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filed under the Revenue Act of 1941 would number more than 22,000,000, 70 percent of which it was estimated would show taxable income.

The Revenue Act of 1940 and the first Revenue Act of 1941 imposed an excessprofits tax. The difficulties of administration and interpretation of these acts will be admittedly great and a substantial volume of litigation is inevitable.

Already a large deficiency appropriation has been granted to the Bureau of - Internal Revenue to take care of the increased burden imposed by the Revenue Act of 1940. The burden of administration imposed by the Revenue Act of 1941 will in many ways be greater. I have been informally advised that the Bureau of Internal Revenue is already planning to increase its personnel to take care of this situation.

It is the fact that there is a lag between the tax return and its investigation by the Commissioner of Internal Revenue and the litigation stage before the Board, which explains why we are not making the same immediate plans to meet the situation as is the Bureau of Internal Revenue. This normal lag may, however, be shortened if the present national emergency demands a further speed-up by the Treasury Department officials.

EXPENSES

We have been forced to increase our cost of communication service by the installation of a small switchboard to handle the telephone calls of our organization.

We have also had to increase our estimate for travel, as it is anticipated that during the fiscal year 1943 the Board members will be obliged to travel more extensively than heretofore on the hearing of cases. This naturally will produce a slight increase in the estimated cost of stenographic reporting.

The other items are quite similar in amounts to those alloted for the current fiscal year and I do not think a further explanation is necessary.

PRINTING AND BINDING

As stated above our request for printing is the same as that for 1942. Members of this subcommittee have indicated at previous hearings their interest in the work of the Board. I can report that the Board has been making steady progress and at the present time has fewer proceedings pending on its docket that at any corresponding time since 1925. There were 6,322 proceedings pending on October 31, 1940, and on the same date in 1941 the number had been reduced to 5,536, a substantial reduction. This is due in part to the increased production of the Board members. It is interesting to note that although there has been a falling off in the number of pending cases settled during this period, this has been offset to some extent by the fact that fewer cases have been docketed. The latter fact no doubt reflects the efforts of the Bureau in this direction.

The Board will continue its efforts to hold the number of pending cases to a minimum and to be prepared for an increase in the number of petitions filed should that be the result of recent revenue acts.

ITEMS OF INCREASE IN ESTIMATE

EXECUTIVE ACCOUNTANT AND AUDITOR POSITION REQUESTED

Mr. WOODRUM. Now tell us briefly the necessity for this increase from $522,000 to $550,037.

Mr. MURDOCK. The first item we are asking for here is $6,500. That item really is something that we dropped because we lost a valued employee at one time. We had employed an expert certified public accountant and we used him for years in a sort of pool; that is, when anybody had some case which particularly involved accounting, and there are not so very many, but every once in awhile there is one that is quite puzzling from the lay man's standpoint, and pretty hard to deal with, we had this man and then he got a new job. That is what happens to all our employees; they find some place outside

where they can make more money. He was being paid $7,500 a year and we did not fill his vacancy and have not filled it up to this time, but we do need a man of that character and, if we can get the right man-for instance, this man we had could do other work; he was not a lawyer, but he was able to handle cases pretty well, even though they were not strictly matters of accounting, and we hope to get another man like that; because we feel, with all these excess-profits taxes, that we are going to get back into a lot of problems involving a lot of accounting, and we ought to have a man of this kind.

Mr. FITZPATRICK. Those men who get their experience with you and then leave and go out at better salaries-do they then deal for the corporations who employ them and have relations with you in reference to taxes?

Mr. MURDOCK. Oh, vaguely. For instance, this man got a job with some big corporation and I have never seen him since.

Mr. FITZPATRICK. Do they have anything to do with making up their taxes?

Mr. MURDOCK. Probably.

Mr. FITZPATRICK. And taking appeals?

Mr. MURDOCK. They probably do.

Mr. FITZPATRICK. And they are familiar with the loopholes?

Mr. MURDOCK. Well, familiar with the facts, not necessarily loopholes.

Mr. FITZPATRICK. It is a strange thing, but that seems to be the way it works out.

Mr. MURDOCK. But this man I have not seen since. His name is Roy Russell, a good man. He went with some large corporation, and that is the last I ever saw of him.

Mr. FITZPATRICK. The corporation, though, that he went withdid you ever have any dealings with them where they made appeals, or where there was a possibility of appeals?

Mr. MURDOCK. Nothing that I recall.

Mr. WOODRUM. Anyway, there is no way you can control that? Mr. MURDOCK. No, sir. I do not recall, though, that this one was involved in any right now.

Mr. WOODRUM. But there is a rule he cannot practice before you for a certain períod of time?

Mr. MURDOCK. He has never applied to practice.

Mr. WOODRUM. Does that rule apply to your Department?

Mr. MURDOCK. Yes, sir.

Mr. HOUSTON. That really applies to the Internal Revenue Office, more than to your organization; does it not?

Mr. MURDOCK. We lose a lot of them, too.

Mr. WOODRUM. They all do; the Federal Employees Commission, the Federal Trade Commission, and all of them do.

Mr. MURDOCK. What they like to do is if they can get some experience with us and then get in the Bureau and get some trial experience, or go over to the Department of Justice and get some experience there, that is the usual track they follow, and then they get out and get a better job. But we feel fully satisfied in getting young men and starting them at the bottom, because frequently some of the older ones do not turn out so well.

ASSOCIATE ATTORNEYS

Mr. WOODRUM. That $6,500 is accounted for by the fact you want to fill the place of this accountant you lost?

Mr. MURDOCK. Yes, sir. Then there are two others.

Mr. WOODRUM. Let us have those.

Mr. MURDOCK. That is due to a shift in grade, I think, and the net. result is two additional men.

Mr. WOODRUM. Two additional $3,200 attorneys?

Mr. MURDOCK. Yes. We have 16 members and this would give us two lawyers, two law clerks, per member. Some members, however, do not use two, but we have need occasionally for a man to fill in some place to help somebody out who has gotten a little bit behind; for instance, some man may get on some cases which have taken a tremendous lot of hearing time and he may need a little boost to get caught up with his work, so that the cases do not get too old. But, generally speaking, there are two attorneys to every member.

Mr. WOODRUM. That accounts for $6,500 and $6,400; what is the balance of it? It seems to be all for the new positions there, Mr. Tracy?

Mr. TRACY. That is right, a new accountant and auditor at $6,500 and two associate attorneys in grade P-3 at $3,200 each. Then we have asked for a slight increase under the expense end, for travel and stenographic reporting.

INCREASE IN TRAVEL EXPENSE

Mr. WOODRUM. You are increasing travel from $14,000 to $16,000; what is the necessity for that?

Mr. MURDOCK. Just the increased activity of the Board. It is really only to cover the normal practice. We figure this year we can cover a certain amount of territory, and we will need a slightly larger fund to cover the expenses of members and clerks while they are out on these trips.

METHOD OF SELECTING ATTORNEYS

Mr. FITZPATRICK. How do you select your attorneys?

Mr. MURDOCK. Well, we have a formal application blank that they fill out, giving all of their qualifications, including their schooling and all that sort of thing, and we try to pick the most likely looking candidate, then have a personal interview, usually by the Chairman, and also by the member who is going to use him; because these law clerks have an extremely personal relationship with the members who are actually going to use them, so the member has to be pleased with the man who is selected.

Mr. FITZPATRICK. The reason I ask that is that some years ago there were temporary appointments made under a department just organized and all of the men were disqualified who, as you state here, were appointed just on an application; when the civil service examination was held, those men who were qualified for temporary appointment, not a one of them passed the examination, while the men who were not accepted passed the civil service examination. I am just wondering if this is a very good method.

Mr. MURDOCK. It is hard to pick a new man. For instance, my man left and I had no one. It was early in the spring, and I interviewed, I dare say, 12 or 15 men who came in, with good qualifications, and finally selected 1. Well, he did not take the job after I had chosen him. He said he would not take it, and another man came in 2 days later and I said to him, "How did you know there was a vacancy here?" He said, "This man Jackson you have been interviewing told me; I work with him over there" and he said Jackson had five chances for jobs in 1 week. He was a young man, a good student; he had a good record in the Michigan Law School and in the Michigan University, and there were just so many jobs hanging around here that he was being lapped up. Then I had to go through the process again, but I finally selected a man and have been working with him ever since to try to make something out of him.

Mr. FITZPATRICK. What about that new Board that has been set up that is supposed to pass on attorneys; is that functioning? Mr. TRACY. That starts the 1st of January.

Mr. FITZPATRICK. They have been supposed to start functioning several times in the last 6 months, but have kept postponing it. Won't that be handled in the same way, on an application and interview, and the Board will pass on the application?

Mr. MURDOCK. I do not know.

Mr. FITZPATRICK. There won't be any competitive examination? Mr. TRACY. That is still open to question, I understand.

Mr. STARNES. Are all of these positions filled through Civil Service, practically?

Mr. MURDOCK. After the 1st of January they will be; yes.

Mr. STARNES. But, if they are filled prior to January 1, they

won't?

Mr. WOODRUM. These cannot be filled prior to January 1; this is for the fiscal year 1943.

Mr. STARNES. Referring to these men leaving you, you speak, I take it, of what becomes a traveling circus here more and more all the time inside the Government agencies. In your judgment, does that add to or detract from the efficiency of the various agencies involved?

Mr. MURDOCK. I did not understand what you said at the start. These attorneys you are talking about, now?

Mr. STARNES. No. A moment ago you spoke about one university student who had five jobs available to him at once in different Government agencies?

Mr. MURDOCK. Yes.

Mr. STARNES. Now on other committees and in investigations I have watched the names of certain persons who appear as an employee of a certain governmental agency; then he is either discharged or asks for a transfer to another group, and the first thing you know you find him bobbing up here over in another agency, and it just seems to me a traveling circus in those agencies. That certainly applies to a certain group or set, and may apply to all. In your judgment, does that detract or add to the efficiency of operation of the governmental agencies, to have that existing?

Mr. MURDOCK. I would say from our experience these men who come with us are all men who are trying very hard to get some tax

experience, they are capable people, and they want to stay there at least long enough to get sufficient experience to do some good. That means at least 2 years. I feel, personally, if they stay with me 2 years, they will have given back sufficient reward for my trouble in the first part of their employment in trying to train them into the job. It takes them a while before they are any good, but you can work along with them and given them the kind of work they can get started on and, by the end of 2 years, they are doing a full job.

Mr. STARNES. Is there not some way we can hold men in the service after we have trained them?

Mr. MURDOCK. Of course we have been prevented from holding some by our inability to increase their salaries. We feel the most desirable way to hold them is to give them small increases from time to time. Of course, recently, we have not been able to do that.

Mr. STARNES. I think it is tragic for you and other governmental administrative heads to take young men into the service and train them and, right at the time when we might expect the maximum of usefulness from them from the standpoint of their services to the Government, which has paid, clothed, and trained them and given them experience, that we lose them and private business, we will say, gets the advantage of it to the disadvantage of the Government-in two ways. Private business then has agents or attorneys that we, the Government, have trained, and they then take the benefit of that training and experience themselves and they are enabled--the clients. on the outside or private business-just to be brutally frank, to beat us out of tax money and to find means and methods of beating us. Mr. MURDOCK. I think you are right.

Mr. STARNES. I think that situation should be remedied if we can find a practical solution. It may be, as Mr. Fitzpatrick suggests, that we should pay additional salaries.

Mr. HOUSTON. Even the salaries that we could pay those fellows, I do not think would be commensurate with what they can get outside. Mr. MURDOCK. But we could hold them.

Mr. WOODRUM. This is just a temporary situation, and as soon as the war is over they won't have the same opportunities for transfer? Mr. MURDOCK. I think so.

Mr. HOUSTON. How long does it take before a man is an asset to you-a year?

Mr. MURDOCK. It takes about three-quarters of a year.

Mr. HOUSTON. And in 2 years he is gone?

Mr. MURDOCK. They do not actually turn over that rapidly. But, if they stay that long, I feel they have fulfilled their mission with us at least sufficiently to justify their salary. But ordinarily they stay longer than that.

REDUCTION IN NUMBER OF PROCEEDINGS PENDING ON DOCKET

Mr. WOODRUM. I observe from the statement you filed, on page 4, that you have reduced the number of pending proceedings from 6,322 on October 31, 1940, to 5,536 on the same date in 1941. Do you expect you will be able to whittle down that backlog of accumulated

cases?

Mr. MURDOCK. It looks as though we would.

Mr. WIGGLESWORTH. That is the lowest figure yet.

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