within the United States paid upon corporate bonds or other obligations containing a tax-free covenant except that such withholding is required at the rate of 1334 per cent if the liability assumed by the obligor does not exceed 2 per cent of the interest. Withholding of a tax of 1334 per cent is also required in the case of payments of other fixed or determinable annual or periodical income from sources within the United States to nonresident foreign corporations, except dividends paid by a corporation subject to taxation under Title I other than dividends distributed by a corporation organized under the China Trade Act, 1922, to a nonresident foreign corporation which is not a resident of China. In the case of income paid prior to the enactment of the Revenue Act of 1932 (5 p. m., eastern standard time, June 6, 1932), withholding is required at the rate of 12 per cent in lieu of the rate of 1334 per cent provided in this article. (See also section 143 and articles 761–770.)

As no withholding of tax on bond interest or other income is required in the case of a resident foreign corporation (see article 1318), the person paying such income should be notified by a letter from the corporation that it is not subject to the withholding provisions of the Act. The letter from the corporation shall contain the address of its office or place of business in the United States, and be signed by an officer of the corporation giving his official title. Such letters of notification shall be immediately forwarded by the recipients to the Commissioner of Internal Revenue, Sorting Section, Washington, D. C., to be examined.

SEC. 145. PENALTIES.

(a) Any person required under this title to pay any tax, or required by law or regulations made under authority thereof to make a return, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any tax imposed by this title, who willfully fails to pay such tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than one year, or both, together with the costs of prosecution.

(b) Any person required under this title to collect, account for, and pay over any tax imposed by this title, who willfully fails to collect or truthfully account for and pay over such tax, and any person who will fully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years. or both, together with the costs of prosecution.

Art. 781

§ 145

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(c) The term person" as used in this section includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

ART. 791. Penalties.-The penalties provided for in section 145 can not be assessed but are enforceable only by suit or prosecution. For limitations on prosecutions, see the Act of July 5, 1884, as amended, and further amended by section 1108 of the Revenue Act of 1932.

SEC. 146. CLOSING BY COMMISSIONER OF TAXABLE YEAR.

(a) Tax in jeopardy.-If the Commissioner finds that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect the tax for the taxable year then last past or the taxable year then current unless such proceedings be brought without delay, the Commissioner shall declare the taxable period for such taxpayer immediately terminated and shall cause notice of such finding and declaration to be given the taxpayer, together with a demand for immediate payment of the tax for the taxable period so declared terminated and of the tax for the preceding taxable year or so much of such tax as is unpaid, whether or not the time otherwise allowed by law for filing return and paying the tax has expired; and such taxes shall thereupon become immediately due and payable. In any proceeding in court brought to enforce payment of taxes made due and payable by virtue of the provisions of this section the finding of the Commissioner, made as herein provided, whether made after notice to the taxpayer or not, shall be for all purposes presumptive evidence of the taxpayer's design.

(b) Security for payment.-A taxpayer who is not in defautl in making any return or paying income, war-profits, or excess-profits tax under any Act of Congress may furnish to the United States, under regulations to be prescribed by the Commissioner, with the approval of the Secretary, security approved by the Commissioner that he will duly make the return next thereafter required to be filed and pay the tax next thereafter required to be paid. The Commissioner may approve and accept in like manner security for return and payment of taxes made due and payable by virtue of the provisions of this section, provided the taxpayer has paid in full all other income, war-profits, or excess-profits taxes due from him under any Act of Congress.

(c) Same-Exemption from section.-If security is approved and accepted pursuant to the provisions of this section and such further or other security with respect to the tax or taxes covered thereby is given as the Commissioner shall from time to time find necessary and require, payment of such taxes shall not be enforced by any proceedings under the provisions of this section prior to the expiration of the time otherwise allowed for paying such respective taxes.

(d) Citizens. In the case of a citizen of the United States or of a possession of the United States about to depart from the United States

the Commissioner may, at his discretion, waive any or all of the requirements placed on the taxpayer by this section.

(e) Departure of alien.-No alien shall depart from the United States unless he first procures from the collector or agent in charge a certificate that he has complied with all the obligations imposed upon him by the income, war-profits, and excess-profits tax laws.

(f) Addition to tax.-If a taxpayer violates or attempts to violate this section there shall, in addition to all other penalties, be added as part of the tax 25 per centum of the total amount of the tax or deficiency in the tax, together with interest at the rate of 1 per centum a month from the time the tax became due.

ART. 801. Termination of the taxable period by Commissioner.-Section 146 provides that in the case of a taxpayer who designs by immediate departure from the country or otherwise to avoid the payment of the tax for the preceding or current taxable year, the Commissioner may, upon evidence satisfactory to him, declare the taxable period for such taxpayer immediately terminated and cause the service upon him of a notice and demand for immediate payment of the tax for the taxable period declared terminated, and of the tax for the preceding taxable year, or so much of such tax as is unpaid. In such a case the taxpayer is entitled to the personal exemption and credit for dependents, if otherwise allowable under sections 25, 214, and 251 (see articles 291–295 and 1061), but such personal exemption and credit for dependents shall be reduced proportionately to the length of the period for which the return is made. (See section 47 and article 371.) If suit is necessary to collect a tax made due and payable by the provisions of section 146, the Commissioner's finding is presumptive evidence of the taxpayer's design. A taxpayer who is not in default in making the returns or in paying other taxes may procure the postponement until the usual time of the payment of taxes which are or may be due pursuant to this article by depositing with the Commissioner United States bonds of a principal amount double the estimated amount of taxes due for the taxable period, or by furnishing such other securities as may be approved by the Commissioner. (See section 1126 of the Revenue Act of 1926.)

Aliens departing from the United States will be required to file returns of income on Form 1040 C and to obtain certificates of compliance with income tax obligations from the collector or revenue agent in charge. A certificate of compliance is attached to and made a part of Form 1040 C. Aliens, whether resident or nonresident, who intend to depart from this country should appear before the collector or revenue agent in charge for the district in which they reside and satisfy all income tax obligations with respect to income received up to and including the calendar month next preceding that of their

intended departure. Upon payment of such obligations, or upon satisfactory evidence that no tax is due and payable, the collector or revenue agent in charge will issue a certificate of compliance to the applicant. A properly executed certificate of compliance issued by the collector or revenue agent in charge must be presented at the pier. Aliens presenting themselves at the point of departure without such certificates of compliance will be examined by internal revenue officers at that point, and such taxes as appear to be due and owing will be collected. Citizens of the United States or of possessions of the United States departing from the United States will not be required to procure certificates of compliance or to present any other evidence of compliance with income tax obligations.

If a taxpayer violates or attempts to violate the provisions of section 146, there shall, in addition to all other penalties, be added as a part of the tax 25 per cent of the tax or deficiency in the tax, together with interest at the rate of 1 per cent a month from the time the tax became due.

SEC. 147. INFORMATION AT SOURCE.

(a) Payments of $1,000 or more.-All persons, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, and employers, making payment to another person, of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments described in section 148 (a) or 149), of $1,000 or more in any taxable year, or, in the case 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, shall render a true and accurate return to the Commissioner, under such regulations and in such form and manner and to such extent as may be prescribed by him with the approval of the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

(b) Returns regardless of amount of payment. Such returns may be required, regardless of amounts, (1) in the case of payments of interest upon bonds, mortgages, deeds of trust, or other similar obligations of corporations, and (2) in the case of collections of items (not payable in the United States) of interest. upon the bonds of foreign countries and interest upon the bonds of and dividends from foreign corporations by persons 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.

(c) Recipient to furnish name and address. 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 paying the income.

(d) Obligations of United States. The provisions of this section shall not apply to the payment of interest on obligations of the United States.

ART. 811. Return of information as to payments of $1,000.-All persons making payment to another person of fixed or determinable income of $1,000 or more in any calendar year must render a return thereof to the Commissioner for such year on or before February 15 of the following year, except as specified in articles 813-815. The return shall be made in each case on Form 1099, accompanied by transmittal Form 1096 showing the number of returns filed. The street and number where the recipient of the payment lives should. be stated, if possible. Where no present address is available, the last known post-office address must be given. Although to make necessary a return of information the income must be fixed or determinable, it need not be annual or periodical. (See article 762.)

ART. 812. Return of information as to payments to employees.-The names of all employees to whom payments of $1,000 or over a year are made, whether such total sum is made up of wages, salaries, commissions, or compensation in any other form, must be reported. (But see article 813.) Heads of branch offices and subcontractors employing labor, who keep the only complete record of payments therefor, should file returns of information in regard to such payments directly with the Commissioner. When both main office and branch office. have adequate records, the return should be filed by the main office. (See article 53.)

ART. 813. Cases where no return of information required.-Payments of the following character, although over $1,000, need not be reported in returns of information on Form 1099:

(a) Payments of interest on obligations of the United States; (b) Payments by a broker to his customers;

(c) Payments of any type made to corporations;

(d) Bills paid for merchandise, telegrams, telephone, freight, storage, professional services, and similar charges;

(e) Payments of rent made to real estate agents (but the agent must report payments to the landlord if the amount paid during the year was $1,000 or more to a single person, a partnership, or a fiduciary, or $2,500 or more to a married person);

(f) Payments made by branches of business houses located in foreign countries to alien employees serving in foreign countries; (g) Payments made by the United States Government to sailors and soldiers and to its civilian employees;

(h) Salaries and profits paid or distributed by a partnership to the individual partners; and