done by the West Publishing Co. and the Edward Thompson Co. VII INTRODUCTION This Code contains all of the laws of a general and permanent character relating exclusively to internal revenue in force on July 16, 1932. The first edition was published in 1930 and embraced the internal revenue laws in force on December 1, 1930. The codification was prepared with the cooperation of the chairman of the Committee on Revision of the Laws of the House of Representatives and the Treasury Department. It has been substituted for title 26 of the United States Code and is, therefore, prima facie evidence of the law. It is not a mere duplication of old title 26 of the United States Code. In addition to correcting errors and eliminating obsolete matter, it has added certain omitted provisions and finally has completely rearranged the internal revenue provisions in a manner which appears logical and useful. The following should be noted in connection with the general character of this codification: First. It contains all the law of a permanent character relating exclusively to internal revenue in force on July 16, 1932. Second. It makes no changes in existing law and no new law is stated. Third. It makes liberal use of catchwords, headlines, different types, indentations, and other typographical improvements. Fourth. By a system of cross references, it correlates provisions in titles of the United States Code other than "internal revenue" with provisions of this Code. Fifth. It is arranged with the view of giving prominence to matters which concern the ordinary transactions of the ordinary classes of taxpayers. The primary purpose of the undertaking is to produce a code suitable for enactment into absolute law. This code has been substituted for title 26 of the United States Code and, as contained in Supplement VI of that document, is now prima facie law. It should therefore be useful and convenient for those who constantly refer to the internal revenue laws. The preparation of this code began with the collection and examination of all original statutes relating to internal revenue without reference to the United States Code. This procedure allowed an independent check to be made subsequently against that code. The next step was the elimination of obsolete and temporary matter. It should be especially noted in this connection that the codification includes only the permanent law, and omits the many laws of a temporary character which are still applied. The most striking examples of such temporary laws are the income tax provisions of the Revenue Act of 1928 and prior revenue acts. While these provisions remain in force for the purpose of administering the cases pending for the earlier years, they have no place in a permanent code. After the elimination of the opsolete and temporary provisions from the whole body of internal revenue laws, a check was made with the remaining permanent provisions against the United States Code, as previously mentioned. The care used in the preparation of the United States Code and in the present codification gives assurance of the accuracy of the final product. In addition, every provision has been checked by the Treasury Department, and conferences have been had with the proper officials on all doubtful issues. The final step was to arrange the Code in a logical and convenient manner. The title is divided into five subtitles, namely: Subtitle A, Income Tax, Estate Tax, and Board of Tax Appeals; Subtitle B, Miscellaneous Taxes; Subtitle C, General Administrative Provisions; Subtitle D, Personnel; and Subtitle E, the Joint Committee on Internal Revenue Taxation. The purpose of this division is to make the subtitles, as far as possible, complete in themselves. For example, those interested solely in provisions relating to income, estate, or gift taxes need concern themselves only with Subtitles A and C, and thus may avoid confusing themselves with the provisions relating to liquor and other miscellaneous taxes which are collected in Subtitle B. In Subtitle C, all general administrative provisions have been collected. The chapter arrangement is based both upon the importance of the tax from a revenue standpoint and the number of persons affected. The income tax produces more revenue and concerns more people than any other tax, and therefore is made the subject of the opening chapter of the Code. The plan for the arrangement of provisions in the income tax chapter follows the Revenue Act of 1928 and consists of the collection of the provisions under two classifications-general provisions and supplemental provisions. The general provisions are those which apply to the ordinary transactions of the ordinary classes of taxpayers. In the main, the supplemental provisions are those which apply to extraordinary classes of taxpayers or to the extraordinary transactions of the IX |