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"SEC.

(a) For the purposes of the Federal Alcohol Administration Act, the Food and Drugs Act, as amended, and of any act of Congress amendatory of or in substitution for either of said acts, no product shall be labeled or advertised or designated as neutral spirits, whisky, or gin, or any type thereof, for nonindustrial use, if distilled from materials other than grain, or if the neutral spirits contained therein are produced from materials other than grain. The term "neutral spirits" includes ethyl alcohol.

"(b) The fifth paragraph of section 605 of the Revenue Act of 1918 is hereby repealed."

H. R. 9185 is the omnibus bill referred to in previous institute bulletins. It passed the House August 22, 1935, and is now the subject of hearings before a subcommittee of the Senate Finance Committee.

The text of the fifth paragraph of section 605 of the Revenue Act of 1918, as amended, will be found in bulletin no. 2225, dated January 16, 1936.

JAMES P. MCGOVERN, General Counsel.

Re H. R. 10200.

INDUSTRIAL ALCOHOL INSTITUTE, INC.,

420 Lexington Avenue, New York City, January 16, 1936.

BULLETIN NO. 2225

Attached hereto will be found copy of H. R. 10200, being "a bill to repeal the fifth paragraph of section 605 of the Revenue Act of 1918, as amended" (U. S. C., .1934 ed., title 26, sec. 1151 C-1). It was introduced on January 14 by Representative Everett M. Dirksen, Republican, of Illinois, and has been referred to the Committee on Ways and Means.

The paragraph of the above-mentioned statute which would be repealed by the enactment of H. R. 10200 reads as follows:

"All distilled spirits or wines taxable under this section shall be subject to uniform regulations concerning the use thereof in the manufacture, blending, compounding, mixing, marking, branding, and sale of whisky and rectified spirits, and no discrimination whatsoever shall be made by reason of a difference in the character of the material from which same may have been produced."

The foregoing paragraph was originally incorporated in section 304 of the Revenue Act of 1917, approved October 3, 1917, without, however, the words "or wines", which were included in the above-quoted paragraph of section 605 of the Revenue Act of 1918, approved February 24, 1919.

Section 605 of the Revenue Act of 1918 is that which imposes "a tax of 30 cents on each proof-gallon and a proportionate tax at a like rate on all fractional parts of such proof-gallon on all distilled spirits or wines hereafter rectified, purified, or refined in such manner, and on all mixtures hereafter produced in such manner, that the person so rectifying, purifying, refining, or mixing the same is a rectifier within the meaning of section 3244 of the revised statutes, as amended: Provided, That this tax shall not apply to gin produced by the redistillation of a pure spirit over juniper berries and other aromatics." For the purposes of this bulletin it is not deemed necessary to quote the complete text of such section 605.

JAMES P. MCGOVERN, General Counsel.

[H. R. 10200, 74th Cong., 2d sess.]

IN THE HOUSE OF REPRESENTATIVES,

January 14, 1936.

Mr. Dirksen introduced the following bill; which was referred to the Committee on Ways and Means, and ordered to be printed:

A bill to repeal the fifth paragraph of section 605 of the Revenue Act of 1918, as amended

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the fifth paragraph of section 605 of the Revenue Act of 1918, as amended (U. S. C., 1934 ed., title 26, sec. 1151 (c) (1)), is hereby repealed.

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DEAR SENATOR KING: In accordance with the permission given to me at last evening's session of the public hearings on H. R. 9185 to supplement my views for the record, I would now direct attention to a situation which impresses me as quite important in regard to section 308 of H. R. 9185, amending section 602 of the Revenue Act of 1918.

It is understood that the Treasury Department has furnished amendments to the bill which include radical changes in said section 308. The observation herein made relates to the purposes and objects of such section as it appears in the original act, and any amendment now proposed to such section should be considered in view of the original intent.

I am, as you may know, very much interested in this section as it relates to alcohol, and reference may be had to the correspondence addressed by me to you under date of January 17, 1936, and which is set forth in part 1 of the hearings held January 13, 15, and 16, 1936, at pages 121 to 127.

Section 602 of the Revenue Act of 1918, now sought to be amended, consists of four paragraphs. This section appeared in the official 1925 edition of the Code of the Laws, title 26, the separate paragraphs being sections 369, 370, 310, and 322, respectively. The section also appeared in title 26 of the United States Code Annotated at sections 369, 370, 310, and 322. The proposed amendments (sec. 308, H. R. 9185) relate to the first paragraph of section 602, same being section 369 of the code.

The code was revised and a new edition issued in 1934. Title 26 of the United States Code Annotated was also revised in 1935, new volumes issued covering such title, and the provisions relating to distilled spirits are found in volume 3, embracing sections 1150 to the end. The sections, as contained in the original 1925 editions, were renumbered in the new 1935 editions, and in the front of the new volumes of the annotated code (title 26) will be found a Table of Corresponding Sections showing the section number of the 1925 edition and the corresponding number in the new 1935 edition.

In the new 1935 edition, after the reference to section 369 (which, as above stated, constitutes the paragraph of sec. 602 now sought to be amended) the statement is made that such section was superseded by chapter 3 of title 27. Section 369 of the 1925 edition of the official code does not now appear in the 1935 revision nor does such provision appear in the 1935 edition of the annotated code.

Chapter 3 of title 27 of the United States Code Annotated, which, as above stated, superseded section 369, constitutes title III of the National Prohibition Act relating to industrial alcohol and still appears as chapter 3 of title 27 of the code.

It is, therefore, most interesting and impressive to note that the authorities who revised the code, both the official edition and the annotated code, were of the definite opinion that the first paragraph of section 602 of the Revenue Act of 1918, now sought to be amended, had been superseded and taken over by title III of the National Prohibition Act and was therefore regarded no longer applicable, necessary, or proper. This is also a very strong indication that section 602 in question related solely and exclusively to alcohol as distinguished from other spirits. It is possible that such section may have been expressly repealed but, if not, it was the view of the revision committee in charge of revising the code that such section had been superseded by the provisions of title III of the National Prohibition Act and was therefore inapplicable and unnecessary. Title III is, as you know, still in effect and has, in fact, been reaffirmed, broadened and strengthened by subsequent legislation (Liquor Law Repeal and Enforcement Act, approved Aug. 27, 1935).

It being, therefore, most convincingly shown that the first paragraph of section 602 of the Revenue Act of 1918 (26 U. S. C. A. 369) relates exclusively to alcohol, any amendment to such section should now be considered in its relation to alcohol. No modification or change in the section should be approved which in any way whatsoever adversely affects the production, warehousing, distribution, or use of alcohol in accordance with the purposes and

objects of title III of the National Prohibition Act and regulations issued thereunder.

With assurances of esteem, I remain,
Very sincerely yours,

JAMES P. MCGOVERN,

General Counsel, the Industrial Alcohol Institute, Inc. Senator KING. Is there anything further from any witness? Do you desire to say anything further, Judge DeVries? Judge DEVRIES. We have nothing further.

Senator KING. At this point I desire to submit for the record a letter I have received from Mr. H. E. Howe, of the American Institute of Chemical Engineers.

(The letter referred to follows:)

Hon. WILLIAM H. KING,

Chairman, Senate Finance Committee,

Washington, D. C.

FEBRUARY 10, 1936.

DEAR SENATOR KING: As chairman of the industrial alcohol committee of the American Institute of Chemical Engineers, an organization of approximately 1,400 technical men, I wish to have placed in the record the opposition of that body to the amendment proposed by Senator Murphy, of Iowa, to H. R. 9185.

The proposed amendment is to a bill drawn to insure the collection of revenue on intoxicating liquor, to provide for the more efficient and economical administration and enforcement of the laws relating to the taxation of intoxicating liquor, and for other purposes. The amendment undertakes to define according to its source a perfectly definite identifiable chemical compound, namely, ethyl alcohol. The American Institute of Chemical Engineers as such is not directly concerned with the nonindustrial use of ethyl alcohol, where it is affected by the Federal Alcohol Administration Act, but it is convinced that it is both unsound and unwise to set up for this or any other purpose a definition of a chemical compound as something derived from a particular source in contradistinction to the established properties of the product, regardless of how it is made.

The basic purposes of the Food and Drug Act are to prevent the manufacture, sale, or transportation of adulterated or misbranded food and drugs, but there is no reference in the Food and Drug Act nor in the bill S. 5, now pending, to the industrial or nonindustrial use of distilled spirits or the beverage or nonbeverage use of alcohol. The Food and Drug Act has to do with the purity and quality of the articles which it covers and not their use, and in the pending legislation the term "drugs" refers to preparations recognized in the United States Pharmacopoeia, in which ethyl alcohol as such has long been recognized, quite irrespective of the source of its manufacture, being concerned only with its quality and purity.

Under the wording of the proposed amendment all other sources than grains themselves would be barred as a source of ethyl alcohol. This would include sugars, whether derived from the cane, the beet, or corn; starches that might be converted into fermentable carbohydrates; various farm crops, such as the Irish and the sweet potato; artichockes, which are being widely discussed as a source of alcohol to give variety to farm crops; and many agricultural wastes. Ethylene as a source would likewise be barred. Since alcohol is alcohol, regardless of the raw material from which it is made, it is not difficult to foresee numerous difficulties and unjustifiable expense in the enforcement of such a plan of manufacture, and the amendment can scarcely be viewed as anything else than an effort to discriminate in favor of one small group at the expense of the others.

We urge that action on the amendment be unfavorable.

Very truly yours,

H. E. HOWE,

Chairman, Industrial Alcohol Committee,
American Institute of Chemical Engineers.

Senator KING. The hearings will now be closed and the committee will go into executive session.

(Thereupon, at 5: 10 p. m., the hearing was closed.)

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