jurisdiction of the Railroad Retirement Board. Specifically, it could be provided in that legislation that both railroad wages and wages earned under oldage and survivors insurance would be taken into account in computing survivors' benefit amounts (at the desired formula) but that any benefits payable to the survivors under old-age and survivors insurance would be deducted from the amounts payable under the railroad legislation. Under a plan of this sort the only obligation of the Social Security Board would be to furnish necessary information to the Railroad Retirement Board. The complete duty of administering the special provisions relating to railroad employees would be assigned to the Railroad Retirement Board.

Major technical points

If survivors' benefits for railroad employees should be provided in a manner substantially in accordance with the provisions of S. 293, then a number of major technical points concerning these provisions may be made.

1. Definition of "a current connection with the railroad industry.”—The definition of the term, "a current connection with the railroad industry," is of particular importance to the old-age and survivors insurance system. In general, as indicated, if the deceased individual had had such a connection, any old-age and survivors insurance benefits otherwise payable would not be paid. However, under the bill, determinations as to whether or not the deceased individual had had a current connection with the railroad industry would be made by the Railroad Retirement Board.

In theory, then, no social-security survivors' benefit award could be made until after a ruling by the Railroad Board that a current railroad connection did not exist. As a practical matter, though, the Social Security Board would no doubt make awards in cases where it seemed clear that there was no current railroad connection. Only cases where some recent railroad employment was involved, or where for some other reason doubt existed, would be forwarded to the Railroad Board for a determination on the point. If a current connection was found, that Board would retain the case and adjudicate the claim. Otherwise, the case would be returned to the Social Security Board for the adjudication to be completed.

From the foregoing, it can be seen that adjudication would be very awkward in those cases where it appeared that current connection with the railroad industry might exist. For this reason, it seems important that the definition of the term be as clear-cut and definite as possible. The definition contained in S. 293, however, is quite vague, particularly because of obscurity as to what "30 consecutive calendar months" must include 12 calendar months of service as a railroad employee, and as to what constitutes "regular employment other than employment for an employer." There have been consultations between members of the staff of the Social Security Board and Mr. Latimer looking toward a simplification of the definition. For technical reasons, it was agreed that the test should be 18 months of service out of thirty-six consecutive months, rather than 12 months out of 30, as the bill provides, if the proviso were added that, in cases where the individual had not had a current connection with the railroad industry on this basis, he would nevertheless be deemed to have had such a current connection if he had been paid more wages under the railroad legislation than under the Social Security Act. This proviso would be more satisfactory to us than that proposed in the bill.

2. Retroactive features.-Some consideration should be given to the retroactive features concerning survivors benefits. Under the bill the survivors of individuals who died before 1946 could receive benefits beginning January 1946 if the deceased had had a current railroad connection, and the benefits would be based on the combined wages he had received under the two programs. In some cases of this sort the survivors would previously have been receiving social security benefits, which would have to be terminated when the larger railroad benefits became payable. However, if the deceased had not had a current railroad connection, the only benefits payable are those which the survivors may be eligible for under the existing old-age and survivors insurance legislation. These benefits would not be recomputed to take account of railroad wages.

It seems somewhat anomalous that in these cases of death prior to 1946 wages under both programs would be taken into account if a current railroad connection had existed while only social-security wages would be taken into account if such a. connection had not existed. Either wage credits under the two systems should not be combined for deaths occurring prior to the effective date of the act or all survivor benefits should be recomputed to take account of railroad wages. The Social Security Board favors the latter solution.

3. Amendments to the Social Security Act. Since S. 293 would effect substantial changes in the Social Security Act, it would be desirable that the bill be so revised as to amend the Social Security Act expressly rather than by implication.

At the present time, title II of the Social Security Act is a substantially complete and self-contained statement of the rights of claimants to old-age and survivors insurance. Without changing the text of that title, S. 293 would nevertheless increase in some cases the benefit rights conferred by it and would deny benefits under it in other cases. This would mean that claimants, as well as the personnel of the Social Security Board, would have to refer to two inconsistent statutes to determine what rights were provided. The Social Security Board believes that a patchwork of possible conflicting statutes would be confusing to employers and employees covered under the Social Security Act and would make it difficult to ascertain rights under the Social Security Act. The Board believes that all amendments to the Social Security Act should specifically amend the Social Security Act. The Social Security Board would be glad to present specific suggestions concerning the legislative drafting of the changes which would be.necessary to accomplish this purpose.

4. Harmony in drafting.-The phraseology employed in section 213 differs, in many instances, from the analogous phraseology in title II of the Social Security Act even where the intended meaning is apparently exactly the same. While per haps it would have been desirable if title II had been drafted differently, in certain respects, at the time of its enactment, it has now been law for a number of years, and it seems undesirable that unnecessary departures from it (even if improvements) be incorporated in the railroad legislation,

As an example, it can be assumed that the changed phraseology might, in a particular case, result in a woman being considered a widow under one law but not under the other. She might claim benefits under the latter law, and the Board administering the law might accept jurisdiction of the case, and then disallow the claim. She would apparently be free then to apply for and receive benefits under the first law. It can be inferred from this example that no disallowance would be final until both Boards had disallowed the claim.

In other instances intentional differences between the phaseology of the two laws seem needless and undesirable particularly in view of the border-line cases which would arise concerning which law would apply. Thus, under subsection 213 (i) of S. 293, the month's benefit of a beneficiary under the railroad legislation would be suspended if during the month he worked for a railroad for any amount, or if he earned $25 or more in employment covered by old-age and suvivors insurance. On the other hand, under the present title II of the Social Security Act an analogous benefit would be suspended only if the beneficiary earned $15 or more in employment covered by old-age and survivors insurance. There would be no suspension for earnings of any amount in railroad employment.

It thus appears that, wherever feasible, the phraseology in section 213 should be made identical with the comparable phraseology in title II of the Social Security Act.

Hon. B. K. WHEELER,

TREASURY DEPARTMENT, Washington, 25, August 6, 1945.

Chairman, Committee on Interstate Commerce,

United States Senate, Washington, D. C.

MY DEAR MR. CHAIRMAN: This is with further reference to your letter of July 9, 1945, requesting the views of this Department on S. 293, a bill "to amend the Railroad Retirement Acts, the Railroad Unemployment Insurance Act, and subchapter B of chapter 9 of the Internal Revenue Code; and for other purposes." This bill is identical with H. R. 1362, now pending before the Committee on Interstate and Foreign Commerce in the House. At the request of the chairman of that committee, this Department issued a report on April 26, 1945, containing views which I am summarizing below.

The Treasury has consistently favored the amplification and extension of the whole social-security system. S. 293 extends and improves social-security benefits for an important group of employees. Accordingly, the Treasury favors the objectives of this bill, and believes that legislation should be enacted to achieve them.

The Treasury believes, however, that S. 293 should be amended in certain respects. It views the proposed transfer of additional tax collecting powers to

the Railroad Retirement Board as objectionable. It feels that taxpayers should not be required to deal with more than one Federal agency in tax matters and should not be subjected to an unnecessary duplication of audits. This position was expressed by the Treasury in 1938 when the Railroad Unemployment Insurance Act was under consideration. Since then collection of income tax at source has been instituted. There are potentialities for integration of the collection and administration of the pay-roll and income taxes. These potentialities for simplification cannot be achieved under the proposed division of the responsibility for tax collection as regards the railroad industry.

The Treasury desires to call to the attention of the committee a matter of general importance in connection with this legislation. Section 12 of the Railroad Retirement Act and section 2 (e) of the Railroad Unemployment Insurance Act provide that benefits under these acts shall not be subject to any tax. The present bill would increase certain benefits and create others which would be exempt from taxation. The Treasury is opposed to such special tax exemption provisions and believes that they should be removed from the law so that the treatment accorded those benefits would be governed by the provisions of the Internal Revenue Code generally applicable to other benefits of the same character. The basic question of the proper treatment of annuities and similar benefits under the income tax is being reexamined and whatever decision is reached should be made aplicable to the benefits paid under the Railroad Acts as well as to others.

There are also a number of administrative and technical problems which are raised by the provisions of the bill. In general these problems relate either to the dividing line between the railroad security program, on the one hand, and the social-security system on the other, or to the proposed transition from the present system of collection of these taxes to the proposed method of collection. These are discussed in detail in a separate, technical report which accompanied the Treasury report on H. R. 1362. This technical discussion is reprinted in the hearings on H. R. 1362 before the House Committee on Interstate and Foreign Commerce, part 3, pages 1146 to 1163. I am enclosing for your convenience two copies of this supplementary report.

The Director, Bureau of the Budget, has advised the Terasury Department that there is no objection to the presentation of this report.

MY DEAR MR. CHAIRMAN: Further reference is made to your letters of January 12, 1945, and March 14, 1945, relative to H. R. 1362 (79th Cong., 1st sess.), entitled "a bill to amend the Railroad Retirement Acts, the Railroad Unemployment Insurance Act, and subchapter B of chapter 9 of the Internal Revenue Code; and for other purposes." You requested the Department's views on this proposed legislation. In the Department's letter to you under date of April 26, 1945, the views of the Department with respect to the broad policy questions involved in the bill were outlined; and you were advised that a supplementary report would be transmitted as promptly as possible.

The Railroad Retirement Acts, subchapter B of chapter 9 of the Internal Revenue Code (which, effective April 1, 1939, superseded the Carriers Taxing Act of 1937), the Railroad Unemployment Insurance Act, the Social Security Act, the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the unemployment compensation laws of the several States established two systems of old-age and unemloyment protection, one for employees of the railroad industry and the other for employees of other employers generally. The systems are in general supported by taxes upon employers and employees; and the definitions relating to coverage for tax purposes correspond to the definitions for benefit purposes. The taxes or contributions imposed by the Railroad Unemployment Insurance Act are collected by the Railroad Retirement Board. The carriers' taxes imposed by subchapter B of chapter 9 of the code in support of the railroad retirement system and the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act

in support of the general social security system are collected by the Bureau of Internal Revenue. The contributions to provide for unemployment benefits under the State laws are collected by the several State unemployment compensation agencies. The existence of the two systems leads, in border-line cases, to some difficulties of determining under which system benefits are to be paid and taxes collected. The controlling test is the coverage under the railroad system, since usually the general social security system merely excludes services covered under the railroad system.

The Department would be affected by the bill through the transfer from the Bureau of Internal Revenue to the Railroad Retirement Board of the duty of col lecting the taxes imposed for the purpose of providing funds for the payment of benefits under the railroad retirement system. Also, since the Bureau of Internal Revenue is charged with the duty of collecting the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act (subchapters A and C, respectively, of chapter 9 of the code) upon wages paid by employers other than those covered under the railroad system, the Depart ment would be affected by the definitions in the bill in determining coverage as between employers within the railroad system and other employers.

Section 4 of the bill would, effective January 1, 1946, amend sections 1500 to 1530, inclusive, of the Internal Revenue Code (which are included within subchapter B of chapter 9 of the code) by substituting "Board" for "Commissioner" and for "Bureau of Internal Revenue," and "title" for "subchapter," and by deleting "with the approval of the Secretary,” wherever such language appears, and would transfer such sections, together with section 1536 of the code, as amended by the bill, from the Internal Revenue Code to the Railroad Retirement Act of 1937. The aforementioned sections of the code would constitute title II of the Railroad Retirement Act of 1937. All other provisions of subchapter B of chapter 9 of the Internal Revenue Code would be repealed, effective January 1, 1946. Section 4 of the bill also provides that the provisions of such section becoming effective on January 1, 1946, shall not affect any rights or liabilities accrued before January 1, 1946.

In connection with the proposed transfer of sections 1503 and 1512 of the Internal Revenue Code to title II of the Railroad Retirement Act of 1937, it is suggested that, if the proposed transfer is made, sections 1503 and 1512 be amended, effective January 1, 1946, by inserting "of the Internal Revenue Code" after "chapter 1" in such sections.

Section 1530 (a), as amended by section 4 of the bill, would provide that the taxes imposed by title II of the Railroad Retirement Act of 1937 (which, effective January 1, 1946, would supersede subchapter B of chapter 9 of the code) shall be collected by the Railroad Retirement Board. Section 1536 of the code would be amended, effective January 1, 1946, to provide that all provisions of law ap plicable with respect to the contributions imposed by section 8 of the Railroad Unemployment Insurance Act shall be applicable with respect to the taxes imposed by title II of the Railroad Retirement Act of 1937.

Section 8 (h) of the Railroad Unemployment Insurance Act after providing that all provisions of law, including penalties, applicable with respect to any tax imposed by section 600 or section 800 of the Revenue Act of 1926 and the provisions of section 607 of the Revenue Act of 1934 shall be applicable, insofar as not inconsistent, to the contributions imposed by the Railroad Unemployment Insurance Act, contains a proviso that all authority and functions conferred by such provisions upon any officers or employees of the United States, except the authority to institute and prosecute criminal proceedings, shall, with respect to the contributions imposed by such act, be vested in and exercised by the Railroad Retirement Board or such officers and employees of the Board as it may designate. Since sections 600 and 800 of the Revenue Act of 1926 and section 607 of the Revenue Act of 1934 were superseded in 1939 by sections 2700, 1800, and 3661 of the Internal Revenue Code, respectively, and since such sections of the respec tive revenue acts were repealed as of the effective date of the corresponding code sections, it would appear to be advisable to amend section 8 (h) of the Railroad Unemployment Insurance Act so as to refer to the appropriate sections of the Internal Revenue Code.

The intended effect of section 1536 of the code, as amended, is to confer upon the Railroad Retirement Board, or any of its designated officers and employees, in connection with the administration of the taxes imposed under title II of the Railroad Retirement Act of 1937, all powers conferred upon the Secretary of the Treasury, the Commissioner of Internal Revenue, and collectors of internal revenue by internal revenue laws applicable generally, or in the case of taxes

imposed by section 600 or 800 of the Revenue Act of 1926 or the corresponding provisions of the Internal Revenue Code. For example, it is intended that the provisions of internal revenue laws relating to compromise of civil and criminal cases, examination of books and witnesses, liens for taxes and their enforcement, penalties, returns, assessments, and refunds and credits hall be made available to the Board or its designated employees for the purpose of the administration of the taxes imposed under title II of the Railroad Retirement Act in the same manner as they are available to the Secretary, Commissioner, and collectors of internal revenue in connection with internal revenue taxes. Unnecessary duplication of facilities and functions, and possibly conflict in administrative policies and interpretations developed under the same or corresponding provisions of law, result when another agency is permitted to function, even in a limited field, in the tax-collection activities of the Federal Government.

As stated in the Department's report to the committee under date of April 26, 1938, relative to H. R. 10127 (75th Cong., 3d sess.), which became the Railroad Unemployment Insurance Act, this Department is opposed to the collection of Federal taxes or to the collection of contributions or other payments (even though not taxes) under provisions of law relating to taxes, by any other agency than the Treasury Department notwithstanding the fact that the proceeds are to be devoted to carrying out the functions for which such other agency was created. In addition to the considerations mentioned above, it is desired to invite attention to the fact that the Department, through the Bureau of Internal Revenue, now has the duty of collecting from employers, including carrier employers, the income tax required under existing law to be withheld from the wages of their employees; and that possibilities exist for a future unification or simplification of the various pay-roll taxes and the income tax collected at source from employees, or the procedures for the collection thereof, to the advantage of taxpayers and the Government, if the administration of all such Federal taxes is entrusted to a single agency. The Department therefore recommends that those provisions of the bill which would vest in the Railroad Retirement Board the function of collecting the taxes levied to support the railroad retirement system be not enacted and that the function of collecting the contributions levied under the Railroad Unemployment Insurance Act to support the railroad unemployment system be transferred from the Board to the Bureau of Internal Revenue. If the Congress should decide to assign to the Bureau of Internal Revenue the duty of collecting the taxes and contributions to support the railroad retirement and railroad unemployment systems, such taxes and contributions should be imposed by appropriate amendments to subchapter B of chapter 9 of the Internal Revenue Code, the provisions of the Railroad Unemployment Insurance Act relating to contributions should be repealed, and the rights and liabilities accrued under such act in respect of the contributions imposed thereunder should be appropriately preserved.

The Department would also be affected by the changes, which would be made by the bill, in the coverage definitions under the Railroad Retirement Act of 1937 and the Railroad Unemployment Insurance Act, since coverage under the railroad system would be excluded from coverage under the general social security system.

Section 1426 (b) (9) of the Federal Insurance Contributions Act excepts from "employment," for purposes of that act, service performed by an individual as an employee or employee representative as defined in section 1532 (subchapter B of chapter 9) of the Internal Revenue Code. The coverage definitions in section 1532 of the code are substantially the same as the corresponding definitions in the existing section 1 of the Railroad Retirement Act of 1937. Section 1607 (c) (9) of the Federal Unemployment Tax Act excepts from "employment," for purposes of that act, service performed by an individual as an employee or employee representative as defined in section 1 of the Railroad Unemployment Insurance Act. Accordingly, in the administration of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act the Bureau of Internal Revenue must determine whether service in the employ of a person is excepted from "employment" by virtue of the exceptions stated in sections 1426 (b) (9) and 1607 (c) (9), respectively. This requires the determination whether service is so excepted as service performed as an employee or employee representative as defined in section 1532 of the Internal Revenue Code or section 1 of the Railroad Unemployment Insurance Act.

Sections 1, 2, and 3 of the bill would amend the definitions of the terms “employer," "in the service of an employer," and "compensation," for the purposes of the Railroad Retirement Act of 1937 and the Railroad Unemployment Inst