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no return has been filed, such examination and inquiry to be made by any regularly appointed revenue agent, with proper provision to require the attendance of any officer or employee or person, and take his testimony with reference to any matter required by law to be included in a return of annual net income, with power to administer oath or oaths to such person or persons. Upon the information so acquired the Commissioner of Internal Revenue should be authorized to amend any return of annual net income or to make a return where none has been made.

Attention also is invited to the fact that the Internal Revenue Bureau as organized does not have any foreign agents, and that, therefore, the Commissioner of Internal Revenue is limited in his examinations for the purpose of verifying returns of annual net income to those returns which are made by citizens or residents of the United States. It should, therefore, be considered whether it would not be wise to confer authority upon consular officers to make inquiry and examination, the same as requested above for revenue agents.

The emergency revenue law. The act to increase the internal revenue and for other purposes, approved October 22, 1914, is yielding approximately the estimated revenue therefrom. Because of the short time between its passage anp its going into effect, considerable confusion arose at the beginning, and the Bureau of Internal Revenue was at that time swamped with inquiries as to its construction and application owing to the limited force available. Information in regard thereto was given as promptly as possible, however, and correspondence in regard to the act was made current in a few months. Suits are pending in the courts to test the correctness of the commissioner's rulings as to the basis for computation of tax due from bankers and as to the inclusion of talcum powder among articles taxable under Schedule B. There are a number of provisions in this act which are obscure and which should be amended in the interests of clarity if the act is extended beyond the current calendar year. It is believed also, from correspondence received and reports of revenue officers in the field that a very considerable amount of tax is lost to the Government through ignorance of the public as to the requirements of the law, and it is therefore strongly recommended that in the event of its extension additional force should be provided to see to its enforcement.

United States cotton futures act.

The Secretary of the Treasury delegated to the Commissioner of Internal Revenue the execution of this act, approved August 18, 1914, so far as it relates to the Treasury Department, which has been put in effect with very little friction or apparent objection on the part of brokers and dealers affected thereby. Two suits, one generally to test the constitutionality of the act as it relates to contracts made in accordance with the provisions of section 5 and one to test specially the constitutionality of section 11 of the act relating to orders sent for execution on foreign exchanges have been instituted. The principal part of the objection which has been raised to the act appears

to center about the latter provision, as it is claimed that it interferes seriously with the transaction of legitimate business by exporters of cotton.

Tax on railroads in Alaska.

rent year.

Formerly a license tax of $100 per mile per annum was imposed on railroads operated in Alaska, which was repealed by the act of July 18, 1914, and the additional income tax on gross income levied, to be computed and collected in the same manner as the general income tax. The proceeds of the additional tax on Alaska railroads under the law is paid to the treasurer of Alaska and applied to general Territorial purposes.

Oleomargarine. The investigations instituteď and conducted during the fiscal year 1914 were continued with renewed energy during the fiscal year 1915 with gratifying results, as a number of the largest cases involving extensive frauds in stamp taxes due, in which investigations were begun the latter part of the preceding year, were completed and additional new cases of lesser importance discovered during the cur

The total amount of taxes out of which the Government had been defrauded through artificially colored oleomargarine being placed on the market under tax-paid stamps at one-fourth of 1 cent per pound instead of the rate of 10 cents due on such product, in four of the largest cases of this character ever discovered, was definitely determined during 1915, and the sum found due reached the enormous total of $17,692,410.47, representing the tax on practically all of the oleomargarine produced and placed on the market as uncolored under one-fourth cent stamps by these manufacturers since the inception of the present law.

In addition to the completion of these four cases, one case was discovered during the current year where the amount out of which the Government had been defrauded reached a total of $1,503,203.30, which sum represented the tax on the product manufactured for a period of six years that these frauds had continued undetected, all of the product in this case having been placed on the market as butter without payment of any tax.

These five cases alone involved a total of $19,195,613.77 stamp taxes, which does not include special taxes of wholesale and retail dealers incurred on account of the purchase and sale of the product. Of this amount only $4,611,051.83 was within

the assessable period of two years, the remainder being collectible only by suit. Assessments of the taxes within this period were made and suits instituted to recover the balance, and during the fiscal year ended June 30 1915, there was collected approximately $751,000 from these five cases, and arrangements perfected whereby further recoveries of taxes are expected to be made next fiscal year.

The principal officers and employees of the companies involved in these frauds were indicted, and in three cases where trials have been held all were convicted or plead guilty. Prosecutions in a large number of cases for illicit coloration

of white oleomargarine, and various 23871o-Ab. 1915vol 1-10

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other violations of this law, resulted in conviction or a plea of guilty in every case tried since January 1, 1915.

Notwithstanding these results growing out of the thorough and sweeping investigations and vigorous efforts to enforce the law, it only emphasizes the incentive to fraud under the present oleomargarine statutes, and the need of amendatory legislation to correct these faults and at the same time afford adequate protection to the revenues and to the public.

It is again recommended that the present law be amended by repealing those provisions imposing a double rate of tax on the product and special taxes on dealers, and substituting therefor a flat rate per pound and single rates of special taxes upon wholesale and retail dealers, with provision for individual or original packages of certain sizes fixed by the law, each of which shall bear the tax-paid stamps, marks, and brands so as to clearly identify the character of the product to the purchaser.

Under such a law imposing a flat rate of 2 or 3 cents per pound, and special taxes of $240 and $24 per annum upon wholesale and retail dealers, respectively, without regard to the color of the product, it is estimated, upon the basis of production for the fiscal year ended June 30, 1915, that the total collections would amount to from $4,500,000 to $7,000,000 per annum, with a continued increase in the collections from this source in proportion to the increase in the production of oleomargarine.

Adulterated butter.

The recommendation of previous year for legislation amending the act of May 9, 1902, known as the “adulterated butter law,” is again renewed, as the defects pointed out heretofore still exist, both from an administrative and revenue standpoint.

A definite standard of moisture or butter fat content should be fixed by statute for the various classes of butter defined in the original act of August 2, 1886, as amended by act of May 9, 1902, and as the value of the product is based upon the fat content, this should be fixed as the standard in the classification of the different grades of butter covered by this law.


The law relative to the business of dealers in leaf tobacco is greatly in need of strengthening. Every leaf dealer should be required to give bond, make a true inventory on the 1st day of January of each year, and to render report of transactions either quarterly, monthly, or for such periods (and within 10 days after the close of such periods) as the Commissioner of Internal Revenue may prescribe. The commissioner should be empowered to make assessments for tax on tobacco not accounted for by leaf dealers after proper allowance has been made for loss by shrinkage, etc. It is urged that section 26 of the act of October 1, 1890, be amended so as to require registry of manufacturers of cigars, manufacturers of tobacco, dealers in leaf tobacco, and peddlers of tobacco on commencement of business only and not on the 1st day of July of each year when special taxes on these occupations are not in force.

Denatured alcohol.

In view of the large decrease in receipts from domestic distilled spirits and the probable further decrease in such receipts during the present fiscal year, it is recommended that a reasonable tax be levied on denatured alcohol, which under existing law is now wholly exempt from tax.

Fortified wine. By the act of October 22, 1914, a tax of 55 cents per proof gallon is now imposed on brandy and wine spirits used in fortifying domestic wine. This tax, however, will, under the provisions of the act, expire by limitation January 1, 1916. It is therefore recommended that a like tax be imposed on all brandy or spirits used in fortifying such wine on and after that date.

Work done by revenue agents.

The revenue agents and the field officers who have been assigned to duty under their direction during the fiscal year ended Juno 30, 1915, have, with a few exceptions, maintained the high standard that has prevailed in the past, and those agents who have remained steadfast and unswerving in the trust reposed in them are deserving of high commendation. In two cases revenue agents, with other subordinate officers, connived with illicit distillers, with the result that thousands of gallons of illicit whisky were put upon the market without payment of tax. These officers have been summarily separated from the service, and their vigorous prosecution was recommended.

Gigantic frauds upon the revenue, especially with respect to oleomargarine and distilled spirits, have been unearthed during the past fiscal year, more than have obtained in any one year during the history of the Internal Revenue Bureau. These frauds are not of recent origin, but extend back over a number of years. Taxes with respect to oleomargarine, approximately $17,600,000, have been uncovered and reported to this office by revenue agents and subordinate officers working under their direction.

Taxes amounting to $176,481.70 have been assessed on reports made to this office by revenue agents on account of illegal manipulation of distilled spirits in distillery warehouses, known as "equalizing." Of the amount so assessed there has been collected in the way of taxes and compromised the sum of $83,944.64.

The business of the moonshiner" in whisky in the Southern States, from the number of illicit distilleries reported seized during the fiscal year ended June 30, 1915, appears to be increasing. There were reported 3,817 illicit distilleries destroyed during the fiscal year 1915, as against 2,677 destroyed during the fiscal year ended June 30, 1914.

As a result of information received by the revenue agents through informers, as well as by the officers themselves endeavoring to capture these illicit distillers or destroy their distilleries and distilling apparatus, the following persons were killed: 0. B. Byrd, an informer to the still of Marion and John Pennington, Campbell County, Tenn., was killed April 13, 1915; J. S. West, acting as posse man, was killed on February 10, 1915, while raiding the still of Bud Tucker, Putnam County, Tenn.; C. P. Phlogar, deputy United States marshal,

killed May 14, 1915, while on a raid, acting as posse man, in Patrick County, Va.

There does not appear to be any abatement respecting the illegal sale of liquors by "bootleggers.” Many reports are received in this bureau from the law-abiding element throughout the country, reciting conditions as to illegal sales of liquors in the various localities by "bootleggers,” and asking this bureau to assist them in stamping out the conditions complained of. These conditions are largely brought about by failure of local officers to enforce the provisions of the State laws governing the manufacture and sale of liquor.

During the fiscal year ended June 30, 1915, there were received from income-tax agents and inspectors reports recommending assessment of corporation and individual income tax approximating $6,600,000


Congress appropriated for the operation of the Bureau of Engraving and Printing the sum of $3,639,902.48, and the bureau was reimbursed for services and materials furnished the several executive departments and bureaus to the amount of $1,839,722.02, the aggregate available for the work during the year having been $5,479,624.50. The expenditures were $234,483.29 for salaries, of which $858.21 was for employees detailed to other branches of the department and not reimbursed; $8,366.69 for custody of dies, rolls, and plates; $1,985,101.98 for compensation of employees, of which $3,545.33 was for employees detailed to other branches of the department, $898.37 of which was reimbursed; $2,008,606.76 for wages of plate printers and assistants; and $802,646.08 for materials and miscellaneous expenses, making an aggregate expenditure of $5,039,204.80, and leaving unexpended $440,419.70.

The work accomplished by the Bureau of Engraving and Printing during the fiscal year aggregates 307,634,334 sheets, an increase of 27,361,506 sheets as compared with the preceding year.

The increase in the output is due to the large number of emergency national bank notes furnished under the Aldrich-Vreeland Act of May 30, 1908; of Federal reserve notes furnished under the act of December 23, 1913; of new revenue stamps furnished under the act of October 22, 1914; and of opium stamps and orders furnished under the act of December 17, 1914.

The deliveries were 71,112,000 sheets of United States notes and certificates; 18,300 sheets of United States bonds; 19,134,418 sheets of national bank notes; 16,890,000 sheets of Federal reserve notes; 88,051,581 sheets of internal-revenue stamps; 260,735 sheets of customs stamps; 108,918,176 sheets of United States postage stamps; 63,466 sheets of United States parcel-post stamps; 266,668 sheets of Philippine postage stamps; 361,550 sheets of silver certificates, checks, documentary and internal-revenue stamps, and postal cards; and 2,557,440 sheets of checks, drafts, etc. In addition to these sheets delivered, miscellaneous work was executed to the value of $131,505.59. The face value of all classes of securities, internalrevenue stamps, postage stamps, etc., furnished by the bureau amounted to $3,558,150,626.31.

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