My suggestions for carrying on the work of the Pan American Financial Conference and for establishing improved financial and commercial relations between Latin America and the United States may be summarized as follows:

First. That the 12 Federal reserve banks establish promptly joint agencies in the leading cities of all the countries of Central and South America for the purpose of providing enlarged credit facilities, as outlined in the first part of this report.

Second. That the Government of the United States provide promptly the necessary steamship facilities by subscribing the capital stock of a corporation organized for the purpose of owning and operating the necessary steamship lines.

Third. That the International High Commission on Uniformity of Laws be granted an appropriation of $25,000 to enable it to carry on the important work it has undertaken and represent the United States in the meeting of the international high commision of all the Latin American Republics.

Fourth. That a Pan American Financial Conference be held annually in the city of Washington, and that the Congress authorize the President to extend invitations to the Republics of Latin America to attend a financial conference in the city of Washington during the year 1916, and that an appropriation of $50,000 be made for said conference.

Meanwhile the group committees and the committee to arrange for a visit of our representative business men and bankers to South and Central America will carry on the work assigned to them with earnestness and enthusiasm. It is most gratifying to note the deep and general interest manifested throughout the United States in the Pan American Financial Conference and in the subject of Pan Americanism.

Respectfully,

The PRESIDENT,

(Signed)

The White House, Washington, D. C. 7424°-FI 1915-7

W. G. MCADOO.

EXHIBIT E.

PROPOSED AMENDMENTS TO THE INCOME-TAX LAW, AS RECOMMENDED BY THE FOLLOWING COMMITTEE APPOINTED BY THE COMMISSIONER OF INTERNAL REVENUE, BY DIRECTION OF THE SECRETARY OF THE

TREASURY:

E. C. Johnson, Solicitor of Internal Revenue; L. F. Speer, Deputy Commissioner of Internal Revenue; S. H. Boyd, Chief of Personal Income Tax Division; J. O. Lambert, Chief of Corporation Tax Division; and George W. English, Income Tax Attorney.

1. Strike out all after "provided" in eighth line of subdivision 1, paragraph A, and insert:

"And a like tax shall be assessed, levied, collected, and paid annually upon the entire net income arising or accruing from all sources within the United States in the preceding calendar year to persons residing elsewhere."

Explanation. This amendment is suggested in order to make the basis of taxation of nonresident aliens conform to that of citizens and residents of the United States, and remove a question arising under the present language applicable to this subject in the incometax law.

2. In line 2, paragraph B, insert "taxable" before "net income," and strike out that word before the word "person" in the following line.

In the third subdivision of said paragraph B strike out the first two lines and insert in lieu thereof:

"The entire net income arising or accruing from all sources within the United States, as hereinbefore enumerated, to persons residing elsewhere."

Explanation. This amendment is intended to harmonize the language of the law with amendment No. 1, as hereinbefore suggested, and place the taxable income of nonresident aliens upon the same basis as that of residents and citizens of the United States.

3. In subdivision D strike out all of the first "Provided further," relating to and requiring "no return of income not exceeding $3,000," and insert in lieu thereof:

"That in case of a citizen of the United States or resident thereof, no return of gross income not exceeding $3,000 shall be required; but in case of all persons not citizens or residents of the United States, all persons, firms, associations, or corporations having the control, receipt, disposal, or payment of income to such person residing elsewhere, of whatever kind and in whatever form derived from any source whatever in the United States, as hereinbefore enumerated or otherwise, shall make return for said person and pay the tax thereon, and their failure to make such return or pay such tax shall render them personally, individually, and directly liable to

double the amount of said tax and to all the penalties prescribed in this act for the failure of withholding agents or agencies to render returns and pay income taxes."

Explanation. This amendment is suggested in order to secure collection at the source of income from nonresident aliens and to emphasize the meaning of the law and its purpose by fixing the tax upon the income of all such nonresidents before the taxable subject (income) passes beyond the congressional or geographical jurisdiction of the United States, and to fix sufficient penalty to produce the required result.

4. Strike out all of paragraph 4 in subdivision E and insert in lieu thereof:

"Nothing in this section shall be construed to release the taxable net income of any person from liability for income tax, nor shall any contract entered into after this act takes effect be valid in regard to any Federal income tax imposed upon the income of any person."

Explanation. It is the purpose of this amendment to indicate more clearly the requirements of law relative to the withholding and payment of the tax on income derived from bonds and other similar securities containing a tax-free covenant.

5. Strike out all after the word "partnership" and to "provided," relating to foreign corporations, in paragraph (a), subdivision G, and insert in lieu thereof:

"But if organized, authorized, or existing under the laws of any foreign country, then upon the amount of net income arising or accruing from all sources within the United States during such year."

Explanation. This amendment is deemed necessary in order to make the language of the law in this connection conform to that used in the body of the act as suggested in previous amendments. 6. Strike out all after the word "properties," seventh line, paragraph (b), subdivision G, and insert in lieu thereof:

"Including rents or other similar payments required to be made as a condition to the continued use or possession of property not including, except as herein otherwise specified, any interest or charge paid upon any lien or incumberance of any character created in any manner upon such property."

Explanation. This amendment makes clear the meaning of the law as to the allowance of interest deductions; that is to say, it distinguishes between the interest due on liens and mortgages from any payments made in the nature of rentals or charges constituting, in the ordinary sense, an expense of doing business.

7. Begin with the beginning of paragraph B, in line 34, on page 4, strike out down to and including line 9, on page 5, and insert in lieu thereof the following:

"For the purpose of the income tax, the net incomes of a person shall be the difference between his gross income from all and every source (other than as stated in the proviso next following) and the sum of the specific deductions provided in this subdivision to be made from gross income for the purpose of ascertaining net income: Provided, That there shall not be included in the statement of gross income the proceeds of life insurance policies paid to individual beneficiaries upon the death of the insured; the amount received by the insured, as a return of premium or premiums paid by him under

life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon the surrender of the contract; the value of specific property acquired by gift, bequest, devise, or descent (but the income only from such property shall be included as income); interest upon the obligations of a State or any political subdivision thereof or upon the obligations of the United States or its possessions; the compensation of the present President of the United States during the term for which he has been elected, and the Judges of the Supreme and inferior courts of the United States in office October 3, 1913, and the compensation of all officers and employees of a State, or any political subdivision thereof, except when such compensation is paid by the United States Government."

Explanation. The reason for this suggestion of amendment is that it meets a criticism constantly made of the definition of net income as employed in this paragraph as it now stands, and it groups in one place the income specifically provided not to be included in returns of income.

The suggestion of amendment in no way changes the statute as it exists, but does state the interpretation of the statute used in administration of the law.

8. Strike out line 10 and line 11, on page 5, ending with the word "deductions," and insert in lieu thereof the following:

"In computing net income for the purpose of the annual income tax there shall be allowed as deductions from gross income:

Explanation. This amendment will cause the language of the statute to conform to the scheme of the definition of net income heretofore suggested and will be in harmony with the suggestion hereinafter for making return on the basis of gross income.

9. Change the eighth deduction, beginning in line 38, page 5, so this item will read:

"Eighth. The amount of income, if any, on which the income tax has been paid or is to be paid at the source of the income, under the provisions of this section."

Explanation. This amendment harmonizes with the practice of the office and will avoid much confusion in explaining the meaning of the language employed in this provision of the statute as it now stands and particularly as to the definition of the language "or is not fixed or certain or is indefinite or is irregular as to amount or time of accrual." The explanation as to the kind of income from which withholding of tax must be made and when is sufficiently stated in other portions of the statute.

10. Beginning with line 11, page 6, strike out all down to and including line 21.

Explanation. The reason for this is that the specification here of income not to be included in the terms of income has been transferred to the first part of paragraph B in the grouping of statement of income not to be included in returns of income.

In page 7, line 6, strike out the words "subject to the tax imposed by this section, and."

In line 7 change the word "net" to "gross."

In line 9 strike out the words "or has his principal place of business."

Line 12, after the word "States," insert:

"Or if there be no legal residence or place of business in the United States, then with the collector of internal revenue at Baltimore, Maryland,"

so that this part of paragraph D, beginning with the first sentence on page 7, will read:

"On or before the first day of March, 1914, and the first day of March in each year thereafter, a true and accurate return under oath or affirmation shall be made (by each person of lawful age, except as hereinafter provided, having a gross income of $3,000 or over for the taxable year) to the collector of internal revenue for the district in which such person has legal residence or, in the case of a person residing in a foreign country, in the place where his legal residence or principal business is carried on within the United States, or if there be no legal residence or place of business in the United States, then with the collector of internal revenue at Baltimore, Maryland, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth specifically the gross amount of income from all separate sources and from the total thereof, deducting the aggregate item of expenses and allowances herein authorized."

Explanation.-These amendments make the statute conform to the idea that the tax is levied on income and not on the individual. They definitely require the change of the basis of return from "net to "gross" income and make the place of filing return the place of legal residence of the individual, except in the case of persons residing in a foreign country who are required to make return of income, in which case the return may be filed either at the place where such person has his legal residence or where his place of business is located in the United States, and if there be neither legal residence nor place of business, then with the collector of internal revenue at Baltimore, Md., where is located the collector of internal revenue for the district in which the seat of the Government of the United States is located.

12. In page 7, line 17, after the word "authorized," insert:

"Provided, That the Commissioner of Internal Revenue shall have authority to grant a reasonable extension of time, in meritorious cases, for filing returns of income by persons residing abroad who are required to make and file returns of income and who are unable to file said returns on or before March 1 of each year."

Explanation. In the law as it stands there is no provision for the extension of time in which to make and file returns of income other than by the collector of internal revenue in case of "sickness or absence," and then only for a period of 30 days. period of 30 days. The proposed amendment will give the commissioner authority to grant adequate relief in meritorious cases.

13. Beginning on line 17, after the semicolon, strike out all down to and including line 24, substituting the following:

"Guardians, trustees, executors, administrators, agents, receivers, conservators, and all persons, corporations, or associations acting in any fiduciary capacity, shall make and render a return in the form prescribed by the Commissioner of Internal Revenue of the income coming into their custody, control, and management from