MENTS. INCOME TAX AMEND- residents, corporate or otherwise, and including the income derived from dividends on capital stock or from net earnings of resident corporations, joint-stock companies or associations, or insurance companies, whose net income is taxable under this title." New provision. Vol. 39, p. 766, amended. Additional tax on undistributed net earn ings. cluded. Income taxes not in- portion retained for business use. Proviso. (2) Section ten of such Act of September eighth, nineteen hundred and sixteen, is hereby further amended by adding a new subdivision as follows: "(b) In addition to the income tax imposed by subdivision (a) of this section there shall be levied, assessed, collected, and paid annually an additional tax of ten per centum upon the amount, remaining undistributed six months after the end of each calendar or fiscal year, of the total net income of every corporation, joint-stock company or association, or insurance company, received during the year, as determined for the purposes of the tax imposed by such subdivision (a), but not including the amount of any income taxes paid by it within the year imposed by the authority of the United States. "The tax imposed by this subdivision shall not apply to that portion of such undistributed net income which is actually invested and employed in the business or is retained for employment in the reasonable requirements of the business or is invested in obligations of the United States issued after September first, nineteen hundred and Surtax if not so em- seventeen: Provided, That if the Secretary of the Treasury ascertains and finds that any portion of such amount so retained at any time for employment in the business is not so employed or is not reasonably required in the business a tax of fifteen per centum shall be levied, assessed, collected, and paid thereon. ployed. Applicable to each taxable year. Deductions. Allowed domestic corporations. "The foregoing tax rates shall apply to the undistributed net income received by every taxable corporation, joint-stock company or association, or insurance company in the calendar year nineteen hundred and seventeen and in each year thereafter, except that if it has fixed its own fiscal year under the provisions of existing law, the foregoing rates shall apply to the proportion of the taxable undistributed net income returned for the fiscal year ending prior to December thirtyfirst, nineteen hundred and seventeen, which the period between January first, nineteen hundred and seventeen, and the end of such fiscal year bears to the whole of such fiscal year." SEC. 1207. (1) That paragraphs third and fourth of subdivision (a) Vol. 39, p. 768, of section twelve of such Act of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: amended. tations. Provisos. included. "Third. The amount of interest paid within the year on its indebtExceptions and limi-edness (except on indebtedness incurred for the purchase of obligations or securities the interest upon which is exempt from taxation as income under this title) to an amount of such indebtedness not in excess of the sum of (a) the entire amount of the paid-up capital stock outstanding at the close of the year, or, if no capital stock, the entire amount of capital employed in the business at the close of the year, and (b) one-half of its interest-bearing indebtedness then outPreferred stock not standing: Provided, That for the purpose of this title preferred capital stock shall not be considered interest-bearing indebtedness, and interest or dividends paid upon this stock shall not be deductible from gross income: Provided further, That in cases wherein shares of capital stock are issued without par or nominal value, the amount of paid-up capital stock, within the meaning of this section, as represented by such shares, will be the amount of cash, or its equivalent, paid or Secured by collateral, transferred to the corporation as a consideration for such shares: Provided further, That in the case of indebtedness wholly secured by property collateral, tangible or intangible, the subject of sale or hypothecation in the ordinary business of such corporation, joint-stock company or association as a dealer only in the property constituting such collateral, or in loaning the funds thereby procured, the total Shares without nominal value. ! MENTS. interest paid by such corporation, company, or association within the INCOME TAX AMENDyear on any such indebtedness may be deducted as a part of its Limitation. expenses of doing business, but interest on such indebtedness shall only from tax. Interest on bank de be deductible on an amount of such indebtedness not in excess of the No allowance for actual value of such property collateral: Provided further, That in bonds guaranteed free the case of bonds or other indebtedness, which have been issued with a guaranty that the interest payable thereon shall be free from taxation, no deduction for the payment of the tax herein imposed, or any other tax paid pursuant to such guaranty, shall be allowed; and in posits allowed. the case of a bank, banking association, loan or trust company, interest paid within the year on deposits or on moneys received for investment and secured by interest-bearing certificates of indebtedness issued by such bank, banking association, loan or trust company shall be deducted; General taxes. "Fourth. Taxes paid within the year imposed by the authority Income and excess of the United States (except income and excess profits taxes), or of profits excepted. its Territories, or possessions, or any foreign country, or by the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, not including those assessed against local benefits." (2) Paragraphs third and fourth of subdivision (b) of section twelve of such Act of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: amended. Foreign corporations. Vol. 39, p. 769 Deductions from income in United States. Interest paid on in debtedness. Proviso. "Third. The amount of interest paid within the year on its indebtedness (except on indebtedness incurred for the purchase of obliga-xceptions and limitions or securities the interest upon which is exempt from taxation as income under this title) to an amount of such indebtedness not in excess of the proportion of the sum of (a) the entire amount of the paid-up capital stock outstanding at the close of the year, or, if no capital stock, the entire amount of the capital employed in the business at the close of the year, and (b) one-half of its interest-bearing indebtedness then outstanding, which the gross amount of its income for the year from business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States: Provided, That in the case of bonds or other indebtedness which have been issued with a guaranty that the interest payable thereon shall be free from taxation, no deduction for the payment of the tax herein imposed or any other tax paid pursuant to such guaranty shall be allowed; and in case of a bank, banking association, loan or trust posits allowed. company, or branch thereof, interest paid within the year on deposits by or on moneys received for investment from either citizens or residents of the United States and secured by interest-bearing certificates of indebtedness issued by such bank, banking association, loan or trust company, or branch thereof; No allowance for bonds guaranteed free from tax. Interest on bank de General taxes in "Fourth. Taxes paid within the year imposed by the authority of United States. the United States (except income and excess profits taxes), or of its profits excepted. Territories, or possessions, or by the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, paid within the United States, not including those assessed against local benefits." Returns. SEC. 1208. That subdivision (e) of section thirteen of such Act of Vol. 39, p. 771, September eighth, nineteen hundred and sixteen, is hereby amended amended. to read as follows: Foreign corporations. resident aliens appli "(e) All the provisions of this title relating to the tax authorized Provisions for nonand required to be deducted and withheld and paid to the officer of cable to tax-paid divithe United States Government authorized to receive the same from dends. the income of nonresident alien individuals from sources within the United States shall be made applicable to the tax imposed by subdivision (a) of section ten upon incomes derived from interest upon MENTS. INCOME TAX AMEND- bonds and mortgages or deeds of trust or similar obligations of domestic or other resident corporations, joint-stock companies or associations, and insurance companies by nonresident alien firms, copartnerships, companies, corporations, joint-stock companies or associations, and insurance companies, not engaged in business or trade within the United States and not having any office or place of business therein." Penalty provisions. amended. Penalty for not making returns, etc. tended. returns, etc. SEC. 1209. That section eighteen of such Act of September eighth, nineteen hundred and sixteen, is hereby amended to read as follows: "SEC. 18. That any person, corporation, partnership, association, or Application ex- insurance company, liable to pay the tax, to make a return or to supply information required under this title, who refuses or neglects to pay such tax, to make such return or to supply such information at the time or times herein specified in each year, shall be liable, Punishment for false except as otherwise specially provided in this title, to a penalty of not less than $20 nor more than $1,000. Any individual or any officer of any corporation, partnership, association, or insurance company, required by law to make, render, sign, or verify any return or to supply any information, who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this title to be made, shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, in the discretion of the court, with the costs of proseTax duly paid not to cution: Provided, That where any tax heretofore due and payable has be withheld at source. been duly paid by the taxpayer, it shall not be re-collected from any withholding agent required to retain it at its source, nor shall any penalty be imposed or collected in such cases from the taxpayer, or such withholding agent whose duty it was to retain it, for failure to return or pay the same, unless such failure was fraudulent and for the purpose of evading payment.' Proviso. Penalty restricted to fraudulent evasions. Corporation returns. Vol 39, pp. 777, 1004, amended. Sworn returns to be made of all dividend payments. Names, etc., of stockholders included. visions. SEC. 1210. That section twenty-six of such Act of September eighth, nineteen hundred and sixteen, as amended by the Act entitled "An Act to provide increased revenue to defray the expenses of the increased appropriations for the Army and Navy and the extensions of fortifications, and for other purposes," approved March third, nineteen hundred and seventeen, is hereby amended to read as follows: "SEC. 26. Every corporation, joint-stock company or association, or insurance company subject to the tax herein imposed, when required by the Commissioner of Internal Revenue, shall render a correct return, duly verified under oath, of its payments of dividends, whether made in cash or its equivalent or in stock, including the names and addresses of stockholders and the number of shares owned by each, and the tax years and the applicable amounts in which such dividends were earned, in such form and manner as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury." Administrative pro- SEC. 1211. That Title I of such Act of September eighth, nineteen Vol. 39, p. 777, hundred and sixteen, is hereby amended by adding to Part III six new sections, as follows: amended. "SEC. 27. That every person, corporation, partnership, or association, doing business as a broker on any exchange or board of trade or other similar place of business shall, when required by the Commissioner of Internal Revenue, render a correct return duly verified under oath, under such rules and regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may prescribe, showing the names of customers for whom such person, corporation, partnership, or association has transacted any Details of profits and business, with such details as to the profits, losses, or other information which the commissioner may require, as to each of such cus losses. MENTS. tomers, as will enable the Commissioner of Internal Revenue to deter- INCOME TAX AMENDmine whether all income tax due on profits or gains of such customers has been paid. Persons paying fixed returns thereof. Exceptions. Returns from United "SEC. 28. That all persons, corporations, partnerships, associations, incomes to others of and insurance companies, in whatever capacity acting, including $800 and over to make lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, receivers, conservators, and employers, making payment to another person, corporation, partnership, association, or insurance company, of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable gains, profits, and income (other than payments described in sections twenty-six and twenty-seven), of $800 or more in any taxable year, or, in the case states officials. of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, are hereby authorized and required to render a true and accurate return to the Commissioner of Internal Revenue, under such rules and regulations and in such form and manner as may be prescribed by him, with the approval of the Secretary of the Treasury, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment: Provided, That such returns shall be required, regardless of amounts, in the case of payments of interest upon bonds and mortgages or deeds of trust or other similar obligations of corporations, jointstock companies, associations, and insurance companies, and in the case of collections of items (not payable in the United States) of interest upon the bonds of foreign countries and interest from the bonds and dividends from the stock of foreign corporations by persons, corporations, partnerships, or associations, undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange. "When necessary to make effective the provisions of this section the name and address of the recipient of income shall be furnished upon demand of the person, corporation, partnership, association, or insurance company paying the income. "The provisions of this section shall apply to the calendar year nineteen hundred and seventeen and each calendar year thereafter, but shall not apply to the payment of interest on obligations of the United States. Details. Proviso. All payments of inrequired. terest on bonds, etc., Collection of foreign bonds, dividends, etc. Name and address. Applicable each year. Exception. Excess profits tax to returns. "SEC. 29. That in assessing income tax the net income embraced be credited in income in the return shall also be credited with the amount of any excess profits tax imposed by Act of Congress and assessed for the same calendar or fiscal year upon the taxpayer, and, in the case of a member of a partnership, with his proportionate share of such excess profits tax imposed upon the partnership. Investment of foreign governments in United Vol. 38, p. 166. "SEC. 30. That nothing in section II of the Act approved October third, nineteen hundred and thirteen, entitled 'An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes,' or in this title, shall be construed as taxing the income of foreign governments received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments, or from interest on deposits in banks in the United States of moneys belonging to foreign governments. "SEC. 31. (a) That the term 'dividends' as used in this title shall ing since March 1, 1913, be held to mean any distribution made or ordered to be made by a corporation, joint-stock company, association, or insurance company, out of its earnings or profits accrued since March first, nineteen All dividends accruincluded in income. MENTS. INCOME TAX AMEND- hundred and thirteen, and payable to its shareholders, whether in cash or in stock of the corporation, joint-stock company, association, or insurance company, which stock dividend shall be considered income, to the amount of the earnings or profits so distributed. Distributions taxed at rate for year earned, etc. "(b) Any distribution made to the shareholders or members of a corporation, joint-stock company, or association, or insurance company, in the year nineteen hundred and seventeen, or subsequent tax years, shall be deemed to have been made from the most recently accumulated undivided profits or surplus, and shall constitute a part of the annual income of the distributee for the year in which received, and shall be taxed to the distributee at the rates prescribed by law for the years in which such profits or surplus were accumulated by the corporation, joint-stock company, association, or insurance comMarch 1, 1913, not pany, but nothing herein shall be construed as taxing any earnings or profits accrued prior to March first, nineteen hundred and thirteen, but such earnings or profits may be distributed in stock dividends or otherwise, exempt from the tax, after the distribution of earnings and profits accrued since March first, nineteen hundred and thirteen, has been made. This subdivision shall not apply to any distribution made prior to August sixth, nineteen hundred and seventeen, out of earnings or profits accrued prior to March first, nineteen hundred and thirteen. Earnings prior to taxed. Limitation. Life insurance by corporations, etc., of from income. "SEC. 32. That premiums paid on life insurance policies covering employeesnotdeducted the lives of officers, employees, or those financially interested in any trade or business conducted by an individual, partnership, corporation, joint-stock company or association, or insurance company, shall not be deducted in computing the net income of such individual, corporation, joint-stock company or association, or insurance com pany, or in computing the profits of such partnership for the pur Tax of citizens with- poses of subdivision (e) of section nine." held at source for 1917, released. Vol. 39, p. 762. Ante, p. 332. Collection from individuals. GENERAL PROVISIONS. Invalidity of any clause, etc., not to affect remainder of Act. Special preparedness fund repealed. pealed. SEC. 1212. That any amount heretofore withheld by any withholding agent as required by Title I of such Act of September eighth, nineteen hundred and sixteen, on account of the tax imposed upon the income of any individual, a citizen or resident of the United States, for the calendar year nineteen hundred and seventeen, except in the cases covered by subdivision (c) of section nine of such Act, as amended by this Act, shall be released and paid over to such individual, and the entire tax upon the income of such individual for such year shall be assessed and collected in the manner prescribed by such Act as amended by this Act. TITLE XIII.-GENERAL PROVISIONS. SEC. 1300. That if any clause, sentence, paragraph, or part of this Act shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of said Act, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered. SEC. 1301. That Title I of the Act entitled "An Act to provide Vol. 39, p. 1000, re- increased revenue to defray the expenses of the increased appropriations for the Army and Navy and the extension of fortifications, and for other purposes," approved March third, nineteen hundred and In effect day after seventeen, be, and the same is hereby, repealed. passage. SEC. 1302. That unless otherwise herein specially provided, this Act shall take effect on the day following its passage. Approved, October 3, 1917. |