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Referring to sections 3152, 3167, 3173 and 3176 of the Revised Statutes, a Treasury decision states:

RULING. Reading these provisions of law together, it is evident that any collector, deputy collector, agent, clerk, or other officer or employee of the Bureau of Internal Revenue, including internal revenue agents, who divulges or makes known in any manner whatsoever not provided by law the amount or source of income, profits, losses, expenditures, or any particulars thereof set forth or disclosed in any income return made by any taxpayer, or by a collector or deputy collector, or by the Commissioner of Internal Revenue, or who permits any income return or copy thereof, or any book containing any abstract or particulars thereof, to be seen or examined by any person, except as provided by law, or who prints or publishes in any manner whatever, not provided by law, any income return or any part thereof, or source of income, profits, losses, or expenditures appearing in any income return, is guilty of a misdemeanor and subject to a fine not exceeding $1,000 or to imprisonment not exceeding one year, or both, at the discretion of the court, and if he be an officer or employee of the United States, to be dismissed from office or discharged from employment. (T. D. 2903, July 30, 1919.)

List of taxpayers to be posted.-A provision inserted in the 1918 law requires that the names and addresses of taxpayers be thrown open to public inspection.

Law. Section 257. ... The Commissioner shall as soon as practicable in each year cause to be prepared and made available to public inspection in such manner as he may determine, in the office of the collector in each internal-revenue district and in such other places as he may determine, lists containing the names and the post-office addresses of all individuals making income-tax returns in such district.

The regulations are silent as to the foregoing section of the law. As the words "shall” and “in each year” are used, it may be expected that the lists will be made available before December 31, 1919.

Publication of statistics.

Law. Section 258. That the Commissioner, with the approval of the Secretary, shall prepare and publish annually statistics reasonably available with respect to the operation of the income, warprofits and excess-profits-tax laws, including classification of taxpayers and of income, the amounts allowed as deductions, exemptions, and credits, and any other facts deemed pertinent and valuable.

REGULATION. The Commissioner will publish annually a volume of statistics of income, showing, among other things, the distribution of incomes between corporations and individuals and by States, by classes and by occupations. (Art. 1101.)

Such a compilation, showing statistics of income for the calendar year 1917, was issued by the Commissioner on Octo

ber 2, 1919

Penalties and Procedure in Cases of Delinquency Failure to make return-collector to supply deficiency.-

LAW. Section 1317. [Section 3176, Rev. Stat.] If any person, corporation, company, or association fails to make and file a return or list at the time prescribed by law or by regulation made under authority of law, or makes, willfully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowledge and from such information as he can obtain through testimony or otherwise. In any such case the Commissioner may, from his own knowledge and from such information as he can obtain through testimony or otherwise, make a return or amend any return made by a collector or deputy collector. Any return or list so made and subscribed by the Commissioner, or by a collector or deputy collector and approved by the Commissioner, shall be prima facie good and sufficient for all legal purposes.

Accordingly in cases where the collector or Commissioner makes a return, the amount of tax determined under the substitute return is payable upon notice and demand.10


Penalties for failure to make return.-

Law. Section 253. That any individual, corporation, or partnership required under this title to pay or collect any tax, to make a return or to supply information, who fails to pay or collect such tax, to make such return, or to supply such information at the time or times required under this title, shall be liable to a penalty of not more than $1,000."

** See page 183.

1 The above penalties are for cases where the failure to file return or pay tax is not "willful.” For penalties in cases of willful refusal to file return or pay tax, see page 128.


LAW. Section 1317. [Section 3176, Rev. Stat.] .. .. In case of any failure to make and file a return or list within the time prescribed by law, or prescribed by the Commissioner of Internal Revenue or the collector in pursuance of law, the Commissioner of Internal Revenue shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect," no such addition shall be made to the tax.15

This is broader than the earlier law in that it is now necessary only to show that failure was “due to a reasonable cause and not to willful neglect," whereas before it was necessary in addition that the return be filed "voluntarily and without notice from the collector.” Such voluntary filing, however, is obviously the best possible evidence that the failure to file was due to a reasonable cause and not to wilful neglect. Certainly the taxpayer seeking relief from a penalty is in a much stronger position if his return has been voluntarily filed. The regulations in the past have prescribed that the penalty of increased tax shall be remitted only if the cause "is found to be reasonable.” It can be assumed that any cause short of fraud or wilful neglect will be deemed to be reasonable.


“Reasonable cause,” is such a condition of fact as, had the taxpayer in default exercised ordinary business


12 [Former Procedure] A minimum fine of $20 was provided by section 18 of the 1916 law.

[Former Procedure] Fifty per cent under 1916 law (section 16).

1 (Former Procedure] Under the previous law this remission of penalty was granted only when a return was filed "voluntarily and without notice from the collector." (Section 16, section 3176, Rev. Stat.)

15 In the case of this 25 per cent penalty as well as the 50 per cent penalty for false or fraudulent list, “The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax." (Law, section 1317, section 3176 Rev. Stat.)

care and prudence, it would have been impracticable or impossible for him to have filed return in the prescribed time. .... (Art. 1004.)

This regulation further declares that, to avoid the penalty, the taxpayer should attach to the return an affidavit showing the facts alleged as a reasonable cause for failure to make the return in due time. The Commissioner passes upon the validity of the showing and without his consent no remission is made. Relief from the ad valorem penalty does not necessarily relieve the taxpayer from liability to the specific fine. 16

16 See page 191.

[Former Procedure] TAXPAYERS WHO DID NOT MAKE TENTATIVE RETURNS ON MARCH 15, 1919.-It was stated that many taxpayers neglected to pay the first instalment due March 15, 1919, and thereby lost the privilege of the 45-day extension of time within which to complete their returns and also thereby lost the privilege of paying their tax in four instalments. The Commissioner on March 17, 1919, announced that the privilege of paying in instalments was irrevocably lost, as the law [section 250 (a)] provides that the firsť instalment must be paid at the time fixed by law for filing the return unless an extension has been granted, and further states that if any instalment is not paid when due the whole amount of tax unpaid shall become due and payable upon notice and demand by the collector. The Commissioner, however, announced that some degree of leniency would be granted to those who had some legitimate reason why they failed to file their returns when they were due. This further statement was made :

"Revenue collectors will accept all delinquent returns presented after March 15, and deposit any payment made therewith. Under the law failure to make first payment by March 15 automatically makes the whole tax payable immediately. Taxpayers filing income returns subsequent to March 15, therefore, must pay in full, but if the taxpayer submits a partial payment he will be notified of the balance due later in the regular procedure of listing and sending notices. In reference to the penalty of 25 per cent additional tax for all delinquents, the policy will be to proceed sympathetically in accordance with the regulations permitting the taxpayer, if he desires, to file an affidavit within ten days explaining the cause of delinquency."

In another official statement the policy of the Department was more definitely explained:


RULING. "In view of the delay in the final passage of the revenue act of 1918, and the short period allowed for filing returns thereunder, it has been decided that if a return is filed on or before May 1, 1919, by an individual, partnership or corporation under the provisions of such act, the specific penalty of $1,000 will not be asserted.

"Where returns of income are filed after the date mentioned above,

The 50 per cent penalty.

Law. Section 1317. [Section 3176, Rev. Stat.) .... In case a false or fraudulent return or list is willfully made, the Commissioner of Internal Revenue shall add to the tax 50 per centum of its amount.

In view of the notice by the Commissioner that "tax slackers” are to be severely dealt with, it should be noted that in addition to all other penalties there will be added to the tax an additional 50 per cent thereof. Determination of what constitutes a false return will depend on the circumstances of each case, but it is reasonable to suppose that the wide publicity during the last year given to all income tax matters will put the burden of proof upon every citizen who makes an understatement, and when it is found that there has been failure to report income it will be much more difficult than heretofore to claim ignorance of the law.

Penalty for wilful refusal to make return or attempt to evade-fine or imprisonment.

Law. Section 253. ... Any individual, corporation, or partnership, or any officer or employee of any corporation or member or employee of a partnership, who willfully refuses to pay or collect such tax, to make such return, or to supply such information at the time or times required under this title, or who willfully attempts in any manner to defeat or evade the tax imposed by this title, shall be guilty of a misdemeanor and shall be fined not more than $10,000" or imprisoned for not more than one year, or both, together with the costs of prosecution.

$ 5


or where returns of information at the source are filed after May 15, 1919, the specific penalty will be asserted unless it can be shown that the delay was due to a reasonable cause, and offers in compromise will be accepted in the minimum amounts stated below:

Delinquent returns of income by individuals.
Delinquent returns of income by corporations.
Delinquent returns of information...

5 "Of course, it must be borne in mind that the above does not relate to cases where there is evidence of willful intent or hostility toward the administration of the law. Such cases will be taken care of in the same manner as heretofore." (Mim. 2077, signed by Commissioner Daniel C. Roper, and dated March 13, 1919.)

1 [Former Procedure] Under the earlier law the fine applying to individuals was restricted to $2,000 (1917 law, section 18).

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