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Tiretó, U T )0 *•' LIBRA RY ponivi 5030 JUN 14 1972 TREASURY DEPARTMENT TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, June 10, 19^2, Press Service No, JP-O The Bureau of Customs announced today preliminary figures for imports of commodities within the quota limitations provided for under the Philippine Independence Act, as amended hy the Act of August 7, 1939, from January 1 to May 30, 1942, inclusive, as follows: Products of Philitroine Islands : S Period Established Quota : Quantity : Unit of »Imports as of : Quantity :Mav 30. 1942 \ Coconut oil Calendar year 448,000,000 Pound 31,149,515 Refined sugars Calendar year 112,000,000) Pound 2,346,712 !" ) > ) 1,798,000,000) Sugars other than refined Calendar year Cordage Calendar year 6,000,000 Pound 323.826 Buttons of Pearl or shell Calendar year 060,000 Cross 72,057 Cigars Calendar year 200,000,000 Scrap tobacco and stemmed and unstemmed filler tobacco Calendar year 4,500,000 1/ Pound. 43,232,544 Number 521,366 Pound 210,675 The duty-free quota on Philippine Sugars applies to 850,000 long tone, of which not more than 50,000 long tons may be refined sugars. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, June 10, 19^-2. Press Service No* The Bureau of Customs announced today preliminary figures for imports of commodities within quota limitations provided for under trade agreements, from the beginning of the quota periods to May 30, 1942, inclusive, as follows* Commodity * Established Quota * Unit of *Imports as of s Period & Country * Quantity * Quantity tMav 30. 1942. Cattle less than 200 pounds each Calendar year Cattle, 700 pounds or more each (other than dairy cows) Quarter year from April 1, 1942 Canada Other countries 100,000 Head 51,720 it 8,280 » 39,111 49,447 (Tariff rate quota filled) Whole milk, fresh or sour Calendar year 3,000,000 Callon 1,965 Cream, fresh or sour Calendar year 1,500,000 Gallon 429 Pish, fresh or frozen filleted, etc., cod, haddock, hake, pollock, cusk and rosefish Calendar year 15,000,000 Pound 4,250,471 White or Irish potatoes Certified seed 12 months from Sept* 15, 1941 90,000,000 Pound 33,004,274 12 months from Sept* 15, 1941 60,000,000 Pound 1,247,939 Other Cuban filler tobacco, unstemmed or stemmed (other than cigarette leaf tobacco), and scrap tobacco Calendar year 22,000,000 Bed Cedar Shingles Calendar year 2,617,111 Square 1,438,498 41,774 Number 14,079 Silver or black foxes, furs, and articles* Poxes valued under $250 ea. and whole furs and skins Tails Period - May Nov, 1942* All countries 12 months from December 1, 1941 5,000 Pound (Unstemmed equivalent) 9,214,925 Piece (Import quota filled) ✓ - Commodity 2 : Established Quota * Unit of sPeriod & Country i Quantity s Quantity : X Imports as of May 30. 1942 Silver or “black foxes, furs, and articles* Paws, heads, or other separated parts 12 months from December 1, 1941 500 Pound Piece plates n 550 Pound Articles, other than Piece plates n 500 Unit Crude petroleum, topped crude petroleum, and fuel oil Calendar year Venezuela 2,,082,574,771 Netherlands Colombia Other countries Molasses and sugar sirups containing soluble nonsugar solids equal to more than 6$ of total soluble solids (Import quota filled) None 22 Gallon 291,865,057 630,097,196 it 226,027,106 94,662,490 it 84,750,183 150,868,343 it Calendar year à^Oo- 1,500,000 Gallon (import quota filled) 665,594 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, June 10, 1942. Press Service No. 32-2 The Bureau of Customs announced today that preliminaiy reports from the collectors of customs show imports of cotton and cotton waste chargeable to the import quotas established by the Presidentas proclamations of September 5, 1939, and December 19, 1940, as follows, during the period September 20, 1941, to May 30, 1942, inclusive? COTTON HAVING A STAPLE OF LESS THAN 1-11/16 INCHES (OTHER THAN HARSH OR ROUGH COTTON OF LESS THAN 3/4 INCH IN STAPLE LENGTH AND CHIEFLY USED IN THE MANUFAC TURE OF BLANKETS AND BLANKETING, AND OTHER THAN LINTERS). Annual quotas commencing September 20, by Countries of Origin? Country of Origin Egypt and the AngloEgyptian Sudan ...... P e r u ................. British India ......... China ................. Mexico ............... Brazil ............... Union of Soviet Socialist Republics .. Argentina ............ H a i t i .......... . Ecuador........... . Honduras .............. Paraguay ............. Colombia .............. I r a q ................. British East Africa .... Netherlands East Indies ............. Barbados............ . Other British West Indies 1/ .......... Nigeria ....... ....... Other British West Africa 2/ .......... Algeria and Tunisia .... Other French Africa 3/ . «—■r (In Pounds) ? Staple len¿rth less : than 1-1)f 8" • • ■ f • Imports Sept. : Established ê 20, 1941, to • May 30. 1942 • 1 Quota ?Staple length l-l/8rt or Jmore but less than l~ll/l6tt % m i Imports Sept ? Established î 20,1941, to ? May 30. 1942 ? Quota 783,816 247,952 2,003,483 1,370,791 8,883,259 618,723 8,883,259 618,723 475,124 5,203 237 9,333 752 871 124 195 2,240 203 2 9,333 — — — - *m mm mm mm 29,909 170 71,388 - — 12,554 ' *4 21,321 5,377 30 16,004 — ■ 689 247,952 69,452 43,451,566 2,056,299 64,942 2,626 31,136,080 2,056,299 mm mm mm 3,808 6 435 506 «. 2 6 mm mm m . 30,139 m — mm 2,002 1,634 — mm mm Total 45.656.420 9.828.954 -- ---- 14.516.882 1/ Other than Barbados, Bermuda, Jamaica, Trinidad, and Tobago. 2/ Other than Gold Coast and Nigeria. 3/ Other than Algeria, Tunisia, and Madagascar, 33.192.563 - 2 - COTTON CARD STRIPS 2/, COMBER WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTHERWISE ADVANCED IN VALUE. Annual quotas commencing September 20, by Countries of Origin: Total quota, provided, however, that not more than 33-1/3 percent of the quotas shall be filled by cotton wastes other than card strips 2/ and comber wastes made from cottons of 1— 3/16 inches or more in staple length in the case of the following countries: United Kingdom, France, Netherlands, Switzerland, Belgium, Germany, and Italy: Country of Origin ; Established : TOTAL.QUOTA • m (In Pounds) TOTAL IMPORTS : Established Sept. 20, 1941,: 33-1/3$ of to Mav 30. 1942: Total Quota United Kingdom ... ,.. Canada ........... ... France.......... British India .... Netherlands ...... Switzerland...... Belgium......... Japan ............ China ............ Egypt ........... C u b a ............ Germany.......... Italy........... 4,323,457 239,690 227,420 69,627 68,240 44,388 38,559 341,535 17,322 8,135 6,544 76,329 21,263 434 231,615 Total 5,482,509 301,676 — 69,627 — — — — Imports Sept. 20,1941, to . Mav 30.19421/ 1,441,152 — 75,807 — 22,747 14,796 12,853 — m — — — - — - - — — — — - 25,443 7,088 — 1,599,886 434 1/ Included in total imports, column 2, 2/ The Presidents proclamation, signed March 31, 1942, exempts from import quota restrictions card strips made from cottons having a staple 1-3/16 inches or more in length. -oOo- 434 — TREASURY DEPARTMENT Washington POR RELÉASE; MORNING NEWSPAPERS, Friday, June 12, 19^2,__________ The Secretary of -the Treasury, by this public notice, invites thttée¡boxxtá-¿::of~91~&a& tenders for .$300,0^^ Treasury, hills, * ;tb b e ^spüéd, on a discount: basis* under competitive bidding. ' h i IT 8 o f this series will be' 'dated June 17, 19^2, September 16, ■interest. Í9^2, The and’ will mature when the fa c e 1 amount will„be payable without They will be issued in bearer form only, and in denomi- riatlons of $1/000;' #5, 9$0,‘,$10, 000,* $100,000, '$500,000, ' and $1, 000, 000 (maturity value ). Tenders will be received at Federal Reserve'Banks.and Branches up to the closing hour, two o ’clock p.m., Eastern war time,. Monday, June 15’, 19^2, Tenders will not be received at the Treasury Depart ment, Washington, Each'tender must be for an even multiple of $1 ,000, and the price offered must be expressed on the basis of 100 , with not more than three decimals, e, g., 99*925* Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on June 17, 19^2, The income derived from Treasury bills, whether interest or gain from 'the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other dispo sition of Treasury bills shall not have any special treatment, as such,, under Federal tax Acts now or hereafter enacted. The bills shall be subject to estate, inheritance, gift, or other excise 32-3 (Over) 2- - • " V j r v r .•■rr'.V^ ,.,j. :■/. **• taxés, fcfcether Federal or State, but shall be exempt from all taxa tion now or hereafter Imposed on the principal or Inter®8^ thereof b r any Stated, ■-or ?-the rpòsapaftlaa«;- oêteth*...ün,lKta^. jt a$ es, or by any. local taxing authority. For purposes of taxation the amount of discount 'àt ¿Which Treasury. bills are briginally-#old by the Unit e<i States,shall be considered to be interest. Under Sections WZ and117 (a ) (1 ) of thè Internai Revenue Code » :as; amended of the Revenue Act of 19kl, the amount of discount at which bills Issued hereundeb are sold shall* not be considered to accrue.until such bills shall be sold, redeemed or otherwise disposed of, ana such bills are excluded from consideration as e^ltal^asef taf. .. Accordingly, the owner of Treasury bills (other than life insurance companies ) Issued hereunderjneed. Include *in his incpme_ tax.*ra$uMi,. only the difference between the price paid for such bills whether^ on original^issuè 'Or oh*bubòé£juent purchase, and the amount, actually received either upon sale or redemption at maturity during thè taxable year for which the return is made, as ordinary^gain o r Ip.88* ■ Treasury’Department Circular-;No*: -as amended, apd this notice, prescribe ths tirmsi of the Treasury.bills, and govern the. -conditions'-O? their 'issue. ‘ Copies -of.the circular may be òptAaine,d from any Federal,Reserve Bank or Branch. p ; ;'vJ >'¿*'< .XK -oOo- ■•'X . ' / * , * * \ iV ? ' Ox f . * 1 » •• * . i . f • • ’ •t ‘..s' '»i *p .■V;: § t : i v * -V' *i -'>.1 ? ■»•*> /»p; ■ a-; ■ *L 4 < i* ' ?» <m «vil • V t • ' .■;’ S ; 1 v‘ :--I f $Ü tT.v -7 ,1 ' # :tv *\ V ; TREASURY DEPARTMENT Bureau of Internal Revenue Washington FOR IMMEDIATE RELEASE, Friday, June 12, 1942, Press Service No, 32-4 Commissioner of Internal Revenue Guy T. Helvering announced today that, as the result of the War Bond drive which has been under way since June 1, the employees of the Bureau of Internal Revenue, both in Washington and the field, have authorized the allotment from their salaries of an amount in excess of 10 percent of their gross pay. At the close of business on June 10, 26,197 employees representing 90 percent of the total personnel of the Bureau of Internal Revenue had allotted $6,&53i121.0^ from their annual compensation for the purchase of War Savings Bonds. for the Bureau was #6,665,1^6. The quota TREASURY DEPARTMENT Washington FOR RELEASE, MORNING- NEWSPAPERS, Monday, June 15. 19^2. 6712742— Press Service No. 32-5 ------ (The following address by Assistant Secretary of the Treasury John L. Sullivan, before the United Nations Flag Day rally in Chicago, Illinois, is scheduled for delivery at 2 p.m.f Central War Time, Sunday, June 1*K 1942, and is for release at that time,) I am very happy to Join with you folks today In celebrating Flag Day, and United Nations Day and in paying tribute to those gallant Americans who in distant lands are fighting under the leadership of one we honor today — General Douglas MacArthur, It was a stroke of genius to combine Flag Day and United Nations Day. I believe the same spirit out of which Flag Day arose and which made of America a home of Liberty and a fortress of Freedom exists again today. That spirit is casting its influence over the widened horizons of a shrinking world. It gives promise to the United Nations and to all men of good will of an era of liberty, peace, and progress. One hundred sixty-five years ago today, on the l^th of June, 1777, the Continental Congress selected as the banner of this new Republic the first model of that flag we love so well. That flag has since become for all the world the symbol of Justice and fair play, Pause a moment and consider the gallantry and the faith of the men and women who made the Stars and Stripes possible. Thirteen handfuls of pioneers in isolated outposts. They dldnft know each other very well; they had never relied on each other very much. Each colony had its own government, its own militia, its own special problems and interests, Communica tion among them hardly existed, and transportation was most difficult. It took ten days to make the Journey from Boston to Philadelphia that we now make by plane in an hour and a half. Then the Journey from New Hampshire to Georgia took ten times as long as it takes today to fly to Australia and back, The colon ists were a band of friendly strangers, facing the armed might of a great military power. They ware Impoverished in all sg.ve the spirit and the courage to seek a pattern of life never before known and to establish a land where mankind could live truly free and truly equal, We know what they suffered, from Lexington through Yorktown. We remember their hunger, their misery, their gallant deaths. We now know the value of every sacrifice they made, for they established Democracy in a land where it could and did achieve Freedom, Liberty and Equality, And this great nation today is - 2 - a monument to those valiant men and women, men and women who really believed In the brotherhood of man. They saw a vision of a better life and they dared to die to make that dream come true. Today the civilized world faces the same opportunity America faced 165 years ago. True, it is composed of geographi cally isolated nations, of differing races and creeds and tongues. But in terms of transportation and communication all the nations of the earth are closer to each other today than the thirteen colonies were. And during the last few years America, yes, and Britain and Russia and China and a host of conquered nations have learned a lesson it took America eighty years to learn. Eighty-five years ago this week, speaking in Springfield, Abraham Lincoln declared that this nation could not endure half slave and half free. Today you and I and thoughtful people all over the world know that civilization itself cannot endure in a world half slave and half free. We know that on this shrinking globe the dwelling place of Freedom is the world Itself. We know now that if Freedom is endangered anywhere it is in peril everywhere. We know that what the Chinese do today to the Japs in Chekiang, or the British do to Rommell in Lybia, or the Russians do to the Nazis at Kharkov will have a more direct and a more immediate effect on all of us than the Battle of Bunker Hill had on the Colonists of Virginia and the Carollnas. At long last we have learned how false is the security $f Isolation, And so it is that America and the twenty-sis other United Nations whose flags fly above you today have Joined together, Just as the thirteen colonies did, in a campaign of mutual helpfulness to defend our common liberties. Here*s what we propose to do; We propose to preserve for ourselves and our children the freedom and the opportunity which we Americans have created in this nation.. We propose to help the nations allied with us to defend their threatened independence. And we propose to restore the liberty which has been trampled and defiled and stolen from the lands of our ancestors— to bring freedom again to the people of Holland and Belgium— Poland and Norway and Denmark to China and France and Czechoslovakia — to Greece, and the Ukraine, — to Albania and Yugoslavia — to all the beaten and broken but unconquered countries. «t ^ M And here 18 how we Americans propose to do this: We will build and man a Navy that will sink our enemies' ships beneath all of the seven seas. We will build and man an air force that will sweep the world ' 8 skies clear. We will man and equip armies that will crush the Nazis and Japs in Europe and Asia and Africa or wherever we have to chase them. We will smash their war machines until there isn't enough left to sell for Junk. We will crush them so completely that they will never again dare to lift their hands against the free American people, That is our plan for overwhelming the enemies of our nation and of all free people, and these are the ways we will accomplish that plan. Every man who is fit and of an age to fight must fight. The Navy is asking Chicago for 10,000 volunteers. The Navy will get them. The Army Air Force is calling for men to fly its planes, and to service them, and to do ground work that will release flyers and fighters for active service. These are opportunities for those of us who are young enough and fit enough for active service, to do our part in this common struggle. Many of us who cannot actually fight can still serve actively and vitally by making the weapons of our victory — the tanks and planes, the guns and ships, that will outshoot and overpower the enemy. They also serve who make the steel, and tend the lathes, and assemble the sinews of war. As new millions of citizens Join the armed forces, as new munitions plants swing into production, millions more of our women and middle-aged men will find this their way of serving America. And this work must go forward without delay or interruption, as faithfully and continuously as the soldiers and sailors themselves serve. And finally, all the rest of us, the millions of the civilian population, every man, woman and child, can and must serve the nation by lending our dollars. We must enlist them in our country's war effort — every last dollar we can spare — and many a dollar that we cannot spare. We must enlist those dollars to buy the tanks and planes anc guns to batter our enemies — dollars for ships — dollars to feed and clothe and pay our soldiers and sailors — dollars, billions of them to get our war effort into high gear and to keep it rolling in high gear. ~ k~ The nation demands of its sailors and soldiers one hundred percent of all they have, even unto their very lives. The nation expects of the workers in its shipyards and munitions factories one hundred percent of their work and ability. Now the nation is asking of its people — all its people — that they set aside at least ten percent of all their income to pay for the things needed to wage this war to a successful finish. It asks at least a dime out of every dollar — a dollar out of every ten, to buy the War Bonds* that will buy the planes and guns and tanks and ships our fighting men must have. Our record of War Bond purchases is a record to be proud of. But good as it is, it is not yet good enough. Our national production for war has grown so greatly and so fast that our war expenditures now amount to four billion dollars a month. A large part of that staggering amount must be-raised by War Bond purchases purchases every pay day by you and me, and every loyal American. We must literally buy Bonds until it hurts. We — you and I — must provide the money to win this war. You know that there*s no sense in building a bridge three-fourths of the way across a river. We must build this Bridge of Bonds all the way across, to carry our men and our weapons to victory. To do this will mean buying Bonds first — bonds Instead of luxuries; bonds Instead of vacations; bonds instead of pleasures; bonds instead of scores of the things we Americans have been used to buying. And I ask you to remember, when you start to buy some article which you do not really need, that you are actually depriving a soldier or sailor or aviator, of that much equipment or arms or ammunition or some civilian war worker of an article Which might have made him or her a more productive worker for our common cause. Money which you invest in War Bonds is not money spent but money saved. The bonds you buy are the finest, strongest securities in the world. They are backed with the entire resources and strength of the United States Government. They increase in value as you hold them so that when they come to maturity you will receive $4- back for every #3 y°u spent for them. In the meanwhile you capnot lose a penny -<*- because United States War Savlpge Bonds have a guaranteed value, at all times, of at least the full price you paid for them. And all the time they give you an ever-increasing fund of savings to fall back upon when you need it, and to plan a secure future for your family. The people of Chicago and of Illinois are to be congratu lated upon their splendid response to our War Savings Bonds appeal, Your record ranks high among the cities and states of the nation, But the faot remains that more -- far more War Bonds must be purchased and at a greatly accelerated pace, I am r 5 confident that the treasury can rely upon you. You know what le at 8take. You know that no one cftx place a price tag on the freedom of speech. You know that*no sum is too great to pay for freedom of worship. You know that freedom from want and freedom from fear are beyond evaluation, And I know you will scrimp and save to protect those priceless freedoms. This will be a hard war. It may be a long.war. No one can foretell Just when or how it will end. But of this much I am sure: Whether it lasts one year or five, those years will bee America at her best. There is a spirit abroad in this land today that lifts men and women above themselves. Literally rttillions of our people who have never before shown any great interest in public affairs or the activities of their own communities are today willingly and proudly giving their time and wbrk to a gallant purpose. They are taking first aid courses, they are selling War Bonds, they are training in hospitals as nurses aides, they are driving trucks and ambulances. They are sitting up half the night every night as airplane spotters and wardens. Without pay they are doing the hard, dirty, thankless Jobs that this new kind of war inflicts upon a people. And for mobt of them these thankless Jobs have become the most important thing in their lives. Here in Chicago as everywhere in the country, it is an inspiration to see how our people have rallied to those unaccus tomed tasks and how well they are doing them. It is a convincing demonstration of democracy at work, and it carries with it a promise of great things for the future. These millions of new unselfish public servants must not lose their interest in public affairs and retire into their former seclusion when this war ends. I donft think they will. I think this awakening of the democratic processes will mean a revitalized America. So too will the voice of these millions be heard at the peace tables. All of us in America today would gladly give our lives to prevent a repetition of what we are now going through. A single generation that knew not only Chateau Thierry, Belleau Woods, Soissons and the Argonne but also knew Pearl Harbor, Bataan, Wake and Guam ~ we know what war means — and we know the misery that follows a war. We donrt shrink from war. But we do recoil from the stupidity of a bungling peace that begets more wars and breeds more misery, I think I speak the mind of the United Nations and I know I speak the mind of America when I say that this war must end with a Just and enduring peace. It must not happen again. This nation and our allies must build a world of international peace and progress that will endure for generations. To this we dedicate ourselves today. This we shall achieve, God willing, under the leadership of one of the greatest friends and leaders humanity has ever known Franklin Pelano Boosevelt, 0O 0 - Statement by Randolph E. Paul, Tax Adviser to the Secretary of the Treasury, before the Ways and Means Committee of the House of Representatives on the taxation of life insurance companies June IS, 1942. The plan for the taxation of life insurance companies that is outlined in this statement differs from the plan that I proposed in my statement of March 3. We have been assured that it has the active support and approval of the two national associations of the life insurance industry, the Association of Life Insurance Presidents, and the American Life Convention, as well as of independent companies that are not members of these two associations. It also has the ap proval of Mr. Stam of the Staff of the Joint Committee. The Treasury feels that its original plan, arrived at after long and careful con sideration of the problem, is sound and equitable. At the same time, in view of the unanimous representations of the industry, the Treasury would not object to the acceptance of the modified proposal as a tenta tive solution of the problem of the taxation of the life insurance in dustry. In order to clarify the basic issues involved in deciding on the proper method of taxing life insurance companies, I should like to discuss first, the present situation with respect to the taxation of life insurance companies, second, the original Treasury proposal, third, the plan proposed by the industry. 1* The taxation of life insurance companies under existing law Life insurance companies of the United States have combined assets of over $30 billion, an annual premium income of about $4 billion, and an annual investment income of about $1 billion. In 1940, this im portant segment of our economy paid a total corporation tax of only $738,000 or less than l/lO of 1 percent of investment income. None of the 25 largest life insurance companies paid any tax at all in 1938 or 1939. In 1940 only one of the 25 largest companies paid a tax and its tax amounted to only $21,000. Of the almost 700 life insurance com panies that filed income tax returns for 1940, only 139 paid any tax, and these paid only an average of $5,300 per company. There are two main reasons why life insurance companies have paid virtually no tax in repent years. First, under existing law, which taxes only investment income, the companies are allowed an extremely liberal deduction for earnings needed to maintain reserves. This deduction is computed at the rate of 3-3/4 percent of the mean of the reserves required by law (in a few cases, at 32-6 - 2 - an even higher rate), although the average rate of interest earned by all life insurance companies is less than 3 — 1 / 2 percent, and the average rate of interest assumed in computing reserves is about 3-l/4 percent. Second, under existing law, life insurance companies are in effect allowed to deduct part of their tax-exempt interest twice. The total amount of tax-exempt interest is excluded from the gross investment in come. The remaining, taxable part of the gross investment income is then reduced by the a.llowance for earnings on reserves, computed at 0-3/4 percent of the mean of the legal reserves. Part of the earnings on reserves are derived from tax-exempt interest; yet the whole allow ance for reserve earnings is deducted from taxable investment income. That part of tax-exempt interest used to maintain reserves is therefore deducted twice, once by the exclusion of tax-exempt interest from the tax base, and a second time as part of the reserve earnings deduction. 2. The original Treasury proposal In my statement before your Committee on March 3, I outlined a proposed tax ba.se for life insurance companies that would eliminate these defects in the present law, at the same time that it retained the principle of taxing only investment income. The tax base proposed in my March 3 statement eliminated the double deduction of tax-exempt interest by disallowing that percentage of the reser\re earnings deduction which tax-exempt interest bears to the excess of investment income over other deductions. (See Appendix 1, Example 1.) It reduced the reserve earnings deduction by substituting for the present interest rate of 3-3/4 percent a weighted average of 3-l/4 percent and the actual rate of interest assumed by the company in com puting its reserves. The average was computed by giving a weight of 65 percent to the 3-l/4 percent rate and a weight of 35 percent to the actual assumption rate. In this way, the reserve earnings deduction was made fair and equitable among companies, so that two companies with the same volume of business and the same investment income irould pay approximately the same tax, regardless of how they compute their re serves. (See Appendix 1, Examples 2 and. 3.) In addition to these major changes in the tax base the Treasury’s original proposal included three minor changes designed to relieve inequities and hardships that might otherwise have arisen: (1) All interest paid on all sn.pplementary contracts not involving life, health, or accident contingencies, such as a contract to pay the insurance bene fit in 10 annual instalments, is allowed as a deduction. At present, a - 3 - deduction is allowed only for interest on contracts in which the manner of payment is elected by the beneficiary and, for mutual com panies, only for interest at the rate guaranteed in the contract. (2) Re serves computed on the preliminary term plan, a plan which is used primarily by the smaller and younger companies and which gives a smaller reserve than the plan commonly used, are increased by 7 percent in computing the reserve earnings deduction. This put these reserves on the same basis as other reserves. (3) The limit on in vestment expenses, other than specific real estate expenses, that is now imposed if any of the expenses are computed by allocating expenses between investment and other activities is made somewhat more generous. The present limit of l/4 of 1 percent of invested assets is replaced by a sliding scale limit of l/4 of 1 percent plus l/4 of the excess, if any, of the rate of interest actually earned over 3-3/4 percent» (For a more detailed statement of the original Treasury proposal, see Appendix 2.) 3. The industry -plan In preparing these recommendations, the Treasury held numerous conferences with representatives of the principal organizations of life insurance companies as well as with representatives of many individual companies. The views expressed by them were given every practicable consideration in the development of these proposals. We have been informed by representatives of the insurance in dustry that the proposed elimination of the double deduction for tax-exempt interest, and the proposed change in the limit on invest ment expenses are entirely acceptable. Further, the industry accepts the original formula proposed by the Treasury as a method of determin ing the aggregate tax liability for all insurance companies combined. It does not, however, accept the original Treasury proposal as a method for determining the tax liability of each company separately. The in dustry therefore proposes that the Treasury formula be used to deter mine the aggregate tax base of all companies combined; but that a dif ferent method be used to distribute the total tax among the insurance companies. The industry proposal is that a single new deduction (to be called a Hreserve and other policy liability deduction”) be substituted for the present reserve earnings deduction, the deduction for interest paid on supplementary contracts, and the deduction for deferred dividends. This new deduction would be a flat percentage of net investment income after deducting tax-»exempt interest, the percentage to be the same for all companies. This percentage would be determined in such a way as to give the same aggregate deductions for all companies as under the original - 4 - Treasury proposal described above» For example» for 1941» the aggregate deductions of all companies under the original Treasury proposal for re serve earnings, interest on supplementary contracts, and deferred dividents amount to approximately 93 percent of the aggregate net investment income after deducting tax-exempt interest. Consequently for the taxable year 1942, each company would be allowed a deduction of 93 percent of its net investment income after deducting ta*-exempt interest.17 For subsequent taxable years, the corresponding percentage would be determined by the Secretary of the Treasury. In summary, under the industry plan, each company*s tax base would equal investment income less investment expenses less tax-exempt interest less a flat percentage of the remainder, the percentage to be based on the aggregate deductions of the industry under the Treasury formula. (See Appendix 1, Example 4») This statement covers the basic problem of the general method to. be used in taxing life insurance companies* Some subsidiary problems remain. We are ready to outline these at the Committee*s convenience* 1/ The 93 percent is based on preliminary figures and is subject to revision on the basis of a more complete analysis of 1941 data. Appendix 1 - Examples of proposed changes in the taxation of life insurance companies Example 1 . 2. 3. 1 - Double deduction of tax-exempt interest under present law and original Treasury proposal Investment income $4,000,000 Expenses, interest paid, and other deductions 500,000 Investment income after deductions (Item 1 less item 2) 3,500,000 4. Exempt interest 5. Percentage of exempt interest to investment income after deductions 700,000 20$ Present law 6. Reserve earnings deduction 7. Formal tax net income (Item 3 less items 4 and 6 ) 3,375,000 1/ -575,000 Treasury proposal 2/ 8, Reserve earnings deduction 9, Portion thereof from exempt income (Item 8 times item 5) 10. 11, Reserve earnings deduction (Item 8 less item 9) Normal tax net income (Item 3 less items 4 and 10) $3,375,000 675.000 2,700,000 100,000 l] 3-3/4 percent of mean of legal reserves, assumed to he $90,000,000. 2/ This example illustrates solely the Treasury proposal for the elim ination of the double-deduction of tax-exempt interest. Consequently, the reserve earnings deduction has been kept the same as under the present law. Example 2 illustrates the Treasury’s proposed change in the reserve earnings deduction. Example p Computation of reserve earnings deduction under present law and original Treasury proposal Company A 1. Rate of interest assumed in computing reserves Company B 7$ j P $10 0 ,000,000 $ 10 0 ,000,000 Legal reserves 90 ,000,000 8 5 ,281,000 Surplus 1 0 ,000,000 1 ^,719,000 2. Assets 3. k»• Present law 5» Reserve earnings deduction (3 -3 /1$ of item 3 ) $ 3,375,000 $ 3,19M3S Treasury proposal 6 . 65$ 7. 8. 9. of 3 -1m 35 $ of actual (35 $ °f item rate assumed l) Reserve earnings rate (item 6 plus item 7 ) Reserve earnings deduction (item 8 times item 3) $ 2 .112 5 $ 2 .112 5 $ 1.0 5 1.2 2 5 3 .16 2 5 3.3375 2 ,8^ 6,250 $ 2,8^6,253 / Example 3 - Computation of tax under present law and original Treasury proposal 1. Investment income 2. Expenses, interest paid, and other deductions 3. Company A (3$) Company B (3 -3$) $1+,000,000 $ i+,000,000 500,000 500,000 Investment income after deductions (item 1 less item 2 ) $3 ,500,000 $ 3 ,500,000 4. Exempt interest $ $ 700,000 5* Percentage of exempt interest to investment income after deductions (item 1+ divided hy item 3) 700,000 2Cyf> 20io Present law 6. 7• Reserve earnings deduction (See item 5 of Example 2) $3,375,ooo $ 3 .19 2 .03 g Normal tax net income (item 3 less items 1+ and 6) - 39 2 .03 s -575,ooo Treasury proposal 8. 9« 10. 11. Reserve earnings (See item 9 of Example 2) $2 ,81+6,250 $ 2,81+6,253 569,250 569,251 Portion thereof from exempt income (item 8 multiplied "by item 5 ) Reserve earnings deduction (item 8 less item 9 ) $2 ,277,000 $ 2 ,277,002 Normal tax net income (item 3 less items 1+ and 10 ) $ 523,000 $ 522,992 Example b - Computation of tax under the Industry proposal 1, Investment income 2. Investment expenses 200,000 3. Exempt interest 700,000 K Taxable net investment income (item 1 less items 2 and 3 ) 3 ,100,000 Reserve and other policy liability deduction (93 $ of item H) 1 / 2 ,883,000 5. 6, Tax base (item H less item 5) $^,000,000 2 17 ,0 0 0 l/ Determined on the basis of the aggregate deductions and aggregate investment income of all companies under the original Treasury formula«, Ninety-three percent is the percentage to be used for the taxable year 19^+2. For subsequent years, the percentage is to be determined by the Secretary of the Treasury, Appendix 2 - Original Treasury proposal Suggested tax “base for life insurance companies Investment income only The tax base shall be: (l) Investment income less (2 ) Investment expenses less (3 ) Interest paid* including all interest paid (whether or not,-guaranteed) on all contracts not involving life* health; or accident contingencies? regardless of the manner in which the method of payment was selected less (H) 2 percent of reserves for deferred dividends less (5 ) 85 percent of dividends réceived from domestic cor porations less (6) Tax-exempt interest less (7 ) Reserve earnings deduction (1) Investment income shall be gross receipts from interest; dividends? rents? royalties? leases? etc.? plus capital gains 1/ and less capi tal losses on assets acquired subsequent to December 3 1 ? I9U 1 ? less real estate expenses? real estate taxes? and depreciation on prop erty held as an investment. Capital losses are to be allowed in full against other income if attributable to sales or exchanges of bonds or other evidences of indebtedness? the capital loss to be measured by the purchase price (or amortized value if the Committee should adopt the Treasury's recommendation with respect to amorti zation) and the selling price. Losses from other types of capital assets will be allowed only to the extent of capital gains. (2) Investment expenses shall be allowed in full if completely segre gated; but if any general expenses are included in or apportioned to investment expenses? the amount allowed in addition to specific expenses allowed under (l) shall not exceed \ percent of invested assets? plus ^ of the amount by which investment income exceeds 3 - 3 /U percent of invested assets. .1/ The House Ways and Means Committee has tentatively approved a maximum rate of 25 percent on net Capital gains realized by corporations on assets held more than 15 months. If this provision is enacted? the final computation of the tax will be made by deducting such gains from the base as here defined? applying a 25 -percent rate to such gains? and the regular normal and surtax rates to the balance. - (7) 2 - The reserve earnings deduction shall he the product of (a) the mean of the adjusted legal reserves at the beginning and end of the taxable year, (b) the reserve earnings rate? and (c) the ratio of (i) investment income» less investment expenses» less interest paid» less 85 percent of dividends received from domes tic corporations» less 2 percent of reserves for deferred divi— dends» less tax-exempt interest to (ii) investment income less investment expenses» less interest paid» less 2 percent of reserves for deferred dividends. (a) The adjusted legal reserves shall be the legal reserves plus 7 percent of the legal reserves that are computed on a preliminary term basis. (b) The reserve earnings rate shall be a weighted average of (i) 3i percent» and (ii) the weighted average rate of interest assumed in computing the various reserves» each rate of interest being weighted by the mean of the ad justed legal reserves computed at that rate at the begin ning and end of the year. Item (i) shall be weighted 65 percent; item (ii)» 35 percent. This formula will have to be applied twice» first, to compute normal tax, second, to compute the surtax; the term "tax-exempt interest" being given the appropriate interpretation in each case. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Monday, June 15» 19^2. Press Service No. 32-7 Market transactions In Government securities for Treasury investment sind other accounts In May, 19^2, resulted in net purchases of ♦16,525» Secretary Morgenthau announced today. -oQo- Statement by Randolph 38. Paul # Tax Adviser to the Secretary of the Treasury, before the Ways and Means Committee of the House of Representa tives, on inventory reserves The enactment of high corporate tax rates necessitated by the war makes the correct determination of the income to which these rates are anplied of fundamental importance. Under the present treatment of inventories for tax purposes, in periods of rising prices taxable income may include profits that re sult merely from the increase in the value of the inventory on hand. Such profits are not available for the nayment of taxes and may be wiped out by subseouent price declines. The first-in first-out method of accounting for invento ries, required under present law for most taxpayers, can result in the inclusion of inventory profits in taxable income. As long as prices do not change this method gives satisfactory results. If a taxpayer has on hand the same amount of goods at the end as at the beginning of the year and prices paid for his goods do not change, it makes no difference whether in comput ing his income he takes as the cost of the stock he sells the cost of the units he had on hand at the beginning of the year or the cost of the units he purchased during the year. However, if he pays a higher price for goods purchased during the year than he paid for goods on hand at the beginning of the year, the method of inventory valuation becomes important. If he considers that the particular item sold came from the inventory on hand at the beginning of the year, he will compute his profit by deducting from the price at which he sold the item, the value at which it was carried in his beginning inventory. If prices are rising, this procedure will result in a larger book profit than if income is computed by deducting from the selling price the price paid for goods purchased during the year. If the same physical inventory is maintained, this higher apparent profit will not be available for the payment of taxes and dividends since a larger sum will have to be spent in replacing the goods sold than was deducted in comput ing profits. Congress has already recognized the importance of this problem by granting taxpayers permission to use the elective, last-in first-out method of valuing inventories. This method in general excludes book profits on inventories from taxable income. However, many taxpayers are unable to use the last-in first-out method, particularly taxpayers whose inventory con sists of a large number of different products rather than a few homogeneous products. The Treasury believes that during the uncertainties of the war period all taxpayers, and not only those who are able to use the last-in first-out method, should be safeguarded against the inclusion of book inventory profit in taxable Income. The problem of fluctuating inventory values would be more serious were it not for the price ceilings recently imposed. To the extent that price ceilings are effective in keeping prices at their present level, future book profits on invento ries will be absent. However, even with effective price ceil ings, certain problems still remain. A substantial price rise took place before price ceilings were imposed* Prom January, 19^1, to March, 19*+2, wholesale prices rose on the average by 21 percent and many individual prices showed substantially larger increases. Some of the resulting inventory profits were reflected in the 19 ^ 1 tax returns; the rest will appear in the tax returns for 19^-2. In addition, some commodities are exempt from the price ceilings and readjustments may be made with respect to other commodities. Moreover, substantial price rises may occur after the end of the war when the ceilings may be relaxed. By providing for these contingencies now, Congress can give taxpayers the assurance that an attempt is being made to impose the heavier taxes occasioned by the war in a fair and eouitable manner. Taxpayers will then be able to a,djust their inventory policy to the needs of the war program without regard to tax considerations. The Treasury therefore proposes that taxpayers be permitted to establish temporary reserves for possible future inventory losses, these reserves to be deductible in computing taxable income. The maximum amount to be added to the reserve in a year of rising prices, and hence to be deductible in computing income for that year, will be eoual to the approximate amount by which price inflation has increased the value of the basic inventory during the year. Similarly, in a year of declining prices, the taxpayer would be required to subtract from his reserve, and hence to include in his income, the approximate amount by which price deflation has reduced the value of his basic inventory during the year. (An example of the operation of the reserve is attached.) Period to be covered Under the plan proposed taxpayers would be permitted to set up reserves for the period beginning January 1, 19^1* and ending five years after the close of the war. It is proposed that the - 3 reserve be applied retroactively to 19^-1 because of the sub stantial price increases which occurred in that year. Simi larly, the reserve should remain in effect long enough after the war to include post-war adjustments. Taxpayers would not necessarily be required to begin with 19^-1 î they could start at any time. Taxpayers eligible to use reserves The use of reserves would be permitted to all taxpayers with inventories of real goods, as distinguished from the portfolios of financial institutions. Taxpayers would be per mitted to use the reserves for inventories not valued under the elective, last-in first-out, method. Inventories to be covered by the reserve The taxpayer would not be required to use the reserve method for his whole inventory. He would be allowed to elect the reserve method for selected parts of his inventory, pro vided that they are clearly identifiable. The election, once male, could be revised only with the approval of the Commissioner of Internal Revenue. Additions to and subtractions from the reserve When prices rise, taxpayers would be permitted to add to the reserve the approximate inventory profits. If, however, a taxpayer did not desire to credit the reserve with the full amount allowable, he would be permitted to credit the reserve with a smaller amount, or he could refrain from taking any portion of the credit to which he was entitled. The taxpayer electing not to take the maximum allowable credit in any year would not be permitted to take the unused credit in a future year. In years when prices decline, taxpayers would be required to charge the reserve with the full amount of the approximate inventory loss. Such charges to the reserve could not exceed the credit balance in the inventory reserve. Computation of approximate amount of profit or loss The approximate amount of profit or loss would be deter mined by multiplying the basic inventory by the estimated change in prices during the year. The basic inventory will be taken a.s eaual to the smaller of the physical inventories on hand at the beginning and the end of the year. In other words, it is limited to the inventory common to these two periods. The administrative complexities involved in extend ing the treatment beyond this point outweigh its possible benefits. The estimated change in prices will be determined by the use of specified price indexes. The coverage of the price indexes would conform as closely as possible to the actual inventory of the taxpayer and their selection end application would be subject to the approval of the Commissioner of Internal Revenue. Taxpayers would have the option of computing inventory profits and losses for the entire inventory as a unit or for narrower classes of inventory goods. The election made by the taxpayer would be subject to change only upon approval by the Commissioner. Liquidation of part of the inventory If any part of the inventory is liquidated, the reserve against this part of the inventory would be credited to income. Termination 6f reserves The reserves may be terminated either by the exhaustion of the accumulated reserves or by the legal expiration of the reserve provision, that is, five years after the close of the war. If the reserve is exhausted by price declines or inventory liquidations, no further use of the reserve method would be permitted. If the reserve is terminated by legal expiration, any amounts remaining in the reserve would be returned to income, since the purpose of the reserve is solely to safeguard the taxpayer from the inclusion in his taxable income of profits arising from temporary price rises. In order to prevent a severe drain on cash resources in the event of a possible heavy tax on large unused reserves, taxpayers could be permitted to distribute the payment of the tax liability attributable to the unused reserves over the three years subseouent to the termination of the reserve. The proposed inventory reserve will prevent in substantial measure the taxation of inventory profits destined to be wiped out in the next few years. At the same time it will not permit profits from a permanent rise in values to escape taxation. - 5 - A sample of the operation of the inventory reserve A. Effect of inventory as prices rise 1. Under first-in first-out method Suppose that at the "beginning of the year the taxpayer has on hand 1,0 0 0 units of a product, which he has purchased at $ 10 apiece and which he expects to sell a.t $ 12 apiece. The taxpayer expects to earn a ■profit of $2 on each unit sold, or a total profit of $2,000. Actually, however, by the time he sells his product the price has risen to $l6 . Thus, apparently, the taxpayer has earned a profit of $6 per unit or $6,000 in all. But if the taxpayer is to remain in business, he must maintain a stock of inventory goods on hand. Now, when he purchases new inventory goods to take the place of those sold, he finds that the cost price of his product has also risen by $4, from $10 to $l4. Thus, in order to maintain a constant physical inventory of 1,0 0 0 units, he must reinvest $l4,000 of his $16 ,0 0 0 receipts in the replenishment of the inventory. Consequently, he has only $2,000 free cash as a result of his transaction. The other $4,000 is tied up in inflated inventories. Under the first-in first-out method of valuing invento ries, his income would be $6,000 in spite of the fact that $4,000 of this profit simply represents a. higher book value on a constant physical inventory. 2. Under the reserve method Under the proposed reserve method, however, the taxpayer would be allowed to deduct from the $6,000 an amount corres ponding to the increase in the book value of his physical inventory, in this case $4,000. Thus, if the taxpayer main tained his business at a constant rate of operations, his tax able income under the reserve method would equal $2,000 and would coincide with the amount of free cash available for the payment of taxes and dividends. B. Effect of inventory as prices fall 1 . Under the first-in first-out method Assume that the price movement is reversed and prices fall to their original levels. The taxpayer has on hand 1,000 units of inventory goods purchased at $l4 each, which he - 6 - expects to sell at $l6. Actually, by the time he sells them the price has fallen to $12, Thus, apparently, the taxpayer has lost $2 on each unit or $2,000 in all. When the taxpayer pur chases new inventory goods, however, he finds that they cost only $10 each. In other words, although the taxpayer has apparently lost on the transaction, he is able to maintain his physical inventory and still have $2,000 free cash. Under the first-in first-out method of valuing invento ries, the taxpayer would show a loss of $2,000 in spite of the fact that he would have a profit of that size if he disregarded the change in the value at which he carries his inventories on his hooks. 2. Under the reserve method Under the reserve method, however, the taxpayer is required to subtract from his reserve the $U ,000 representing the decrease in the book value of his constant physical inventory and add this amount to his taxable income,. Thus, if he maintained his business at a constant rate of operation, his taxable income under the reserve method would equal $2,000 and, once again, would coincide with the amount of free cash available for the payment of taxes and dividends. Juno 15. 19>*2 Statement of Randolph E, Paul Tax Adviser to the Secretary of the Treasury, to the Ways and Means Committee of the House of Representatives, on A War Supertax on Individual Incomes Above $25,000 1* Introductory In his message to the Congress on April 27, 19^2, the President said: "...discrepancies "between low personal incomes and very high personal incomes should he lessened; and I therefore believe that in time of this grave national danger, when all excess income should go to win the war, no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year . 11 There can be no ‘equality of privilege' for which the President has called when some of our citizens are permitted to enjoy a luxurious standard of living while others in less fortunate circumstances are called upon to cut their living standards to a bare subsistence level. The great masses of our people will more cheerfully bear a substantial reduction in standard of living if they know that no group is being favored; that rich and poor alike are giving up the comforts of peace time in order that we may more effectively prosecute the war. A limita tion on individual income would be a very helpful step in assuring the masses of people that there is to be 'equality of privilege' in fight ing this war. 1 / 2. Proposed tax To implement the Preident's proposal, the Treasury now recommends the enactment of a 100 percent war supertax on that part of the net income after regular income tax which exceeds a personal exemption of $2 5 ,000 . 1/ Great Britain has recognized that high tax rates, accomplishing a practical limitation upon individual incomes, may make an important contribution to the maintenance of public morale an^ thus contribute to the prosecution of the war. In that country under wartime tax rates an individual would have to receive about $500,000 in order to have $25,000 left after taxes, and an additional $ 100,000 before taxes would add only $2,500 to his income after tax. 2 - 3• Definition of the Taxpayer A. Persons and married couples The supertax would apply to single persons and mar ried couples. The recent action of your Committee in approving mandatory joint returns will facilitate the application of the supertax to the combined income of the two spouses. It is recommended that for the pur pose of the supertax joint returns he made mandatory and that a personal exemption of $25,000 for each spouse he allowed, or in effect $50,000 for the married couple. Despite mandatory joint returns, some taxpayers could avoid some of the 100-percent supertax hy trans ferring income-producing assets to their children and to other close relatives who could he expected to use the income as the donors desired. To meet this problem, the Treasury recommends that for purposes of the temporary supertax such gifts not he recognized and that the income from them he taxed to the donors. B. Trusts and estates For purposes of the regular income tax, trusts and estates are in some cases subject to the individual in come tax, regardless of the number of beneficiaries and the income of each from other sources. However, since the $25,000 limit is directed toward the "American citi zen," that is, the individual himself, the supertax must of necessity look beyond estates, trusts, and similar legal entities, to the real person concerned, the bene ficiary. Where this is not practicable, the Treasury recommends that the supertax be made applicable to the fiduciaries. h. Income Subject to Tax The Treasury recommends that for purposes of the supertax, net income be defined to include all income which is received by the taxpayer during the taxable year. A. Ho tax exemptions All tax exemptions should be removed for pur poses of the supertax even though they remain for the regular income tax. For example, there can be no doubt that presently tax-exempt State and local interest should be included in taxable income for purposes of the supertax. The outstanding supply of State and local securities is so large that, if this were not done, persons affected by the supertax could substitute tax-exempt securities for the larger part of their taxable securities and thereby nullify the effect of the supertax. The President specifically referred to this exemption when he said, f,It is inde fensible that those who enjoy Large incomes from State and local securities should be immune from taxation while we are at war.H Of course, the contractual ex emption formerly accorded certain Federal securities must be respected for purposes of this supertax as. for all_other taxes. B. Pension trusts For purposes of the supertax, the present treatment of pension trusts would need to be revised in such a man ner as to preclude corporation executives from taking . portions of their compensation in the form of contribu tions to pension funds rather than current salary, which would defeat the purpose of the supertax. C. Undistributed corporation profits The imposition of the supertax would add to the present inducements for corporations to withhold profits from distribution to stockholders. Some provision would need to be made that when dividends declined relative to corporate profits after taxes, an appropriate portion of the undivided profits would be taxed to the stockholder; or else an offsetting tax would need to be placed on the corporation to induce profit distribution. One of these alternatives would be especially necessary where persons subject to the supertax were in con trol of the corporation. E. Proprietorship and partnership business income The individual income', tax applies to the profits from a business run as an individual proprietorship and to the share of a person in the profits of a part nership whether or not the profits are withdrawn for personal use. The application of a 100 percent tax might impose hardship on such businesses and might impair their growth and endanger their competitive position. Accordingly, for the purposes of the supertax it might be desirable to exclude business income not withdrawn for personal use. To prevent tax avoid ance by this means, however, provision might be made that no larger proportion of the profit could be so excluded each year than was retained in the business on the average during a base period. This would permit normal capital growth and payment of business debts without unduly encouraging tax avoidance. - 5 - 3. Averaging over several years of;concentrated incomes Incomes that are concentrated to an unusual extent in the taxable year* for example? those in the form of fees* patent rights? commissions? etc.? would require special treatment to average the income over several years as is now done for income tax computation in the case of certain compensation paid on completion of work which was done over a period of five years. The law provides that the tax on such compensation shall not he greater than if it had been received over the period during which the work was done* 3. Charitable contributions Charitable contributions present a question. Such con tributions are deductible up to 15 percent of net income. Since contributions now average much less than the allowable 1 5 'percent? the supertax would operate to increase them substantially since for persons with incomes subject to the supertax contributions up to 15 percent of net income would be costless, While the increase in contributions would be in effect a means of tax avoidance? the results in general would not necessarily be undesirable. It is not suggested that the deduction for charitable contributions be limited beyond the limitations provided under present law. 5* Relief for Persons with Debt Commitments The imposition of the $25?000 limit would? of course? necessitate substantial readjustment in the patterns of living of the persons affected. This is in part the very purpose of the limitation. A nation waging total war cannot afford to use its resources to provide luxurious living for a few. In many cases? however? the imposition of the supertax would result in special hardships because of the commitments? especially debts? which persons have incurred and which? if they do not meet? will result in sub stantial losses to them. The great difficulty with any general deduction for debt or other fixed commitments is the discrimination which results. Most large debts are incurred to make investments of one kind or another. One person chooses to build up his estate by borrowing money to buy some earning asset and gradually paying off the debt from the earnings? while another person does not borrow? but reinvests his income from year to year. The allowance of debt as a deduction would discriminate in favor of the first man as opposed to the second since the former would be permitted to build - 6- up his estate free from supertax* while the latter would "be prevented from doing so* < Fortunately* the cases in which debt commitments would raise serious problems would not be numerous. Only commitments to retire principal would be affected* since interest on indebtedness is deductible in com puting taxable income^ Persons with incomes large enough to be affected by the proposed supertax ordinarily haVe a good deal of flexibility in their financial arrangements because of their assets and credit standing* The exemption of a portion of the business income of proprietorships and partnerships previously suggested would meet many situations where in debtedness was pressing. Nevertheless* there would -undoubtedly be some cases where fixed commitments of various kinds would be very difficult to meet and might require a measure of relief under the supertax* For example* many tax payers* even some of those with largo incomes* neglected to set, aside last year the funds necessary to meet the taxes on last year’s income* The imposition of the supertax might make it entirely impossible for such people to accumulate funds to pay taxes on the current year's in come and have anything at all left over to cover living expenses* However to allow a deduction only for those taxpayers who had not set aside funds to pay their taxes* while not allowing an equal deduction to the more provident* would be discriminatory* Accordingly* it is suggested that for the first year only the tax liability on the income of the previous year be allowed as a deduction in computing income subject to supertax. There after taxpayers would be on warning to accumulate funds in advance to pay their taxes# There are other cases of indebtedness which might cause hardship in a similar way. Thus* debts for unusual medical expenses might be a very heavy burden under the supertax. It would be desirable in this and other cases to allow a deduction for the payment of indebtedness. To assure a minimum of hardship without too much discrimination* the most workable plan appears to be to allow a deduction for debt up to per haps 15 percent of the income after present income taxes. While this deduction would be intended for the purpose of relieving the hardship of debt* it would be made available also to people who had no debt commit ments* provided it was spent in meeting other financial commitments* such as insurance premiums on. policies taken out in the past* or was in vested in Federal securities* - 7- 6* Number of taxpayers and revenue Under the existing rates for the regular income tax, this super tax would affect only single persons whose incomes before tax exceeded about $^0i000 and married couples whose combined income before tax exceeded about $100,000. Under the income tax rates tentatively adopted by the House Ways and Means Committee? the supertax would affect single persons whose incomes before tax exceeded about $ 50,000 and married couples whose combined income before tax exceeded about $185,000# With mandatory joint returns, the supertax would fall on approximately 11,000 single per sons and married couples and is estimated to yield about $1SU million, in addition to the revenue from the regular income tax as tentatively revised by the Ways and Means Committee# 7# Conclusion To summarize, the Treasury proposes that in harmony with the President* message to Congress of April 27 , a supertax of 100 percent be imposed on that part of nec income remaining after other taxes which exceeds $ 2 5 ,000 . I have discussed the more important problems which would be involved in making the tax effective and some of the hardships which the tax might im pose, and have made suggestions for meeting these problems. Fundamentally, the purpose of this proposed tax is to promote the war effort. This it would do by assuring the masses of people that there is to be relative ’equality of privilege* in fighting the war; that all are to share in the sacrifices it imposes in an equitable manner. I recommend the proposed tax for your careful consideration. June 15, 19^2 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, June 16, 1942. Press Service No, 32-8 The Secretary of the Treasury announced last evening that the tenders for #300,000,000, or thereabouts, of 9 1 ~&ay Treasury bills to be dated June 17 and to mature September 1 6 , 1942, which were offered on June 12, were opened at the Federal Reserve Baake on June 1 5 , The details of this Issue are as follows: Total applied for - #801,271,000 Total accepted 30 0 ,993» 000 Range of accepted bids: (Excepting 1 tender of #10,000) High % 99*930Equivalent rate Low - 99*907 H tt Average Price - 9 9 .9 0 8 * • approximately 0.277 percent " 0 - 368 " " 0 *36 5 11 (6l percent of the amount bid for at the low price was accepted) -oOo- TREASURY DEPARTMENT Washington POR IMMEDIATE RELEASE, Wednesday, June 17,. 1942 Press Service No* 32-9 The Treasury today announced, in line with its freezing control policy of prohibiting the importation into the United States of Axis-tainted dollars, the first serial numbers of currency en route believed to be of German origin. Officials said that similar information will be released from time to time with respect to any such currency which was known to have infiltrated into Latin America* In its announcement, the Foreign Funds Control Division of the Treasury Department said that a large amount of United States currency, a part of which is destined for Cuba, is known recently to have reached the Dominican Republic* This currency was brought into the Dominican Republic on a Spanish vessel, and there is good reason to believe that such currency is of Axis origin. It was further stated that the serial numbers of such currency had been obtained, and that there was a presumption that such currency would not be licensed for release in the United States under any circumstances* In order that persons in the dollar areas might be on guard against accepting such currency, it was announced that the ,fhotn money of large denominations involved are Federal Reserve notes and bear the following serial numbers: Thousand dollar bills 1928 series B00011455A, B00014746A, B00046923A, B00047305A, B00050148A, B00053966A, B00077533A, B00079672A, B00091705A, B00093016A, B00093359A, B00006144A, B00097075A, B000106577A, L00017241A, 1934 series B0001974A* B0001661A, B00015131A to 32A inclusive, B00017333A, B00018472A, B00018879A, B0Q018959A to 60 A, B00021161A, B00021114A to 64A inclusive, B00025208A, B00025995A to 96A, B00027838A, B00028331A, B00028654A, B00035898A, B00037432A, B00042556A, B00043536A, B00044413A, B00044576A, B00044829A, B00045225A, B00050146A to 47A inclusive, B00055642A, B00060590A to 91 inclusive, B00065128A, B00066809A to 10A inclusive, B00066819A to 20A inclusive, B00066937A to 46A inclusive, B00075488A, B00076800A, B00077299A, B00081630A, B00090096A, B00091289A, B00092901A, B00097311A, B00119161A; Five hundred dollar bills B00003419A, B00013618A, B00063874A, B00079272A, B00095633A, B00100608A, B00133227A, B00138803A, B00143364A, B00147904A, B00149680A, B00150562A, B00155799A, G00077800A, 1934 series A00001851A, B00009715A, B00002579A, B00015077A to 79A, B00015661A, B00019397A. 2 - The Treasury*s enforcement officials have been instructed to seize any of this currency if any attempt is made to bring it into the United States* Banks and other institutions have been encouraged immediately to inform Treasury officials if they should* at any time, discover the presence of any such currency in this country. Strict measures will be taken against anyone who is found to have brought such currency into this country in violation of our laws, the Department*s officers said» -0O 0 - TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, June 17, 1942. Press Service No. 32-10 The Brotherhood of Railroad Trainmen, through its president A. F. Whitney, today presented a check for $75,000 to Secretary Morgenthau to aid America1s war effort. The money was contributed voluntarily by members of the Brotherhood to be used toward the purchase of an Army bomber which, they hope, ’’will blast Tokyo or Berlin, or be successful in sprinkling iron daisies on the man that everybody hates.” The Brotherhood is an international organization, represent-* ing railroad men on all divisions of all railroads in the United States, Canada and Newfoundland. It has invested already more than $17,000,000 in Government securities. The international convention, scheduled to take place in 1943, has been abandoned, and the $1,000,000 which would have been spent to conduct it will be invested in War Bonds at the express wish of Brotherhood members* -oOo % ment« In «very one where payment 1» sei eo completed, the parent with applica tion Up to 5 percent of the amount of certificates applied for shall, upon declaretiosi Made by the Secretary of the treasury in M e discretion, be forfeited to the United States« lay qualified depositary «111 bo permitted to sake payment by credit for certificates allotted to it for itself and Its customers up to any amount for which It shall bo qualified in excess of existing deposits, whta eo notified by the Federal Baser*» Bank of ite SUtriet* ?*. ammo, m m s t m s 1« As fiscal agente of the United States, Federal Baser*» Banks are authorised and requested to receive subscription#, to make allotments on the basis and up to the amounts indicated by the Secretary of the treasury to the Federal Becerra Baake of the respective districts, to i s m allotment notieoo, to rosei** payment for certificates allotted, to make delivery of certificate# on full-paid subscriptions allotted, and they may i m e interim receipt# pending delivery of the definitive certificates« a* The Secretary of the Treasury may at any time, or fra» tino to timo, prescribe supplemental or amendatory rules and regulations governing the offer ing, which M U be communicated promptly to the Federal Reserve Banks« HEURT MÖHGIOTHAU, JR., Secretary of the Treasury« 4* Bearer certificate* irith one deepen attached will be issusd in denodim* of ü,OCO, #5,000, $10,000 end $100,000* the certificate* «ill net be issued in registered form. 5# The certificates will be subject to the fonerai regulations *f the Treasury Department, now er hereafter prescribed, governing United States certificates* m. subscription 110 uixmiwf 1, Subscriptions will be received at Ü » Federal Beserre Banks and Branches and at ti» treasury Department, Shshdmgtem* Mbeeilbsm «est agree act te edil er otherwise dispose of their subscriptions, er of the securities which say be allotted thereon, prier te the closing of tbs subscription becks« Banking insti* tutina* generally say submit subscription* far account of customers, bat only the fiderei Reserve Bank» and the treasury Department are authorised te act as affidai agredes* Others than banking institutions will net be permitted to enter subscriptions except for their ore account* Subscriptions from banks and treat companies for their ore account dll be received without deposit* Sob* scriptlons frem all others must be aeerepsded by payment of 5 percent of the amount of certificats* applied for* 2, The Secretary of the treasury reserves the right to reject gay subscrip tion, in whole or in part, to allot 1 m m than the amount of certificates applied fer, red te eleee the hedí» as te rey or all subscriptions at any time without noticei red say adire he nay take in these respects shall bo final* Subject te three reservations, subscriptions for recent# up te and Including $2$,000 will fee allotted in M U * the hade of the allotment re a U other subscriptions will be publicly announced, and aUotmret notices d l l be sent out promptly upon alldasnt* if, Pánrar 1* Payment at par and acorred interest, if any, for certificats* allotted hereunder most be sad» or completed re er before «hm 25, 1942, er re later allot- warm mmm it* m of mmoi w « ! cmnncAtm of M U M or smxm Á-1943 Dae February 1, 1943 Dated and bearing intereet from June 2$, 1942 19 a m m m m&àjmm, ornee er the Secretary, ISashington, Jane 18, 1942« Department Circular be« 488 Fiscal Service Bureau of the Publie Debt 1« 1« The Secretary 0 F F M M OF O B T irz a T B S the Treasury, pursuant to the authority of the Second Liberty Bond let, ae amended, Invitee subscriptions, at par and accrued interest, from ti» people of the United States far it* percent certificates of indebtedness of the United States, designated Treasury Certificates of Indebtedness of Soriee 1-1943. The amount of the offering is H , 300,000,000, or thereabouts« il. descriptio* or mmncktm 1« The certificates will be dated June 2$, 19a# and will bear intereet free that date at the rate of $/* percent per annue, payable on an annual basic at the aaturlty of the certificates. They will »ature February 1, 1943# and will not be subject to call for redeeption prior to aaturlty« 2« The incoe» derived free ti» certificates shall be subject to all Federal taxes, now or hereafter laposed. The certificates shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be txsupt from all taxation now or hsreaftor imposed on the principal or interest thereof by any Stato, or any of the peesesdsna of the United States, or by any local taxing authority« 9« The certificates will be acceptable to cenuro deposits of public moneys. They will not be acceptable in payswsst of taxes and will act bear the circulation privilège« ss 9 ishington, iserve Banks, r & m * 17, 1 W U . _ ,i j U| Mass, New York, N. Y. Philadelphia, Pa. Cleveland, Ohio. Richmond, Va. Atlanta, Ga. PMSQ8A1 Am m m fW & ilA L t Chicago, 111. St, Louis, Mo. Minneapolis, Minn. Kansas City, Mo. Dallas, Texas. San Francisco, Calif. 1eferonee today trana- slttisi p m m •tatejseat regarding current offaring STOP Flaaaa add a* final sentano« of lest paragraph of press statomient the following QUOTE the«« certificates will he redeemed in cash at a*t«rlty and «111 carry no exchange privileges* UNQUOTE MJSGIOTIUtj W fo t m tt p t a t sti Private Wire. TKMStmY DfPARTMFKT Washington FOR RILESSI, HORNING JIKWSPAPIR3 Thursday, Fune 18, 1948. 6/ 17 /4 2 Press Service r q . s £ -// Secretary of the Treasury Morgenthau today announced the offering, through the Federal Reserve Banks, for sash subscription et par and ac crued interest, of #1,500,000,000, or thereabouts, of 5/8 percent Treasury Certificates of Indebtedness of Series A-1943. In order to insure nore extensive participation on the part of basks, corporations, and others interested in a type of security carrying maturities somewhat longer than Treasury bills, the subscription books will remain open two days, and sub scriptions up to #85,000 will be allotted in full. There will be no re strictions as to the beets for subscribing to this Issue. The certificates will be dated June 85, 1948, will be payable on February 1, 1943, and will bear interest at the rate of five-eighths of one percent per annum, payable at the maturity of the certificates. They will be Issued in bearer form only, with one interest coupon attached, in denominations of 11,000, #5,000, #10,000 and #100,000. Pursuant to the provisions of the Public Debt Act of 1941, interest upon the certificates now offered shall not have any exemption, as such, under Federal Tax Acts now or hereafter enacted. The full provisions re lating to taxability are set forth in the official circular released today. Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington. Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and tbs Treasury Department are authorized to act as official agencies. Subscriptions for the certificates from banks and trust companies for their own account will be received without deposit, but sub scriptions from all others must be accompanied by payment of 5 percent of the amount of certlfioatas applied for. The basis of allotment of subscriptions over #86,000 will be publicly announced, end payment for any certificates allotted must be plated on or before June 85, 1948, or on later allotment The text of the official circular follows: TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Thursday, June 18, 1942,________ 6/17/42 Press Service No. 32-11 ----------- Secretary of the Treasury Morgenthau today announced the offering, through the Federal Reserve Banks, for cash subscription at par and accrued interest, of $>1,500,000,000, or thereabouts, of 5/8 percent Treasury Certificates of Indebtedness of Series A-1943. In order to Insure more extensive participation on the part of banks, corporations, and others Interested in a type of security carrying maturities somewhat longer than Treasury bills, the subscription books will remain open two days, and subscriptions up to $25,000 will be allotted in full* There will be no restrictions as to the basis for subscribing to this* issue* The certificates will be dated June 25, 1942, will be payable on February 1, 1943, and will bear interest at the rate of fiveeighths of one percent per annum, payable at the maturity of the certificates* .They will be issued in bearer form only* with one Interest coupon attached, in denominations of $1,000, $5,000, $10,000 and $100,000* Pursuant to the provisions of the Public Debt Act of 1941, interest upon the certificates now offered shall not have any exemption, as such, under Federal Tax Acts now or hereafter enacted The full provisions relating to taxability are set forth in the official circular released today* Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington* -Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Subscrip tions for the certificates from banks and trust companies for their own account will be received without deposit, but subscriptions from all others must be accompanied by payment of 5 percent of the amount of certificates applied for* i The basis of allotment of subscriptions over $25,000 will be publicly announced, and payment for any certificates allotted must be made or completed on or before June 25, 1942, or on later allotment* These certificates will be redeemed In cash at maturity and will carry no exchange privileges* The text of the official circular follows: UNITED STATES OF AMEBICA 5/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES Arl943 Due February 1, 1943 Dated and bearing interest from June 25, 1942 TREASURY DEPARTMENT, Office of the Secretaiy, Washington, June 18, 1942 1942 Department Circular No. 688 Fiscal Service Bureau of the Public Debt I. OFFERING OF CERTIFICATES 1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest, from the people of the United States for 5/8 percent certificates of indebtedness of the United States, designated Treasuiy Certificates of Indebtedness of Series A-1943. The amount of the offering is $1,500,000,000, or thereabouts. II. DESCRIPTION OF CERTIFICATES 1. The certificates will be dated June 25, 1942, and will bear interest from that date at the rate of 5/8 percent per annum, payable on an annual basis at the maturity of the certificates. They will mature February 1, 1943, and will not be subject to call for redemption prior to maturity. 2. The income derived from the certificates shall be subject to all Federal taxes, now or hereafter imposed. The certificates shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority. 3. The certificates will be acceptable to secure deposits of public moneys. They will not be acceptable in payment of taxes and will not bear the circulation privilege. 4. Bearer certificates with one coupon attached will be issued in denomina tions of $1,000, $5,000, $10,000, and $100,000, The certificates will not be issued in registered form. 5. The certificates will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States certi ficates. III. SUBSCRIPTION AND ALLOTMENT 1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department, Washington, Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securities which may be ? 2 - allotted thereon, prior to the closing of the subscription books* Banking insti tutions generally may submit subscriptions for account of customers, but only the federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Others than banking institutions will not be permitted to enter subscriptions except for their own account. Subscriptions from banks and trust companies for their own account will be received without deposit. Sub scriptions from all others must be accompanied by payment of 5 percent of the amount of certificates applied for, 2m The Secretary of the Treasury reserves the right to reject any subscrip tion,. in whole or in part, to allot less than the amount of certificates applied for, and to close the books as to any or all subscriptions at any time without notice? and any action he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and including $25,000 will be allotted in full. The basis of the allotment on all other subscriptions will be publicly announced, and allotment notices will be sent out promptly upon allotment, XV. PAYMENT 1. Payment at par and accrued interest, if any, for certificates allotted hereunder must be made or completed on or before June 25, 1942, or on later allot ment, In every case where payment is not so completed, the parent with applica tion up to 5 percent of the amount of certificates applied for shall* upon declara tion made by the Secretary of the Treasury in his discretion, be forfeited to the United States, Any qualified depositary will be permitted to make payment by credit for certificates allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its District, V. GENERAL PROVISIONS 1. As fiscal agents of the United' States, Federal Reserve Banks are authorized and requested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive payment for certificates allotted, to make delivery of certificates on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive certificates, 2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesdayj June 17, 1942. Press Service No. 32-12 The Bureau of Customs announced today that preliminary reports from the collectors of customs show imports of 49,523 head of Canadian cattle weighing 700 pounds or more each (other than cows imported specially for dairy purposes), during the period April 1 to June 6, 1942, inclusive, under the tariff rate quota of 51,720 head for the second quarter of the calendar year 1942, provided for under the trade agreement with Canada. oOo TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday, June 19, 1 9 4 2 , ______ The Secretary;of the Treasury, by this public notice, invites .tenders, for $300,000,000, or thereabouts, of 85—day Treasury bills, to be issued on a discount basis under competitive'bidding. The bills of this series will be dated June 24, 1942, and will mature September 17, 1942, when the face amount will be payable without interest* They will be issued in bearer form only, and in denomina tions of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value)* Tenders will be received at Federal. Reserve’Banks and’Branches to the closing hour, two o ’clock p* m*, Eastern w a r ;time, Monday, 28*.: ..Tenders.will not be received at the Treasury Department* ^ s b i n g t o n , Each tender must be for an everi multiple of $ 1 ,00Q, and. the prlpe offered must be expressed on the basis of 100, with not morë than 'three decimals, e* gv, 99*925* Fractions may not be used* It is urged that tenders be made on- the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor* Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities* Tenders from others must be accompanied by payment of 10 percent of thé face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids* Those submitting tenders will be advised of the acceptance or rejection thereof* The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final* Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on June 24, 1942. The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treatment, as such, 32-15 (Over) 2 under Federal tax Acts now or hereafter enacted* The bills shall be j subject to estate, inheritance, gift, or other excise taxes, whether I Federal or State, but shall be exempt from all taxation now or here- j after imposed on the principal or interest.thereof by any State, or any of the possessions of the United States, or by any local taxing ! authority* For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be * considered to be.interest* Under Sections 42 and 117 (a) (1) of the Internal Revenue"Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall he solely redeemed or otherwise disposed of, and- such bills are excluded from consideration' as capital assets* Accordingly, the owner of Treasury | bills (other than life insurance companies) .issued hereunder need include in his income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss* Treasury Department Circular No* -418, as amended,: and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. • J 111 j I -oOo- t b s a s b h x bipa : Washington Press S e n d FOE REIMS!, MGBKim HEWSPAPERS* ffridaar, Jwn» 19, 1942»------- - 6/18/42 Secretary of the Treasury Horgsnthau announced last night that the subscription books for the current offering of 5/8 percent Treasury Certificates of Indebtedness of Series 4-1943 »ill «lose at the close of business today* ¿tee 1$. Subscriptions addressed to a Federal Reserve Bank* or Branch* or to the Treasuiy Department, and placed in the sail be fore 12 o*clock midnight Friday* J a m 19* will be considered as having been entered before the close of the subscription books. Announcement of the anount of subscriptions and the basis ©f allotment will probably be wade around noon on Monday, June 22. O m & » TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday, June 19, 1942. 6/18/42 Press Service No. 32-14 Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of 5/8 percent Treasury Certificates of Indebtedness of Series A-1943 will close at the close of business today, June 19. Subscriptions addressed to a Federal Reserve Bank, or Branch, or to the Treasury Department, and placed in the mail before 12 a*clock midnight Friday, June 19, will be considered as having been entered before the close of the subscription books. § Announcement of the amount of subscriptions and the basis of allotment will probably be made around noon on Monday, June 22.. -oOo- i * 1 Q |Qip Statement by Randolph j3J. FSUl, Tax AdVieer to the Secretary of the Treasury, "before the Ways and Means Committee of the House of Representatives on the transition to collection at source When on March 3» 19^2, the Secretary of the Treasury recommended the introduction of collection of part of income tax liabilities at source, it was hoped that collection at source could begin a considerable period before the close of this calendar year* This would have provided a gradual transition to collection at source. It is now clear that it is not practicable to begin collection at source before January 1, 19^+3 • This gives rise to a transition problem that I wish to discuss with the Committee. 1. The problem During calendar 19 ^ 3 » taxpayers will be paying taxes on 19^-2 income at the higher rates that will be enacted in the Revenue Act of I9U2 . In addition, if collection at source is adopted, the taxpayer will be paying currently part of his I 9U3 taxes on income derived from sources subject to withholding — wages and salaries, bond interest, and divi dends. Thus, in 19^3 some taxpayers will be required to pay, at one and the same time, the tax on 19*42 income and part of the tax on I 9U 3 income. Provision should be made to ease this payment problem raised by the introduction of collection at source. The extent of the problem depends on the income of the taxpayer. The 10 percent of net income that, under the Treasury’s recommendations, would be withheld at source represents a larger part of total tax lia bilities the smaller the income. Except for the very bottom of the range of taxable incomes, where the total tax is in any event small, the amount withheld at source will not exceed about 60 percent of the liabilities that would accrue under the rates tentatively adopted by your Committee. Por incomes above about $ 2 5 ,000 , the amount withheld at source will be 25 percent or less of the accruing liabilities. Unless some provision is made, individuals with stable incomes would therefore be required to pay during 19*4-3 between 1 and 1 .6 times as much as they w u l d have to pay if there were no collection at source, A supplementary problem is raised by persons with incomes not subject to withholding, for example, businessmen and recipients of rents. Under present arrangements, these persons would not be required to pay any of their 19*4-3 taxes in 19*4-3» but would get the benefit of a postponement of tax payment until 19*4-*4-, This would put these individuals at an advantage compared to persons with incomes subject to withholding, who would be re quired to pay part of their 19*4-3 taxes in 19*4-3« Some provision should be made to put the two groups on a substantially similar basis. - 2. 2 - Proposed solution a. The payment problem The payment problem can be eased by making the transition to collection at source more gradual. The Treasury therefore recommends that the transition be spread over the two years 19^-3 and 19 ^ » by per mitting half of the amount withheld at source in 19^3 to be credited against the quarterly instalments on 19^2 taxes payable in I9U 3 . The balance of the amount collected at source would be credited against 19^3 taxes payable in 19 ^-b. Under this proposal, the taxpayer would be permitted to credit against his March 15,' 19^3* instalment on 19^-2 taxes, half of the amounts withheld at source during January and February, 19^3J against his June 15 instalment, half of the amounts withheld during March, April, and May; against his September 15 instalment, half of the amounts with held during June, July and August; and against his December 15 instal ment, half of the amounts withheld during September, October, and November. !_/ Under this plan, slightly more than half of the total amount with held at source during I9 U 3 would be available in March, I 9UU, as a credit against 19^-3 income tax liabilities. In this way, the transition to collection at source would be spread over the two years, I9U 3 and I 9UU. (Example 1 illustrates the operation of the proposal). b. Income not subject to withholding Persons with incomes that are and those with incomes that are not subject to withholding can be put on an approximate parity by re quiring all taxpayers to pay a part of their 19^2 tax liabilities pay able in 19^+3 in one lump sum in March rather than in quarterly instalments. The lump sum payment required would correspond to the amount withheld at source from persons subject to withholding. Those subject to withholding would be able to pay this amount in the form of a credit for taxes withheld at source; those not subject to withholding would, have to pay this amount in cash, thereby reducing the amount of tax postponed. 1/ Persons taking a credit against 19^-2 liabilities would be required to submit receipts for taxes withheld at source. - 3 - Under the proposal made above to solve the payment problem, persons all of whose income is subject to withholding at source will pay on their 19*+3 liabilities during 19*+3 amount equal to 5 percent of their net income in excess of personal exemptions and dependent credits, the other 5 percent withheld at source being allowed as a credit against I 9U 2 lia bilities payable in 19*+3* Consequently, the simplest procedure would be to require all persons to pay in a lump sum on March 15, 19*+*+» 5 percent of surtax net income in excess of personal exemptions and dependent credits plus l/*+ of the balance of their tax liabilities on 19*+3 income. This amount could be paid either in the form of a credit for taxes withheld at source or in cash. The same treatment would be followed after the transition period 19 *+3“ 19 *+*+ is over except that 10 percent would be substituted for 5 percent to allow for the larger credits that would be available to persons subject to withholding at source. (Example 2 illustrates the operation of this proposal). This procedure red.uces substantially the advantage to persons with income from sources not subject to withholding at source. However, it does not eliminate it entirely. These persons would still have an months postponement of taxes, compared, with individuals subject to withholding at source for whom the average date of payment of taxes would be July 1. l/ l^f If it were desired, to lessen or eliminate this ad.vantage, the amount payable on March 15» 19*+*+» could be increased, say to 10 percent of surtax net income. This would, raise no difficulties for persons none of whose income was subject to withholding; they would be required to pay 10 percent of their surtax net income plus l/*+ of the balance of their tax liabilities in March, 19*+*+. A problem would arise for persons receiving income both from sources subject to wilbh.oid.ing and from sources not subject to withholding. •To solve this problem, the taxpayer could, be required to pay in cash in March, 19*+*+» twice the difference between 5 percent of surtax net income and the credit for taxes actually withheld, at source plus l/*+ of the balance of his tax liabilities. Doubling the difference would have the same effect as requiring persons none of whose income is subject to withholding to pay liabilities equal to 10 percent of their surtax net income in one lump sum. Example 1 Proposal for easing the payment problem The following example illustrates how this proposal for spreading the transition to collection at source over 19*43 19*4*4 would operate for a married man with no dependents and with a net income in 19*42, 1 9 % and 19*4*4, of $2,500 before exemptions, all from sources subject to withholding* 1. 2. 3* Tax liability on 19*42 or 19*+3 income Amount collected at source in 19*43 or 19*4*4 Amount collected at source each month $ 219 130 10*83 Without special payment provision *4* 5* Total amount payable Total amount payable amount collected at amount collected at in 19*+3 (item 1 plus item 2 ) 3*49 in 19*4*4 (item 1 minus item 2, source in 19*43» plus item 2, source in 19*4*4-) 219 With special payment provision 6. Amount of 19*42 tax liability payable on Mar. 15» 19*43 (l/*4 of item 1) 7* Credit for amount collected at source (l/2 of amount collected at source in January and February, 19 *+3 ) 8 . Balance due on March 1 5 , 19*43 (item 6 minus item 7 ) 9 . Amount of 19*42 tax liability payable on (a) June 15, 19*43 (b) September 1 5 , 19*43 (c) December 1 5 , 19*43 10. Credit for amount collected at source (l/2 of amount collected at source' in preceding 3 months) 11. Balance due on (a) June 1 5 , 19*43 (b) September 1 5 , 19*43 (c) December 1 5 , 1 9 % 12* Amount collected at source in 19*43 allowed as a credit against 19*42 income tax liabilities (item 7 plus 3 times item10) 13* Balance collected <nt source in 19*43 available as a credit against 19*43 income tax liabilities payable in 19*4*4 (item 2 minus item 12) 1*4, Total amount paid in quarterly instalments during 19*43 (it em 8 plus item 1 1 a, b, and c) 15« Total amount payable in 19*43 (item 1*4 plus item 2, amount collected at source) l6. Total amount payable in 19*4*4 (item 1 minus item 1 3 , plus item 2 ) 5*4.75 10*83 *43.92 5*4.75 5*+*75 5*4.75 16 ,2 5 3S*50 3S*50 38*50 59 .5 s 70.*42 159**42 289 .*+2 272*58 Example 2 Proposal for persons not subject to withholding at source The following example illustrates hoi? the proposal for persons not subject to withholding at source would work for a married person with no dependents and with a net income in I9 U3 of $ 2,500 before exemptions, all from sources not subject to withholding. 1. 2. Tax liability on 19^-3 income (House Ways and Means Committee rates) $ Surtax net income $1,3 0 0 3 . 5 percent of surtax net (5 percent of item 2 ) 219 income $ 65 Balance of tax liability (item 1 minus item 3 ) $ 15b 5* l/U- of balance of tax liability $ 3S.50 6. Amount due on March 1 5 , 19^+ (item 3 plus item 5 ) $ IO3 .5O Amount due in each of last 3 quarters $ 3S.50 7« Example illustrating transition to collection at source The following example illustrates the transition to collection at source over I9 U3 and 19 ^-H, (l) if the amount collected at source in 19^-3 was applied antirely to 19^3 tax liabilities and (2) if approximately half the amount collected at source in 19^3 was treated as a payment of 19^2 tax liabilities. The example is for a married man with no dependents and with an annual salary of $ 2 ,6 20 , no other income, deductions of $ 12 0 , and thus a net income each year of $ 2,500 before exemptions. 1 . 19^-3 collection at source applied entirely to paying 19^3 tax liabilities : : i Paid in 19^3 Collected at source By installments Total paid in 19^+3 $ 219 $ 219 Paid in 19 ^+ Collected at source By installments Total paid in 19^4 2. $ 219 Total amount paid $ 130 $ 13 0 $ 130 $ 3 Î9 $ $ 89 89 $ 219 219 $ Total, 19^3 and I9UU ; : i Payments applied to tax liabilities for Ï9ÏÏ2 î : Ï9W ” $ 130 $ 89..... $ 219 130 $ 130 $ 130 $ 56g 19^3 collection at source treated as part payment of and part payment of 19^-3 tax liabilities 19^-2 ♦ ; i Paid in 19^3 Collected at source By installments Total paid in 19^3 59-58 159.U2 $ 70.^2 $ $ 2 19 .0 0 $ 70.^2 $ 13 0 .0 0 $ I k s . 58 13 0 .0 0 $ $ 278.58 I k s . 58 i k S . 58 $ 130 .0 0 $ 219 .0 0 0 $ $ 1—1 2 19 .0 0 289*^2 $ 0#0 to $ 13 0 .0 0 159-te -to- Ijkk Total amount paid $ Paid in 19^-U Collected at source By installments Total paid in 19 ^ Total, 19^3 and : ï : Payments applied to tax liabilities for 19k2 ï i Ï91& 1943 $ 568.00 In 19^-5 and subsequent years $130 would be collected at source and applied to the payment of current year liabilities while $89 would be paid in March or in installments to complete the payment of the previous year’s liabilities. Treasury Department, Division of Tax Research June 19 , 19^2 TH&ASUHI DEPARTMENT Washington FOB mmi#r& MIMS&, Honday. June 22. 1942* Press Eerviae -2 ^ Secretary of the Treasury Morgenthau today announced the sub scription figures and the basis of allotasnt for the cash offering of 5/8 percent Treasure Certificates of Indebtedness of Series A-1943. Reports received frosx the Federal Reserve Banks sheer that sub scriptions aggregate $3,113,000,000. Subscriptions in amounts up to and including $25,000, totaling about $61,000,000, were allotted in full* Subscriptions in anoimts ©Ter $25,000 were allotted £6 percent, on a straight percentage basis, but not less than $25,000 on any one subscrip tion, with adjustments, where necessary, to the $1,000 denoaination* Details as to subscriptions and allotments will be announced when final reports are receiwed from the Federal Reserve Banks* o ¿2 & TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Monday, June 22, 1942. Press Service No, 32-15 Secretary of the Treasury Morgenthau today announced thè subscription figures and the basis of allotment for the cash offering of 5/8 percent Treasury Certificates of Indebtedness of Series A-1943, Reports received from the Federal Reserve Banks show that subscriptions aggregate $3,113,000,000. Subscriptions in amounts up to and including $25,000, totaling about $61,000,000, were allotted in full. Subscriptions in amounts over $25,000 were allotted 50 percent, on a straight percentage basis, but not less than $25,000 on any one subscription, with adjustments, where necessary, to the $1,000 denomination. Details as to subscriptions and allotments will be announced when final reports are received from the Federal Reserve Banks, -oOo- TREASURY DEPARTMENT Washington POR IMMEDIATE RELEASE, Monday, June 22, 1942. Press Service No. 32-16 Secretary Morgenth.au today announced that the Foreign Funds Control had uncovered assets in various New York banks amounting to over $10 million in securities and cash accounts, all owned by Henry M* Blackmer. Henry M. Blackmer fled from the United States to France when the Government initiated investigation of the Teapot Dome oil fraud in which he was wanted as a principal witness. During the next few years his passport was revoked and he was indicted on various counts including income tax evasion and perjury in connection with his income tax returns, and a warrant was issued for his arrest. Numerous attempts to extradite him from France were unsuccessful and at various times between 1927 and 1932 substantial fines for contempt of court were levied against his American assets. Indictments against Blackmer are still outstanding and he is regarded as a fugitive from justice. Blackmer is now believed to be in Switzerland. Included in the assets uncovered by the Foreign Funds Control are $3,865,000 United States of America Treasury Notes Series A due June 15, 1943,. $3,250,000 United States of America Treasury Notes Series B due March 15, 1944, and several million dollars in munici pal issues. Blackmer was not holding his assets in his* own name but had such assets concealed in ’’numbered11 accounts and in the accounts of foreign banks. All of these millions of dollars of assets owned by Blackmer have been effectively frozen by the Foreign Funds Control and the Government agencies having a possible claim against Blackmer have been advised of the existence of such assets in New York. -oOo- TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, June 23, 1942* 6/22/42 a Press Service No* 32-17 The Secretary of the Treasury announced last evening that the tenders for $300,000,000, or thereabouts, of 85-day Treasury bills to be dated June 24 and to mature September 17, 1942f which were offered on June 19, m w©re opened at the Federal Reserve Banks oh June 22* The details of this issue are as follows: Total applied'for- $709,632,000 Total accepted - 301,249,000 Range of accepted bids: High - 99*935 Equivalent rate approximately 0*275 percent Low - 99.913 " • " 0.368 « Average Price - 99.914 * . ” M 0.362 " (28 percent of the amount bid for at the low price was accepted) oOo- TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE,. Wednesday, June 24, 1942,. Press Service No, 32-18 The Bureau of Customs announced today that preliminary reports from the collectors of customs show imports of 49,561 head of Canadian cattle weighing 700 pounds or more each (other than cows imported specially for dairy purposes), during the period April 1 to June 13, 1942, inclusive, under the tariff rate quota of 51,720 head for the second quarter of the calendar year 1942, provided for under the trade agreement with Canada. -oOo- TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, June 24, 1942. Press Service No. 32-19 Mayor Frank J. Lausche of Cleveland will present a check for more than $300,000 to Secretary Morgenthau tomorrow afternoon and will tell him and Assistant Secretary of War for Air Robert A. Lovett that the sum represents outright contributions of the people of Cleveland to buy a four-motored bomber for the Army. President M. J. Fleming of the Federal Reserve Bank of Cleveland, who has been treasurer of the fund, will join the mayor in describing how it developed spontaneously from nickel and dime donations that rolled in after Pearl Harbor. Treasury officials say that the check will be the largest single contribution made to the Government since military appro priations were first expanded in 1940. It will bring the total of outright gifts to Uncle Sam* s war cheat since last December 7 to approximately $2,000,000, more than eighty times the total amount given to the Treasury during the two years of the first World War. On behalf of the donors, Mayor Lausche will request the Army to name the bomber for the city of Cleveland and send it into action as soon as possible. Cleveland officials reported that every penny contributed to the fund became a part of the final check and that the most money flowed from factories and offices whose employees were already participating 100 per cent In the Treasury* s War Savings payroll allotment program. John C. Birden, regional director of the War Production Board, and Richard E. Kroesen, Cuyahoga county (Ohio) commander of the American Legion, will join Mayor Lausche and President Fleming In the presentation of the check. -oOo- (The check will be handed over to Secretary Morgenthau at 3 p. m* / Photographers are invited.) TREASURY DEPARTMENT Washington FOR.RELEASE, MORNING NEWSPAPERS, Friday, June 26, 1 9 4 2 . _________ The .Secretary of the Treasury, by this public notice, invites tenders'for $300,000,000, o n thereabouts, of 91-day •i ■Treasury bills, to be issued on a discount basis•under competitive bidding. The bills of this series will •be dated July 1, 1942, and will mature September 30,.¡1942, when the face amount will be payable'without interest.,.'They will be issued in bearer form . only, and in^denomina.tions of $1,000, $5,000, $10,000, $100,000, $500-,'000, .and $1^000,000 (maturity value)#; .: Tenders will be received at Federal Reserve Banks and Branched'up to the closing hour, two o fclockvp; m . , Eastern war time, Monday, June 29, 1942. Tenders will not-be-received1fat thé Treasury Department, Washington, Each tender must be for an even multiple of $1,000, and the price offered must be expressed on the basis' of. 100, with not more than three decimals, -eY g., 99.925. Fractions may not be used. It is urged that tenders be made on the1 printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on applica tion therefor. Tenders will be received without deposit from Incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on July 1, 1942. 32-20 (Over) - 2 The income derived from; Treasury bill s, whethèr interest or gain from the sale or other disposition of the bills, shall not have any exemption,, as such, and loss from, the sale or other’ disposition of Treasury bills shall not have any special treatment, as such, under Federal tax Acts now or hereafter enacted* The v ‘ bills shall be subject to estate, inheritance, gift, or other excise taxep, whether Federal or State, but.'shall be exempt-from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions‘of the United States, or by any local taxing authority. For purposes of taxa tion the amount of discount at which Treasury bills are- originally sold by the United States shall be considered to be interest-. Under Sections 42,and 117.(a) (1) of the Internal Revenué Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded'from.considera tion as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies) issued hereunder.need include in his income tax return only the difference between the price paid for such bills, whether on original issue or on subse quent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which return is made, as ordinary gain or loss. ' Treasury Department Circular No. 418, as amended,-, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be- obtained from any Federal Reserve Bank or Branch. Action of the Ways and Means Committee on the Revenue Bill of 1942 June 26, 1942 (Revised July 20, 1942 in accordance with H.R. 7378 as passed by the House of Representatives.) TABLE OF CONTENTS Estimated revenue effect of the tax changes in the Revenue Bill of 19-42 (li.R. 737 as passed by the House of Representatives July 20, 1942 Present 'law, Treasury proposal, and Committee action on Revenue Bill of 1942 Page No. km B4 Corporation taxes ............ ........ *.................... 1 1. Normal t a x ........... ................ •.............. 1 2• Surtax .............. ......................... •••.... 1 3. Relief for corporations with decreased earnings ..••.••••«• 2 4* Excess profits tax ........ »..••••...••.«»•• a.• Excess profits credit ........ ........ .. •....... . b-* Specific exemption ...••••••......... ••••.•••••••.... c. Excess profits tax rales ..••••••••••.••••••••....•*• di General/relief ............... •........3 2 2 2 2 5* Post-war credit ............. ...................... . 3 6* Consolidated returns ••............................ •••• 5 7. Nonresident foreign corporations ••••.......«........ •••• 5 8. Personal holding companies ...... ...... ........... . 6 9. Capital stock tax and declared value excess profits tax ••• 6 Individual income tax •••••••••••••.•••«•.••••*•«...««•... *••. 6 .................. m m .... ........... ............ Normal tax ..........••••••....... ................. Surtax ............. . Optional tax on individuals with gross income from certain sources of §3,000 or less ..•..*••••••. Non-resident alien individuals not engaged in trade or business within the United States and not having a. place of business therein ........ . 6 6 6 1« Ratos a• b• c. d. 2. Exemptions • • • • • • • « . • • . • a. Single person, Married person, Dependent ...... .. b • Children 18-21 attending school ...... 6 7 7 7 7 3. Earned income credit •.•••.••••••••••••.... . 7 4. Collection at source ...••••...........................* 7 5* Joint returns .... 5a• Working Wife Allowance •••••••«••••.•• ................... 6«. Medical expenses ....9 8 8 - 2 - Page ITo. C. D. Estate and gift taxes .................................. q 1. Rates ........................................... .. g 2. Exemptions ................ ...... ........... . a. Estate tax ................................... Id . Gift t a x .......... .......................... 9 9 9 Excise taxes .................................... 1. 9 Recommended increases ,............. ..... ....... ,. a. Liquor .................................. b. Tobacco ................ *........ ............ c. Gasoline .................................... d. Lubricating oil ............... e. Photographic apparatus ....................... f. Carbonated soft drinks .............. ......... g. Candy and chewing gum ............. h. Communications service ...... i. Transportation of persons .................... j. Transportation of oil by pipe line ............ 9 2. Recommended for repeal ........... a. Commercial washing machines .............. .,., b. Optical equipment ....... c. Electric signs and advertising devices ........ d. Rubber articles ................. i........... 13 13 13 13 13 3. Submitted by request but not included in Treasury recommendations ....... a. Freight and express ............. b. Pari-mutuel wagers ........... c. Coin-operated amusement andgaming devices ..... d. Barber and beauty shop services ............ e. Electrical energy........ ................... f. Manufactured and natural gas .................. g. Sugar ,.... h. Coffee ......................... i. Tea ............................ j . Cocoa .................... k. Radiobroadcasting ......... .............. . ’ 13 13 lU lU lR lh lU lR 1I4 15 15 15 9 10 11 11 11 12 12 12 13 13 E. State and local tax-exempt securities ................ 16 F. Percentage depletion and intangible development expenses .. l6 1. Percentage depletion........... ....... ........ . a. Oil and gas wells ................. b. Sulphur mines and deposits .................... c. Metal mines ........ d. Coal mines ................. e. Fluorspar .................................... 16 l6 l6 l6 l6 l6 -3Page No F . Percentage depletion and intangible development expenses (continued) ............................................ 2. G. Capital gains and losses 1. 2. H. Intangible development expense .......... ....... . .......... ■ 16 17 Individuals ...................... a. Classes of gains and losses ................... b. Percentage of gain or loss takeninto account .. c. Maximum rate on statutory netlong-term gains .. d. Treatment of losses .......................... o. Loss carry-over...... 18 Corporations.... .................................. a. Classes of gains and losses .................. b. Maximum rate on net long-termgains ........... c. Offsetting of losses ......................... d. Carry-over oflosses ..................... IB 18 IB 19 19 Insurance companies .......................... 1. 1$ Life insurance tax base .................... a. life insurance business ...................... b. Cancellable accident andhealth business ...... 17 17 17 17 17 19 19 19 20 2 . Mutual insurance companies other 21 21 21 3 . Foreign insurance.............. 22 than l i f e .......... a , Exemptions ..................... b. Tax base ................................. a. b. Policies not signed or countersigned in United States by an officer or agent of the insurer .. Policies signed or countersigned (companies doing business in the United States) ......... 22 22 I. Inventory reserves .................. 23 J. Check list of technical andadministrative amendments..... 24 - 0 O0 - — 1 . ^ .estimated increase (■+) or decrease (-) in revenue yield due to Revenue Bill of 194-2 (H.R. 7 3 7 8 ) as passed by the House of Representatives, July 20, 194.2 r (in millions of dollars) Increase {+), decrease(-) over yield of present law Income and excess-profits taxes: Corporation: Income Excess profits Declared value excess-profits tax Total corporation income and excess -profits taxes Individual income tax ToteJL income and excess profits taxes * H* 3 8 3 .42 ,3 1 3 .8 5 8 .5 2 ,64 -0 .7 2 .8 7 2 .3 5 ,5 1 3 .0 • to Miscellaneous Internal revenue: Capital stock tax 5 1 .5 Estate tax 14-.8 Gift tax 7 .7 Total ■— 58.6 Liquor taxes: Distilled spirits 1/ -+■ 266.1 Fermented malt liquors 1/ 61.8 Wines 1/ + 11.6 Total liquor taxes 3 3 9 .5 Tobacco taxes: Cigarettes 1/ *♦* 5 1 .4Tobacco, smoking 1 / 11.8 Cigars (large) l/~ 1 5 .8 Cigarette papers and tubes 7 .8 Total tobacco taxes 86.8 Manufacturers’ excise taxes: Lubricating oil •h 1 3 .9 Photographic apparatus *+■ 7 .6 Rubber articles 8 .9 Electric signs .1 Washing machines .1 Optical equipment — .3 Total manufacturers’ excise taxes 12.1 Miscellaneous taxes: Telephone, telegraph, radio and cable facilities 3 leased -wires, etc. •f 26.8 Telephone bill 36.8 Transportation of persons 3 3 .9 Coin-operated amusement end gaming devices 4-•4 Transportation of property 2 5 2 .9 Pari-mutuel wagering 2 3 .6 Total miscellaneous taxes Total miscellaneous internal revenue __ ±__ - 7 ^8 .2 Total internal revenue /■-+ - 6 .2 7 1 .2 Treasury Department, Division of Research & Statistics. July 2 0 , 1 9 4 2 . See next page for footnotes 1/ Excluding nonrecurring floor stocks taxes which are estimated to yield: Distilled spirits, $9 0 .0 millions; fermented malt liquors, $2 ,0 millions; wines, $2,3 millions; cigarettes, $5.g millions; smoking tobacco, $1.H millions; cigars (large), $1.6 millions. Note: All estimates show full year effect assuming all proposed changes were fully reflected in revenue for an entire year. Estimates of income and excess profits taxes and the gift tax are at levels of income estimated for calendar year 19 ^-2 . All other estimates are at levels of income estimated for fiscal year I9U3. Present law* Treasury proposal, and Committee action on Revenue Bill of 1942 (The Committee action and H.R, 7378 are the same except for corporate rates) Present law Treasury proposal Committee action irporation taxes Normal tax Corporations with net income of not more than $25*000: Not in excess of $ 5,000 Next $15*000 Next $5*000 % 17 19 % 17 19 15 % 17 19 Corporations with a net income over $2 5 *000 : 24 24 -24 Notch provision: Alternative tax Top income to ?diich applicable 15 15 $4*250 plus 37$ of excess over $25*000 $4*250 plus 3 1 $ of excess over $25*000 $38,461.54 $ 50*000 $4*250 plus 3 1 $ of excess over $25*000 $ 50*000 Surtax * Corporations with net income of not more than $25*000 6 Corporations with net income over $2 5 *000 : First $25*000 Over $25*000 7 Notch provision: Alternative tax Top income to which applicable Note: 6 None (bracket rates) - 16 10 31 31 21 21 $4*000 plus 46$ of excess over $25*000 $ 50*000 $ 2*500 plus 32 $ of excess over $ 25*000 $ 50,000 Under the Committee action the normal and surtax rates do not apply to the balance of adjusted excess profits net income re maining after excess profits tax. * In final Committee action the surtax rate for corporations with net income over $25,000 was reduced from 21$ to l6$ and the excess profits tax rate was increased from 8>72$ to 90$# The bill, H.R* 7378, as passed by the House, retained the surtax rate of 21$ and adopted the 90$ excess profits rate# - 2 - Present law Treasury proposal Committee action 3 . Relief for corporations with decreased earnings None * None Corporations with current year surtax net income less than the average surtax net income for the base period years 1936-1939 should be allowed a tax credit of 10 percent of the difference but not to exceed the smaller of (a) 20 percent of surtax net income or (b) the excess of the surtax computed without benefit of this provision over $4.,000. This provision should apply only to corporations with not income over $25 «,000 that do not use the alternative rate under the notch provision. In the light of the Committee’s tentative action in adopting a combined normal and surtax rate of 40 percent,, the Treasury withdrew its recommendation. Later the Committee raised the combined rate of 40 percent to 45 percent. 4 . Excess profits tax a. Excess profits credit (l) Invested capital method: First $5 million of invested capital Next $5 million Next $190 million Balance (2 ) Note: c. Specific exemption 8%> 7 6 5 95 95 95 $ 5 ,0 0 0 $5 ,0 0 0 $1 0 ,0 0 0 The Treasury agreed in advance to the modifications in the excess profits credit and specific exemption indicated above under Committee action. Excess profits tax rates ** Adjusted excess profits net income First $2 0 ,0 0 0 $ 20,000 to $ 50,000 50,000 to 100,000 100,000 to 250,000 250,000 to 500,000 Over 5 0 0 ,0 0 0 ** 8$ 7 7 7 Income method: Portion of average earnings in base period 1 9 3 6 -1 9 3 9 b. 8% 7 7 7 See note on page 1. 35 $ 40 45 50 55 60 50% 55 60 65 70 75 90*0$ 9 0 *0 90.0 90.0 90.0 90.0 - 3 Present law e. Notes Treasury proposal Committee action Excess profits tax rates continued (l) Under the Committee action the normal and surtax rates do not apply to the balance of adjusted excess profits net income remaining after excess profits tax. (2 ) Under the procedure in the present law corporations with taxable years beginning after December 31 , 1 9 4 1 , would be sub ject to the new and higher income and excess profits tax rates. This would permit corporations with fiscal years to escape the full import of the new rates on part of the incomes attributable to the calendar year 1 9 4 2 . The Committee voted to follow the 1932 Act or some similar procedure to obviate this result, thus making the new rates applicable to all corporate incomes after January 1, 1 9 4 2 . d. 5. General relief: (A separate statement is available outlining the Treasury's proposals which were accepted by the Committee.) Post-war credit *' (a) Statement of Secretary, March 3 , 1 9 4 2 : "However, it is recognized that very high top, or so-called 'marginal rates,' may leave little incentive for the maintenance of efficiency in business operation. Furthermore, after the war there may well be need for a large volume of expenditure in readjusting industry and maintaining employment. For these reasons it is believed desirable that in the case of any dollar of corpo rate profits the receipt of winch results in an increase in tax beyond perhaps eighty cents, the additional tax on such dollar shall be held by the Government to the account of the corporation and be returnable within a limited period after the war, in those cases where it is spent for now and additional capital equipment or otherwise is spent in the additional employment of labor." (b) Proposal made jointly by Mr* Paul, Tax Adviser to the Secretary of the Treasury, and Mr* Stain, of the staff of the Joint Committee on Internal Revenue Taxation, on June 13 , 1 9 4 2 : "1 * The amount to be returned shall be 14 percent of the taxpayer's adjusted excess-profits net income. "2. The amounts returned shall not be included in corporate income subject to tax. -u "3 . The amounts shall he set aside in a special fund to he held hy the Treasury to the credit of the taxpayer who shall he given a nonnegotiable, non-interest-hearing certificate as evidence of his claim. "U. The amounts returned to the taxpayers are intended for use in the conversion of their businesses to peacetime activity or in the maintenance of employment in business activity. To this end the amounts returned shall not he available for the following purposes: (1 ) The payment of cash or stock dividends. (2) Bonuses or salary increases to executives. (3) The increase of cash reserves unless em ployed in the business. (h) The purchase of securities, ”5 . The amounts returned to the taxpayer shall be returned in the following manner; First-year collections shall be paid within the third year after the cessation of hostilities; second-year collections within the fourth year; third-year collections within the fifth year; balance within the sixth year after the cessation of hostilities.11 This specific proposal was rejected by the Committee. ** The Committee tentatively adopted and then rejected the following formula: 1 . The amount returned be lU percent of the adjusted excess-profits net income— the base upon which the excess-profits tax is computed. (Giving , effect to the proposed refund, therefore, the net excess-profits tax rate will be SO percent.) 2. The refund be effected by the redemption of bonds issued to the taxpayer. .3 » The bonds be issued within 3 months after the payment of the related tax, or the final quarterly installment thereof, for any taxable year. 4 . The bonds mature, subject to prior call, as follows: One-third at the end of the second calendar year following the cassation of hostili ties; one-third at the end of the third such year; and one-third at the end of the fourth such year. 5 . The bonds shall be callable, upon 3 months' notice, at any time prior to maturity date. 6. The maturity date of all the bonds be advertised within ]>0 days after the cessation of hostilities, and in such a way that the maturity date of any bond shall be readily ascertainable. 7 .. The bonds be issued under the provisions of the Second Liberty Bond Act, thus payable without the necessity of a special appropriation. 8. The "bonds "be nonnegotiable and non-inter est-"bearing. 9. The "bonds "be assignable after the end of the \^ar. 10. The amount of bonds issuable to any taxpayer in consideration of the tax paid for any taxable year be adjusted for any overage or shortage in the aggregate amount issued to such taxpayer for the prior year or years, any overage finally remaining to be adjusted by cancellation or, at the election of the taxpayer, by purchase at face value. 11. No amount be included in gross income for any year by reason of the receipt of bonds or of amounts paid for their redemption. 12. No amount be available, by reason of the issue of bonds or their redemption, for any of the following purposes; (1) (2) (3) 15 6. The The to The in The payment of dividends in cash or stock, payment of bonuses or salary increases executives. increase of cash reserves unless employed the business. purchase of securities. 'he amounts refunded to be subject to a 11capital gains11 tax of percent. Committee Present Treasury action law proposal Consolidated returns Not allowed for normal tax and surtax (except for railroads, etc., and cer tain corpora tions in for eign trade.) Allow for both income and excess profits tax Allow for both income and ex cess profits tax imposing, how ever, a differ-? ential tax of c j> of surtax net income for the privilege 2 Allowed for excess profits tax. 7, Nonresident foreign corporations Tax rate Not specifiedto be aligned Not specifiedto be aligned 37 $ SR h— Withholding of tax at source (Sec. lhU) 27 ^ - 6 ~ 8. Present law Treasury Committee action Not in excess of $2,0 0 0 7ià$ Not specified 75$ In excess of $ 2 ,0 0 0 si tr$ Not specified 85$ Personal holding companies Note: 9# The Committee action on points 7 and 8 was taken at the suggestion of the Treasury. Capital stock tax and declared valifrexcess profits tax Capital stock tax $1.25 for each $1,000 of adjusted declared value Repeal 6.6$ Repeal 6.6$ 13.2$ Repeal 1 3 *2 $ Taxes retained hut provision was made for the annual redeclaration of capital stock value Declared value excess profits tax net income: In excess of 10 $ and not in excess of 15$ of adjusted declared value In excess of 15 $ of adjusted declared value B, Individual income tax 1 . Rates a. Normal tax b. Surtax U$ (See U$ attached. 6$ T a b l e Note«. The Treasury recommended that the first $ 2 ,0 0 0 bracket he subdivided into four $500 brackets. Under the Committee action the first $2,000 bracket is retained. c. Note: Optional tax on individuals with gross income from cer tain sources of $3,000 or 1 0SS (See a t t a c h e d Jail e 2) Under present law taxpayers having a married status on the last day of the taxable year are entitled to a married person’s exemp tion for the entire year. Under the Committee action those having a married status on July 1 of the taxable year receive a married person's exemption. - 7 Present law d. Treasury proposal Committee action Non-resident alien individuals not engaged in trade or business within the United States and not having a place of business therein 2 7 §$ Tax rate Not speci^ fied - to be aligned - 37$ Notet The 2 7 |$ rate under present law does not apply to receipts of more than $ 2 3 ,0 0 0 ; the 37 $ rate under Committee action does not apply to non-resident alien individuals with aggregate receipts of more than $22,900. Withholding of tax at source (Section IU3) 27^$ Not speci fied - to be aligned 37$ 7 Exemptions a. * Single person Married person Dependent 3. 750 1,500 UOO $ 600 1,200 300 $ 500 * 1,200 * Hoo In addition, members of the armed forces are allowed an exclusion from gross income of $250 for a single person and $300 for a married person. Thus in effect the present exemptions are retained for the armed forces on active duty. Note: b. $ The original Treasury proposal of March 3 , 19H2, recommended exemptions of $ 7 5 0 » $1 ,5 0 0 and $*4-0 0 , In a letter to the Chairman May 6 , 19 *4-2 » the Secretary recommended the lowering of exemptions to $600, $1,200 and $300. Children 1 8 -2 1 attending school Not included as dependents Include as dependents Not included as dependents 10$ of earned net income but not in excess of the entire net income Repeal Retain without change Rate 10 $* The plan was adopted with the revision indicated in the note on the fol lowing page. Earned income credit For normal tax only Collection at source None - s - * Collect the income tax at source with respect to salaries and wages, dividends and bond interest. For salaries and wages, allow personal exemp tions, credit for dependents, and deductions equal to 10 percent of exemp tions and credit for dependents. Originally the Treasury recommended that the Secretary have discretion to collect at source at a rate up to 10 percent, since it was not known how soon and to what extent it might be necessary to speed up tax collections to check inflation. Subsequently, the Treasury asked outright for a 10 percent rate. On June 1 9 » 19 ^2 , the Treasury submitted a plan to ease the transition to collection at source by spreading the impact of the 10 percent tax over two transition years 19U3 and I9UU. Under this plan one-half the amount collected at source during 19^3 would be credited against the instalment payments on 19^2 liabilities and the balance would be credited against the quarterly payment on I9U3 liabilities due in March, 19 Uh. It was suggested further that for the purpose of equalizing the impact of collection at source on persons with sources of income subject to withholding and persons not subject to withhold ing, all taxpayers be required to pay 5 percent of net income plus one-fourth the balance of the liabilities for 19I+3 in March, 19U4. In the course of the discussion in the Committee, it was suggested by a member of the Committee that a simpler method of transition would be to with hold at a rate of only 5 percent in I9U3 and have all of the withheld tax apply as part payment of I9U3 tax liabilities, The 10 percent rate would be imposed first in 19Uh, applicable as part payment of I9UU tax liabilities. It was informally the sense of the Committee that the Treasury and Joint Com mittee staffs should study this suggestion and report back. In its final action the Committee adopted this suggested revision. Joint returns * 5 a. Present law Treasury proposal Committee action Optional Mandatory Optional * The Committee had tentatively adopted mandatory joint returns, but subsequently reversed its action. Working wife allowance None * ** Hone ** On March 3 0 » 19 ^2 , the Treasury more specifically recommended an allowance as follows: "Where the wife works outside the home, additional household expenses usually are incurred which are not present where the wife is able to devote her full time to the maintenance of the home* For this reason, it is suggested that an additional credit be provided as follows; "There should be allowed as a credit against the tax upon the family an amount equal to 10 percent of the wifers earnings. Such credit, however, should not exceed $100, "A similar credit should be allowed where a person occupying the status of head of the family, such as a widow, works." - 9 - 6. Medical expenses Present law Treasury proposal No allowance * Committee action No action * Allow a deduction for extraordinary medical expenses in excess of a specified percentage of the family's net income* The amount allowed should, however, "be limited to some specified maximum amount. (March 30* 19^2.) Estate and gift taxes 1 . 2. Rates See’attached Table 2 No increase Specific exemption $Uo,ooo Insurance exclusion $Uo#ooo One $60,000 specific ex emption for the present specific ex emption and insurance exclusion Exemptions a. Estate tax Nonresidents1 estates h, Substitute one $60,000 speci fic exemption for the present specific exemp tion and insur ance exclusion $ 2,000 None Gift tax $1+0,000 Specific exemption Annual exclusion 4 $l+,000 for each donee $ 30,000 Allow each donor $ 5»000 for all donees $ 30/000 $ 3^000 ;for each donee Excise taxes 1. Recommended increases a. Liquor Distilled spirits, per gallon Beer (fermented malt liquors), per "barrel Still wines, per wine gallon Not over Over lU not over 21$ Over 21 not over 2U$ $1+ $6 $6 $6 $8 $7 g# 30# 15# 50# $l 10 # 1+0 # $1 m - D. Excise taxes 1. 10 - 10 # 10# 5# 5# 5# 3l4 Ho excise tax The Committee tentatively adopted a tax of eliminated it from the Bill, $6 and subsequently Tobacco Cigarettes, per thousand Small 1 0 # brands 1 5 # brands $ 3.25 3.25 Large Hot over 6ÿ* long Over Sÿ* long Smoking tobacco, per pound Cigars, per thousand, retailing at: A - Hot over 2,5 B - 2 .6 to U.O C -(U.i 11 5.0 ri 6.0 (5.1 D - 6 ,1 it s.o E - 6 .1 ti 11.0 F -1 1 . 1 ti I5 .O G -I5 .I it 20.0 H -2 0 .1 it 3 O.O I -30 .I and over Hote: n 3p Committee action Continued Other wines, per l/2 pint Sparkling Artificially carbonated Liqueurs, cordials, etc. Imported bitters, per gallon t>, Treasury proposal Continued Recommended increases * Present law $ $ 9.60 7.60 3.25 16# 2.00 2.00 2.00 3.0 0 3 .OO 5.00 5.00 IO.5 O I3 .5 O I3 .5 O 3 .5O H .00 6 .1*0 3 .5O 2l+# U.oo 36 # $ $ ) ) 2 .5 O 3 .5 O 5.00 3 .5 0 3 .5 0 $ 2 .5 O 3 .5 O 5 .OO 7.00 10 ,0 0 13 .5 0 7.00 10 .0 0 1 3 .5 0 18.00 18.00 2 5 .OO 35.00 25,00 35.00 Originally, on March 3» 19^2, the Treasury proposed rates as follows: 11 - Present law D, Treasury proposal Committee action Excise taxes Continued. 1 . Recommended increases Continued b, Tobacco Continued Hot over 2 .5 cents, $2,50; 2 .6 to 5 cents, $ 5 ,0 0 ; to 8 cents, $ 7 .5 0 ; 8 .1 to 10 cents, $ 1 0 .0 0 ; 1 0 . 1 to 15 cents, $ 1 5 .0 0 ; 1 5 .I to 20 cents, $ 20 ,00 ; 2 0 .1 to 30 cents, $ 2 5 .00 ; 3 0 .1 and over, $L0 .00 . This schedule was revised upon representations made by manufacturers and workers in the industry. Cigarette paper and tubes Papers: (per l/2 # per 25 pkg.) Not papers or over 25 tubes or fracsheets - ex- tion thereof empt, 26-50 sheets - l/2 ^ each additional 50 sheets or fraction there of - 1 /2 ^ Tubes; 1 ^ per pkg. of 50 or fraction there of C, Gasoline, per gallon 1 1/2 $ 3i# d. Lubricating oil, per gallon k 1 /2 ^ 10(i 10 $ of manu 25$ e. 1 /2 ^ per 25 papers or tubes or frac-r tion thereof 1 1/2^ 6# Photographic apparatus LT\ 1—1 Unexposed film and sensitized paper and photographic plates facturers’ sales price Other photographic apparatus 10 $ of manu facturers ’ sales price 25 i 2 5 $, exempting cameras weigh ing more than H lbs. - 12 - Present law f» Treasury proposal Committee action Carbonated soft drinks Bottle not over 33 fluid ounces retailing at Not over 100 Over 100 not over 200 Over 200 Bottle over 33 fluid ounces No tax 11 it 11 it h 11 20 30 10 per bottle » t* » » No tax fi f» U H 36$ of bottlers’ selling price li li Carbonic acid gas used in unbottled soft drinks ” ” 800 per pound ” ” g* Candy and chewing gum. « » 15$ of manu facturers ’ sales price n it h* Communications Service 1/ Telephone and radio telephone toll service charge of more than 240 50 tax on % charge of 25 to 500 ; additional 50 tax on each 500 20$ of total charge* 20$ of total charge * Originally the Treasury proposed a 50 tax on charges of' 25 to 39 cents; 10—cent tax on charges of 40—64 cents; 150 tax on charges of 65 to 99 cents; additional 50 tax on each 25 cents or fraction thereof*. This proposal m s revised at the suggestion of the industiy to simplify the computation of the tax. Telegraph, cable and radio dispatch or message Leased wire services Local telephone ser vice Public station coinoperated telephone service charges under 250 1/ Revised Treasury proposal*. 10$ of charge 10% of charge 15$ of charge 15% of charge 15$ of charge 15 $ of charge . M of bill 10$ of charge 10$ of charge Exempt Exempt* Exempt - 13 - Present law h. Treasury proposal Committee action Communications Service Continued * Originally the Treasury recommended a tax of 10 percent of service charge. This recommendation was changed on representations of the industry to the effect that the tax could not be shifted to consumers. i. j. Transportation of persons Transportation charges 5$ of amount paid 1P id. 1 op 10$ Seats and berths 5$ of amount paid 20$ 10$ 10$ * 4 * Transportation of oil by pipe line of amount paid * The Treasury withdrew its proposed increase before the action of the Committee. Recommended for repeal 3* a. Commercial washing machines 10$ of mfrs,1 sales price Repeal Repealed b. Optical equipment 10$ of mfrs.* sales price Repeal Repealed c. Slectric signs and advertising devices 10$ of mfrs.1 sales price Repeal Repealed d. Rubber articles 10$ of mfrs,r sales price ■Repeal Repealed Submitted by request but not iflcTuded in Treasury recom mendations •^•*Q3-£»bt and express Ho tax *}$ of amount paid by either contract or common car riers, except . in the case of coal the tax is 5^ per long ton* Present law Pari-mutuel wagers No tax Treasury proposal Committee action 5% of pool Coin-operated amusement and gaming devices 10 gaining devices paying prizes of not more than 50 Other gaming devices Amusement devices: Pinball machines Other amusement devices $50 $50 #10 #50 $10 Exempt #10 #10 Barber and beauty shop services No tax Suggested tax of 10% of charge was rejected 3-1/3$ Suggested in crease to % was rejected Sales by publicly owned plants Exempt Suggested elimination of exemption rejected Manufactured and natural gas No tax Suggested tax of % of amount paid rejected Electrical energy' Rate Sugar Coffee l/2 cent per pound No tax 5 5 Suggested increase to 1 cent re jected Suggested tax of 5 cents per pound rejected - 15 - Present law Treasury proposal Committee action i, Tea No tax Suggested tax of 10 cents per pound rejected j• Cocoa No tax Suggested tax of 5 cents per pound rejected k. Radio “broadcasting No tax Suggested tax based on (a) transmission power or (b) net time sale? rejected* * Suggestion was that tax be higher of (a) or (b): (a)< Transmission power tax at following rates: 100 watts, $1 0 0 ; 25O watts, $250; 500 watts, $250; 1,000 watts, $350» 5*000 watts, $500; 7,500 watts, $750; 10,000 watts, $8 0 0 ; 25,000 watts, $900; 50,000 watts, $ 1 , 000.. (b) Net time sales tax at following rates: First $ 5 0 ,0 0 0 net time sales in excess of $100,000 exemption, 6 percent; next $350*000, 8 percent; balance, 10 percent.. 1. Bank checks No tax Suggested tax of 2 cents pel check rejectee m. Withdrawals from bank accounts No tax Suggested tax of 1/100 of ; 1$ rejected Note: The Committee exempted from the tax on business machines cash registers used in over-the-counter sales of merchandise; and from the tax on musical instruments, organs sold under a bond fide contract entered into before October 1 , 19 ^1 *• - 16 - State and local tax-exemnt securities Present law Treasury proposal Interest exempt from both normal tax and surtax Repeal present exemption for both future and outstand ing securities Committee action Present exemption retained Percentage depletion and intangible development expenses 1* Percentage depletion a. Oil and gas wells b. Sulphur mines and deposits c. Metal mines percent of gross income 3 1 iminate 27i| percent of gross income 23 percent of gross income Eliminate 23 percent of gross income 15 percent Eliminate 15 percent of gross income Eliminate 5 percent of gross income d. e. Note: 2. Coal mines Fluorspar 5 percent of gross income of gross income No per centage depletion 15 percent of gross income Under present law and Committee action percentage depletion is limited to an amount not in excess of .50 percent of net income computed without allowance for depletion* Intangible development expense Option to charge to expense or capitalize* Capitalize Option to charge to expense or capitalize* * The Regulations now give taxpayers the option of expensing intangible development costs of oil and gas properties. They also permit the expensing of the development costs of mines except the excess of costs over receipts for mines that have not yet reached the state of production. This excess must be charged to capital account to be recovered through depletion, - 17 Present law Treasury proposal Committee action Capital gains and losses 1. Individuals a. h. c. d. Classes of gains and losses (l) Short-term Assets held IS months or less Assets held IS months or less Assets held 15 months or less (2 ) Long-term Two classes: Over IS, not over 2k mos,; over 2k mos. One class: Over IS months One class: Over 15 months Percentage of gain or loss taken into account (l) Short-term (2 ) Long-term Hot over 2k months Over 2k months Maximum rate on statutory net long-term gains 10 0 $ 100 $ 100 $ 66- 2/3 50 50 50 50 50 30 60 50 Treatment of losses (l) Short-term losses Allowed solely against short gains of the succeeding year To he allowed against short or long gains and, together with long losses, also against a maximum of $1,000 of other income To he allowed against short or long gains and, together with long losses, also against a maximum of $1,000 of other income - IS Present law d. 2. Committee action' To he allowed against short and long capi tal gains and, together with short losses, also against a maximum of $1,000 of other income To he allowed against short and long capi tal gains and together with short losses? also againstl a maximum of $1,000 of I other income Treatment of losses Continued (■2 ) Long-term losses e. Treasury proposal Allowed against ordinary income in full Loss carry-over (1) Short-term One year Permit 5 -year against carry-over short-term capital gains (2 ) Long-term No carryover required because allowed against other income Permit 5 -yeap carry-over Permit 5~yea.r Permit 5~year carry-over carry-over Corporations a. h. Classes of gains and losses (1) Short-term Assets held No distinction to he made 18 months or less Assets held 15 months or less (2 ) Long-term Assets held No distinction over 18 to he made months Assets held over 15 months Corporate rate 25<fo:in lîau Maximum rate on net long-term gains Corporate rate of corpo rate rate - 19 - c. Present Treasury Committee law proposal action Offsetting of losses (l) Short-term Allowed solely against short term gains (2) d. Hotel H, Long-term Allow against short or long term gains Allowed against Allow against other income short or longin full term gains Allow against short or long term gains Allow against short or long term gains Carry-over of losses (l) Short-term Carried for ward for one year against short-term gains Permit 5 -year loss carry over Permit 5 -year loss carry over (2) Long-term Ho carry-for ward required since offset against other income Permit 5-year Permit 5-year loss carry over loss carry over The modifications in the Treasury recommendations were agreed to hy the Treasury in advance. Insurance companies — ~ e -Ansnr an ce tax base a. (Only major changes are indicated) Life insurance business Deductions from taxable in vestment income (underwriting income excluded) Expenses Investment ex— penses, limited to l/k of 1jo of assets, if any expenses allocated Investment ex penses limited to l/k of Vf» of assets plus l/4 of excess of rate of in terest actually earned over 3- 3 /^. if any expenses are allocated Investment ex penses limited to l/k of Vf, of assets plus l/k of excess of rate of in terest actually earned over 3 -3 /^» if any expenses are allocated 20 - Present law H. Insurance companies Treasury proposal Committee action Continued Heserve earnings 3— 3 percent Percent of Plat percentage deduction of mean of mean of legal of investment legal reserves, reserves equal income after or actual to weighted investment ex assumption average of penses and tax rate, if 3 - 1 /!+ percent exempt interest, higher, hut and actual percentage to not to ex assumption he determined ceed U per hy Secretary rate, 3 -1 /*+ cent ; no percent to he of the Treasury adjustment weighted 65 so as to yield for reserve percent and same aggregate earnings actual assump deduction for derived tion rate, industry as from tax35 percent, under Treasury exempt preliminary formula* income term reserves to he increased hy 7 percent for this purpose; adjustment of deduction to elimi nate doublededuction of reserve earnings derived from tax-exempt interest * This proposal was made hy the industry and the Treasury made no objections to its acceptance. h. Note: Cancellable accicent and health business Same as life business where company quali fies as a life company Add 3 -l/U per cent of re serves on can cellable acci dent and health business; un earned premium reserve to he not less than 25 percent of annual pre miums written Add 3 -1 /1+ per cent of re serves on can cellable acci dent and health business; un earned premium reserve to be not less than 25 percent of annual pre miums written (1 ) The Treasury originally proposed that cancellable health and accident business be segregated and treated like insurance other than life. The modified proposal was suggested by the industry and accepted by the Treasury. - 21 - Present law H. Insurance companies Treasury proposal Committee action Continued (2 ) Treasury recommended that non-cancellable health and accident reserves be included with life reserves in deter mining whether a company was a life insurance company. This recommendation was adopted. (3 ) Treasury recommended that reserves of life insurance companies be, treated as borrowed capital for excess profits tax purposes , and that the reserve earnings deduction be treated like interest paid on the borrowed capital., This recommendation was adopted. 2. Mutual insurance companies other than life a. Exemptions Section 101 (11) has the effect of exempting practically all mutual insurance companies other than life b. Tax base The deduction Eliminate deunder section duction under 2 0 7 (c)(3 ) has 207 (c)(3 ); the effect of permit deduction for divieliminating all premiums dends paid to from the tax , policyholders base in excess of investment income available for the payment of dividends; permit deduction for amounts added to surplus apportioned to policyholders V Note: Exempt companies with less than $100,;000 admitted assets or less than $50,000 net income Exempt companies with less than $100,000 admitted assets or less than $50,000 net income Eliminate deduction under 207(c)(3); permit deduction for dividends paid to policyholders in excess of • investment income available for the payment of dividends; permit dednction for amounts added to surplus apportioned to policyholders Treasury recommended th£fb unearned premium reserves of both mutual and stock insurance companies other than life be in cluded as borrowed capital for excess profits tax purposes. No adjustment is to be made on income because there is no corresponding explicit interest payment. This recommendation was adopted. 22 Present law Treasury proposal Committee action Foreign insurance a. hi Policies not signed or r countersigned in United States by an officer or agent of the insurer a) Life insurance Ho tax Stamp tax at rate of 1 percent Stamp tax at rate of 1 percent of premium (2) Surety and fidelity bonds, and certain other types of casualty income Ho tax Stamp tax at rate of L percent Stamp tax at rate of U percent of premium (3 ) Reinsurance Ho tax Stamp tax at rate of 1 percent Stamp tax at rate of 1 percent of premium (1+) Other insurance Stamp tax at rate of 1+ per cent Stamp tax at rate of b percent Stamp tax at rate of b percent of premium Tax on b asis of United States busi ness Tax on basis of United States busi ness Policies signed or countersigned (com panies doing busi ness in the United States) a) Life insurance Taxed on share of net income from all sources which reserves on United States policies bear to total re serve (2) Insurance other than life Taxed on United Tax on States business United States business Tax on United States business I. Inventory reserves The Treasury proposed that taxpayers he .permitted to set up reserves against future inventory losses through price declines, these reserves to he deductible in computing income and excess profits tax. The Committee accepted the inventory reserve proposal in principle, the provision to he included in the draft if the technical drafting details can he worked out within the time availabl«. It was not possible to complete the draft of the inventory pro*vision in time for the House hill* The drafting will he continued with a view to having the provision ready for the Senate finance Committee. (A separate mimeograph outlining the proposal is available*) J. Check list of technical and administrative amendments Hot approved Income tax amendments Treatment of pre-March 1 ,' 1 9 1 3 * earnings and profits. Basis of assets acquired from a decedent for capital gain and loss purposes. Estate and gift tax amendments Limitation on deductibility of charitable bequests. Deferred until later legislation Income tax amendments Charitable organization engaged in trade or business Approved Income tax amendments Taxation of mutual investment companies. Pension trusts and other retirement plans. Deductibility of investment expenses (Higgins case). Treatment of income accruing at date of decedent’s death (Enright case)♦ Alimony. Annuity trusts* Amortization of bond premium. Treatment of nonbusiness bad debts. Elimination of charge-off requirements for bad-debt deduction. Longer statute of limitations for bad debts and worthless stock losses. Treatment of recoveries of bad debts and previously paid taxes. Elimination of interim report requirement under last-in first-out inventory section. Treatment of improvements by lessee. Treatment of interest on money borrowed to carry paid-up life insurance. Extension of 5 -year amortization provision to individuals and partnerships, and to facilities constructed after January 1 , 1 9 *+Q, and before June 1 0 , 1 9 ^-0 . Personal holding company tax relief to deficit corporations, and allied problems Undistributed profits tax relief to deficit corporations. Eliminating loan and investment companies from taxation under the personal hold ing company tax. Supplement R - 25 - Approved - Continued Income tax amendments - Continued Treatment of involuntary conversion problems* Revisions in method of taxing income from sources without the United States* Revision of section 1 0 7 dealing with compensation for services rendered over several years — 36 months and 80 percent* General procedural relief provision for taxpayers in combat zone or in enemy territories* Modifications in the statute of limitations on refunds. Reciprocal exemption to employees of the Philippine Government residing in the United States* Treatment of income placed upon an annual basis* Modification in treatment of nonresident aliens as respects requirement of of fice or place of business and definition of commodities* Treatment of suits against Collectors of Internal Revenue, Estate and gift tax matters Treatment of renounced legacies* Clarification of credit for property previously taxed* Deduction for charitable pledges. Disallowance of claims in excess of the gross estate* Life insurance for the purposes of the estate tax. Powers of appointment. Community property for Federal estate tax purposes. Reversal of gift tax and State death tax credits. Excess-profits tax Revision of Supplement A, Revision of section Revision of treatment of -liquidations under invested capital credit. Revision of treatment of earnings and profits on certain reorganizations* Clarification of computation of basis of property paid in for stock* Note; In addition to the above amendments, suggested by the Treasury, the Committee voted to' extend the applicability of section 22 (a) (9), relating to discharge of indebtedness, for 3 years, to 1 9 ^5 . and to change the name of the nBoard of Tax Appealsw to the nUnited States Tax Court’1* Table 1 Comparison of individual surtax rate schedule under present law, Treasury proposal, and Ways and Means Committee auction Bra cket rate • • Present : Treasury ;Ways and law : proposal • Means • # * » • • Surtax net income (ooc) - *5 •5 - 1 1.5 2 1 1 •5 2 ~ 3 Vt ¿4 r 6 8 10 12 lU l6 18 18 20 22 26 20 22 26 32 32 38 38 50 3 H 6 8 10 12 lH l6 - 6o 70 80 90 100 150 200 250 300 Uoo 500 750 1,000 2,000 5,000 and HU 50 60 70 80 90 1Ó0 150 200 250 300 Uoo 500 750 1,000 2,000 5,000 over 6$ 6 6 6 9 9 13 17 21 25 29 32 35 32 Ul UU U7 50 53 55 57 59 61 63 6H 65 66 67 69 71 72 73 7^ 75 76 77 12$ 15 18 20 22 2U 27 30 3U 32 13 $ 13 13 13 16 l6 20 2H U2 28 32 36 ^5 UO U8 51 5U U6 U9 57 60 6H 68 72 76 72 80 82 8U 86 86 86 86 86 86 86 86 80 Sb 86 ^3 52 55 52 61 63 66 69 72 75 77 79 81 82 82 82 82 82 82 82 82 82 : Tota 1 surtax cumulative ] Present • Treasury • Ways and * law » proposal • Means • 9 t J t • $ 30 60 $ 60 135 $ 65 130 90 225 195 120 210 300 560 900 1,320 325 260 U20 580 1,820 2 ,UOO 3,oUo 3 .7 1» U,500 5,320 7,080 9,900 12,900 16,080 19,380 25,080 30,980 37,080 1*3 , 3 8 0 U9,780 82,280 1 Ì5 , 2 8 0 lU8,780 183,280 25U,280 326,280 508,780 693,780 1,UU3,780 3 ,7 2 3 , 7 8 0 51*5 785 1.325 980 1,925 2,605 3.365 U,205 5,105 6,065 7,085 8,165 10,UU5 iU,0U5 17,885 21.965 26,285 1,U60 2,020 2,660 33,885 Ul,685 U9 , 6 8 5 57.885 66,285 109,285 152,285 195,285 238,285 32U„285 UlO,2S5 625,285 SUO,285 1,700,225 H,280,285 3,380 U, 18 0 5,oUo 5,960 6,9Uo 9,020 12,320 15,800 l9,U6o 23,2U0 29,8U0 36,71*0 U3,9U0 51,UUo 59,11*0 98,6U0 139,1U0 1 8 0 ,lUO 221,lUO 303,lUO 385,lUO 590,11*0 7 9 5 .v*o i,6i5,iUo i*,075,11*0 Table la. Amount of individual income tax and effective rates under present law, Treasury proposal, and Committee action Single person - No dependents Personal exemption: Net income before personal exemption 1 f Present law - $750 Treasury proposal - oOO Committee action *- 5OO Amount of tax Present law : : • ♦ Treasury proposal Effective rates : Committee : action * • Present : Treasury ¿Committee law : proposal : action • ♦ Percent 500 600 700 soo 900 1,000 1,200 1,500 2,000 2,500 3,000 4,000 5,000 6,000 8,000 10,000 15,000 20,000 25,000 50,000 100,000 500,000 1 ,0 0 0 , 0 0 0 5,000,000 Normal tax rate (percent) l/ — — — $ $ *. 16 32 $ » ** 15 3^ 52 .4 71 1*2 2.1 3 11 21 4o 69 117 165 221 3^7 483 649 1,031 1,493 2,994 4,929 7,224 20,882 53,214 345,654 733,139 3.923,124 7,555 6,816 10,509 27,829 69,757 1*29,71+5 8 7 9 .7^5 V *+7 9 .7^5 9,626 25,811 6 4 ,6 4 l 4 i4 ,6 i6 854,616 i+,371+, 616 4 4 6 48 64 99 89 126 Percent 2.3 4.0 5-3 6.4 Percent 2.5 4.9 6.5 7 *8 8.9 10*5 12.1 509 273 365 472 7.4 8.3 10.4 13.2 15.2 17.0 7 77 686 8.7 19.4 17.2 1,069 920 1,174 1,742 2,390 4,366 9-7 21.4 23.0 25.5 27.8 18.4 10.8 12.9 14.9 20.0 23*9 33*1 29.I 156 263 181 381 1,379 2 ,0 4 l 2,777 ^,961 > 3 4.6 5.9 6.6 24.6 28.9 41.8 53.2 69.I 73-3 78-5 4 13.7 14.6 15*7 19.6 21.8 37.8 34.1 42.0 38*5 55.7 69.8 85.9 64.6 88.0 89.6 4 Maximum earned income assumed for purposes of the earned income credit under the present law and the Committee action. 51.6 82.9 85-5 87-5 6 Table lb Amount of individual income tax and effective rates under présent law, Treasury proposai, and Committee action Married person - No dependents Personal exemption: iMet income before personal exemption l/ : ¡Present : law ; Present law * $1 , 5 0 0 Treasury proposal - 1 , 2 0 0 Committee action - 1,200 Amount of tax Treasury ; Committee proposal ; action : i Effective rate Present Treasury law proposal Percent $ 1,200 1,300 i,Uoo 1,500 1,600 $ 1,800 2,000 2,500 3,000 *4 , 0 0 0 5,000 6,000 8,000 10,000 15,000 20,000 25,000 50,000 100,000 500,000 1,000,000 5,000,000 $ 16 32 $ 13 30 *48 6*4 99 *42 137 mt 90 138 2*49 357 613 889 375 521 1,193 873 1,837 1.305 2.51*9 2,739 1**673 *4,61*4 7,225 6,86*4 10,1*43 2 0 ,1*39 27,373 52,70*4 69,229 3 *4 5 ,08*4 *429,205 879,205 732.5 5 1* 3 *9 2 2 ,5 2 >+ l*,U79,205 Normal tax rate- (percent ) *4 y m m 6 23 U *48 66 103 1*40 232 32*4 532 7*46 992 1,632 £,152 *1,052 6,1*52 9,220 25,328 6*4,060 *a*4 ,ooo 8 5 *4 , 0 0 0 *4,3 7 *1 , 0 0 0 6 — «r» 0 .*4 1.3 2.1 3.6 *4. 6 6.2 7.5 8.7 10.9 13.1 18.3 23.1 27.5 *40 .9 52.7 69.0 73.3 78,5 *4 Percent Committee action Percent 1.2 1.0 2-3 3.2 *4.0 2.1 *4 . 1 5.5 6.9 9.6 5-7 7.0 9-3 11,9 3-2 10.8 15.3 13.3 17,8 19.9 23.0 25.5 31.2 36.1 *4 0 . 6 6*4.7 69.2 85.8 87.9 89.6 1*4.9 *4 16.5 19.2 21.5 27.0 82.3 36,9 82.8 85. *4 87-5 6 Maximum earned income assumed for purposes of the earned income credit under the present-law and the Committee action. Table lc. Amount of individual income tax and effective rates under present law, Treasury proposal, and Committee action Married person ~ two dependents Net income before personal exemption 1J $ Personal exemption; Present law Treasury proposal Committee action - $1 , 5 0 0 - 1,200 - 1,200 Dependent credit: Present law Treasury proposal Committee action - $ ; : ; Present : law Effective rate ; Treasury : Committee ; proposal : action Present law Treasury : Committee proposal : action Percent Percent ** 0.8 1.6 Percent 1,800 - $ 6 12 1,900 2,000 2,100 2,200 2,300 2,400 $ 2,500 3,000 4 ,ooo 5,000 6,000 8,000 10,000 15,000 20,000 25,000 50,000 100,000 500,000 1,000,000 5,000,000 Normal tax rate (percent) l/ Amount of tax 4 oo 3OO 4 oo 58 I5U 271 3 97 717 1,117 2.^75 4,287 6,480 l6 32 48 64 80 99 118 219 U57 721 1,007 1,633 2,321 ^,397 6,895 9,777 19,967 52,160 344,476 26,917 68,701 428.665 878.665 731,930 3 ,9 2 1 , 8 8 4 4 ,478,605 4 4 -m $ 13 26 tem ^3 62 2.3 2.9 0.6 1.2 3*5 4.1 1*9 fc. 7 7.3 11.4 3*2 5*7 8,9 11.4 I72 356 57O 0,3 0,5 1.9 3-9 5 .U 14.4 7 84 6* 6 16.8 1,292 9*0 20.4 1,880 3,716 11.2 16.5 6,036 8,756 2U.776 25.9 23.2 29.3 3U/5 39.1 53.8 68.7 85.7 S7.9 89.6 80 21,4 39*9 52.2 68,9 63,396 413,296 853,296 73*2 .^,373,296 78,U 6 4 4 2.6 13.1 16.2 18.8 24.8 3O.2 35*0 49.6 63.4 82.7 85.3 87.5 6 Maximum earned income assumed for purposes of the earned income credit, under the oresent law and Committee action. Hehle 2 Optional tax schedule for individuals with gros« income of $ 3 , 0 0 0 or le«*«* derived solely from salary* wages, compensation for personal services, dividends, interest, rent, annuities, or royalties. If the gross income is over-* $ 0 525 550 575 6oo 625 650 675 700 725 750 775 soo g 25 850 875 900 925 950 975 . 1,000 1*025 1,050 1.075 But not over - $ 525 5 50 575 600 625 650 675 700 725 7 50 775 800 825 850 375 900 925 950 975 1,000 1,025 1,050 1,075 1,100 Single person (not head of a family)* $ 0 1 $ k 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 11 15 20 2k 28 33 37 hi he 50 5h 0 0 0 0 0 0 0 0 59 63 67 71 76 so Bk 89 93 97 102 The tax shall he (l) Married : person whose : spouse does not file separate ; Married person return or (2 ) :filing separate married person : return* filing joint re-: turn or (3 ) head: of family* : 0 1.275 1,300 128 0 0 0 0 0 0 0 0 1 1,300 1,325 1,350 132 136 k 1 1,100 1,125 1*150 1,125 1,150 1.175 106 1,200 110 1,175 1,200 1,225 1,225 1*250 1,250 1,275 1.325 115 119 123 . $ 0 0 0 0 0 0 3 6 9 ik 18 22 27 31 35 Uo kB 52 57 61 65 70 7^ 7S S3 S7 91 96 100 10U 109 113 117 Table 2 *» Continued 2 - If the gross income is over- $ 1,350 1,375 i,4 oo 1,^25 But not over - $ 1,375 1,1*00 1,1+25 1,1+50 1 ,1+75 1,500 1.U50 1.^75 1,500 1.525 1.550 1,575 1.525 1,550 1.575 1,600 1,625 1,650 1,675 1,700 1,-600 1.625 1.650 1.675 1,700 Single person (not head of a family)* $ Ikl IU5 1^9 154 158 162 The tax shall be (1 ) Married ; person whose : spouse does not; file separate : Married person return or (2) :filing separate married person : return filing joint re-5 turn or (3 ) head: of family* 5 $ 10 l4 n 21 25 29 167 1 71 175 1 80 1 84 188 1 93 1 97 34 36 42 47 51 201 206 210 2 l4 68 56 60 64 $ 122 126 1 30 1 35 139 1^3 l4 g 152 156 161 165 169 1 7 “+ 176 1,850 218 223 1,675 227 231 96 1,900 1,900 1.925 182 1 87 191 1 95 199 204 208 2 12 236 1,925 1.950 1,975 1,950 1,975 2,000 103 107 221 2,000 2,025 2,050 2,025 2,050 2,075 2,075 2,100 2,125 2,150 2,175 2,200 1,725 1,750 1,775 1,800 1.625 1,725 1.750 1,775 1,800 1,625 1,850 1,675 2,100 2,125 2.150 2,175 2,200 2,225 2,250 s 2,225 2,250 2,275 2 40 2 44 249 253 257 262 266 270 275 279 283 288 292 296 73 77 81 65 90 9U 111 116 217 225 230 129 234 238 243 133 137 142 1 46 247 251 256 260 120 124 150 264 1 55 159 269 163 2 73 277 Table 2 - Concluded - 3 - If the gross income is over- $ But not over 4 Single person (not head of a family)* $ 301 2,275 $ 2,300 2,300 2,325 2,350 2,325 2,350 2,375 2,375 2, to) 2,U25 2,450 2,475 2,500 305 309 31 * 31S 322 327 331 335 2,525 2,550 2,575 3U0 3bb 3U8 2,600 2,625 2,650 2,675 2,700 353 3 57 36l 2, Uoo 2,425 2,450 2 .U75 2,500 2,525 2,550 2,575 2,600 2,625 2,650 2,675 2,700 2,725 2,750 2,775 2,800 2,825 2,850 2,875 2,900 2,925 2,950 2,975 2,725 2,750 2,775 2,800 2,825 2,850 2,875 2,900 2,925 2,950 2,975 3,000 The tax shall be (1 ) Married person whose spouse does not file separate Married person return or (2 ) filing separate married person return filing joint re turn or (3) heaci: of family* $ 181 185 189 19U 198 2 02 207 366 371 376 381 3 86 391 282 286 290 295 299 303 308 3 12 316 215 220 334 22b 338 228 2 33 237 3U2 347 2bl 2U5 250 25^ 258 263 396 *+01 H06 tai U16 U21 *+26 U31 $ 321 325 329 211 351 355 359 36U 369 37U 379 267 38b 271 2 76 280 394 £gb 289 Treasury Department, Division of Tax Research * For each dependent, subtract determine tax. 168 172 176 389 399 bob U09 July 1 1 , 19^-2 from gross income and use balance to Note: The taxes in the above schedule are such that they generally com pensate for deductions and credits not allowable if this schedule is used. Table 3 Comparison of* estate tax rate schedule under present lav/ and proposal Net estate afterî Bracket rate specifi c exemp- î Present : tion 1/ : law 2/ ; Proposal • (3 000) ; • ; Total estate tax cumulative : Present law Proposal î * Under 1 10 j — 10 15 20 15 20 30 30 40 4-0 *— 50 50 60 60 70 70 100 100 150 150 200 200 250 250 300 300 350 350 400 4-00 450 450 500 500 600 600 700 700 800 800 900 900 - 1 ,000 1,000 - 1 ,500 1,500 - 2,000 2,000 - 2,500 2,500 - 3 ,000 3,000 - 4 ,000 4,000 - 5,000 5,000 - 6,000 6,000 - ni,000 7,000 - 8,000 8,000 - 9 ,000 9,000 -10 ,000 10,000 arLd over J/O 7 11 11 14 18 22 25 28 28 30 30 30 32 32 32 32 32 35 35 35-37 37 37 39-42 45 49 53 56-59 63 67 70 73 76 76 77 &fo 12 15 18 22 26 30 33 36 40 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 75 76 78 79 80 '80 80 80 80 80 $ 150 500 1,050 1,600 3,000 4,800 7,000 9,500 12,300 20,700 35,700 50,700 65,700 81,700 97,700 113,700 129,700 145,700 180,700 215,700 251,700 288,700/ 325,700 528,200 753,200 998,200 1;263,200 1,838,200 2,468,200 3,3.38,200 3,838,200 4 ,5 6 8 ,2 0 0 5,328,200 6,088,200 | 400 1,000 1,750 2*650 4,850 7,450 10,450 13,750 17,350 29,350 51,350 74,350 98,350 123,350 149,350 176,350 204,350 233,350 293,350 355,350 419,350 485,350 553,350 903,350 1,263,350 1,638,350 2'018'350 2,798,350 3,588,350 4,388,350 5,188,350 5,988,350 6,788,350 7,588,350 — 1/ A specific exemption of $40,000 and a life insurance exclusion of 34-0,000 are allowed by the present law. The proposal would allow a single specific exemption of ‘¿60,000 but no life insurance exclusion. 2/ Present rates not increased byWays and Means Committee. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Saturday, June 27, 1942. Press Service No. 32-21 Commissioner of Internal Revenue Guy T. Helvering today announced the extension until September 29, 1942, of the period during which returns of capital stock tax may be filed and the tax paid by all corporations for the year ended June 30, 1942. The full text of the Treasury Decision providing the extension is as follows: TREASURY DEPARTMENT Office of Commissioner of Internal Revenue, Washington,D.C. TO COLLECTORS OF INTERNAL REVENUE AND OTHERS CONCERNED: General extension.-- Returns of capital stock tax under Chap ter 6 of the Internal Revenue Code (53 Stat., Part 1 ), as amended, for the year ended June 30, 1942, are required to be filed and the tax paid on or before July 31, 1942, unless the time for filing returns and paying the tax is extended under the provision of sections 1203 and 1205 of the afore-mentioned chapter. In accordance with the provisions of these sections, the period during which the returns of capital stock tax may be filed and the tax paid by all corporations is extended to September 29, 1942. Collectors of Internal revenue are authorized to accept returns without assertion of penalties for delinquency or of interest if the returns are filed and the tax paid on or before the extended date. (Secs. 1203, 1205, 3791, 53 Stat., 171, 467; 26 U.S.C. (1940 ed.), 1203, 1205, and 3791.) GUY T. HELVERING, Commissioner of Internal Revenue. Approved: JOHN L.- SULLIVAN, Acting Secretary of the Treasury* -oOo- r-/7 / / L/\ r ' treasury department Washington Press Service FOR IMMEDIATE RELEASE, Monday, June 29. 1942» Secretary of the Treasury Morgenthau today announced the final subscription |alsut and allotment figures with respect to the current offering of 5/8 percent Treasury : jrrent c Certificates of Indebtedness of Series A-1943* ¡Is of S Subscriptions and allotments were divided among the several Federal Reserve Districts and the Treasury as follows: Sub lierai R< Federal Reserve District______ Total Subscriptions Received Total Subscriptions Allotted Boston New Tork Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury $ I 1 7 6 ,9 4 0 ,0 0 0 1 ,4 5 6 ,2 6 4 ,0 0 0 1 2 0 .4 8 9 .0 0 0 90 ,1 7 7 ,0 0 0 731.525.000 6 1 , 832,000 1 1 1 .9 3 9 .0 0 0 477 261.000 9 6 .9 2 5 .0 0 0 4 9 .8 1 9 .0 0 0 8 1 .6 9 7 .0 0 0 8 9 .8 8 4 .0 0 0 2 0 2 ,4 3 4 ,0 0 0 550.000 86.448.000 4 3 .1 2 4 .0 0 0 57.601.000 246.067.000 51.435.000 2 7 .992.000 43.218.000 4 6 , 612,000 1 0 2.189.000 275,000 TOTAL » 3 ,1 U , 479,000 ♦1,588,495,000 168 .022.000 82 ,255,000 . •oOo* pal Rf .strict lia^elpb eveland itaond .anta icago • Louis meapoli tsas Cit; las I Prancii easury TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Monday, June 29, 1942. Press Service No. 32-22 Secretary of the Treasury Morgenthau today announced the final subscription and allotment figures with respect to the current offering of 5/8 percent Treasury Certificates of Indebted ness of Series A-1943. Subscriptions and allotments were divided among the several Federal Reserve Districts and the Treasury as follows: Federal Reserve District Total Subscriptions Received Total Subscrip tions Allotted Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury $ 176,940,000 1,456,264,000 120.489.000 168.022.000 82.255.000 111.939.000 477.261.000 96.925.000 49.819.000 81.697.000 89.884.000 202.434.000 ________ 550,000 $ 90,177,000 731.525.000 61.832.000 86.448.000 43.124.000 57.601.000 246.067.000 51.435.000 27.992.000 43.218.000 46.612.000 102.189.000 _______ 275,000 $>3,114,479,000 $1,588,495,000 TOTAL TREASURY DEPARTMENT Washington (The following address by Edward H. Foley, Jr., General Counsel of^the Treasury Department and chairman of the Inter-American Conference on Systems of Economic and Financial Control is scheduled for delivery before the Conference at 11:50 A . M . , Tuesday, June 30, 1942, and i®. ^o:r release upon delivery.) Mr. Chairman, Members of the Inter-American Financial and Economic Advisory Committee, fellow Delegates and Advisers: I t #is with a feeling of genuine appreciation of the high honor which you have accorded to me that I accept the chairman ship of this important Conference. The responsibility imposed upon each of us by our Governments in this hour of peril is very great indeed. I am confident we shall do everything in our power to accomplish swiftly and effectively the important purposes and goals of this meeting. This is a working conference of experts trained in the field of economic and financial controls. During the period together there will be much to discuss and much which we will learn from each other. I am sure that these dis cussions will result in more effective economic and financial controls^in each of our countries - thereby hastening the destruction of the forces of aggression. Resolution V of the meeting of Ministers of Foreign Affairs held in Rio de Janeiro last January recognized the urgent necessity for the adoption of measures by the American Republics to cut off all commercial and financial relations with the Axis powers and the territories dominated by them. By its terms, the Resolution called for the immediate elimination of financial and commercial activities, prejudicial to the welfare and security of the American Republics, in both the international and the domestic field. Resolution VI of the Rio Conference provided for this meeting. Our common problem is to organize effectively all of our economic and financial strength to strike our common enemy wherever we meet him. The strength of the enemy in the past has been the division and disunity among those nations that should have been united in all of their efforts against the aggressors. These aggressors have always sought to deal with their opponents one by one, alternately reassuring or threatening, and playing on 2 their narrow national interests and Tears to convince them that their neighborfs problem is not their own* Many nations that sought to maintain their independence through the observance of strict neutrality have seen their countries occupied and destroyed. No country can any longer have confidence in the security of a policy of strict neutrality during this war* The^strength of the American Republics is and must continue to be their singleness of purpose and their unity in action. We must forge one continuous chain of economic and financial controls around the Axis and each of the links in this chain must be as strong as all the others. This is and will continue to be the answer of the American Republics to our common foes. And in this unity of action lies the greatest assurance that the political and economic institutions of the Western Hemisphere, the freedom and dignity of its way of life, will survive. It is our task to establish a common program for withholding our resources from the Axis and the areas which it has overrun or dominates. We must prevent the Axis from acquiring our goods and services. We must prevent the Axis from carrying on financial transactions either directly or through the cloaks of neighboring countries. We cannot hope for full success if such Axis trans actions are controlled by one American Republic but not controlled by another; if fugitive funds can pour from one American Republic to another^where the Axis taint can be cloaked and the funds used for financial and commercial transactions inimical to the interests of all the American Republics. If each country imposes effective controls within its own boundaries over Axis funds and transactions of benefit to the Axis, the controls of all the Republics will be strengthened. We must, in a spirit of cooperation and mutual assistance, work out measures to destroy Axis financial and commercial activities carried on within the borders of the Western Hemis phere. Axis-owned or controlled enterprises in the American Republics must be liquidated or taken over by the American Republics# We must make sure that those who manage or work in business enterprises in this hemisphere are loyal to the cause of the American Republics. We know that the Axis nations have planted and are using enterprises and persons within our borders to undermine our war efforts, to limit our production, to subvert our institutions and peoples, and to carry on a myriad of activities of benefit to our enemies and of harm to the interests of the American Republics. This Fifth Column not only seeks constantly to weaken us but also lies in wait for the day when it might join with kindred forces from across the seas to conquer and destroy everything that we hold dear in the Western Hemisphere. If we are to survive, if we are to bring this war to a swift and successful conclusion, 3 \ we must be ruthless in the destruction of this Fifth Column regardless of whether its members have retained their European nationality or sought to gain immunity for its nefarious activities by acquiring the cloak of citizenship of one of the American Republics. In destroying these Axis enterprises or the interests which they hold in the business life of our community, we will need each other’s support and cooperation. The technical and managerial skills and the financial resources of the American Republics should and will be made available to each other to facilitate the reorganization of such business enterprises and to assure their operation by persons of unimpeachable loyalty and of ability capable of contributing to the development of the national economy of the American Republics. We must be deter mined in our methods and mutually helpful in our procedures if we are to succeed in destroying the enemy within our midst. As an integral part of our joint efforts we will, of course, be developing procedures for the exchange of views and informa tion and assistance which will carry over not only during the war but into the period of reconstruction and development after the war. Men who have stood side by side in the struggle to preserve democracy against the forces of aggression, will stand side by side to face and solve common problems in the victory and the reconstruction. These are the purposes of our meetings The agenda which has been adopted for this Conference details the work which we shall do. All of us here will contribute to the completion of our tasks. We are resolved on the economic and financial battlefields to do our part in the winning of the war, 0O0- Memorandum by Randolph E. Paul, Tax Adviser to the Secretary of the Treasury, submitted at the request of the Ways and Means Committee of the House of Representatives on repayment of debts under high tax rates. June 22, 1942 (It should be emphasized that this memo randum does not contain any recommendations of the Treasury but was submitted merely for the information of the Committee in response to questions relating to various subjects, particularly the debt problem. It is merely a staff study and does not incorporate any policy decisions.) Many individuals are finding it difficult, if not Impossible, to continue amortizing the mortgages on their homes, or to maintain premium payments on life insurance and endowment Contracts, or perhaps even payments on installment purchases of automobiles, refrigerators. One of the reasons ior^this difficulty Is the increasing rates of income tax. An individual who conimitted himself to an ambitious saving program before he had reason to foresee the high tax rates of the war period, and who owns virtually no other marketable assets, has some claim to relief — for the time being, at least,— from one or the other of his obligations. Some cor porations face the same difficulty. In one recent case a corporation had agreed to devote to a sinking fund a substantial proportion of net income before taxes. As taxes rose, the promise became so difficult to keep that the corporation . t ?° aPPeal the bondholders to change the terms of the sinking fund provision. In other instances the sinking fund or debt repayment requirements continue regardless of the amount even of net income before taxes. , hardships resulting from the imposition of heavy income taxes on persons with commitments to repay debts present a difficult problem. The solutions which readily come to mind are open to serious objections. However, the importance of the problem is such that even an inadequate and defective treatment may be better than none. The purpose of this memorandum is to indicate certain possible approaches to the debt problem to serve as a basis for formulating a policy with respect to it. 1• Exemption of Income Devoted to Debt Repayment The^most obvious relief is a deduction for amortization payments m computing taxable net income. This remedy would create intolerable discrepancies in benefiting some forms of 32-24 2 saving but not others. Payments on a home are, of course, a form of saving. A taxpayer who at the beginning of the year buys a home for $ 10 ,0 0 0 by paying $ 5 ,0 0 0 down and borrowing $7,000 on a mortgage,- and who pays $700 on the mortgage during to® W x * reducinS it to $6,-300, has an equity in the house of $3,700 by the end of the year — $700 more than at the beginning of the year. He has thus increased his assets, or wealth, by $700. Some other taxpayer may instead put $700 of his year’s income into a savings bank, or use it to buy War Savings Bonds * If the $700 paid on the mortgage is to be deducted in computing the individual's net taxable income, the savings bank depositor ■will not believe that his savings are somehow of a lower grade, not worthy of tax exemption. The purchaser of War Savings Bonds will not believe it either. They might agree that the contractual obligation of the home owner justifies some delay in tax payment, but not outright exemption, so long as they are taxed. 2 *- deferment of Tax on Unusual Amounts Devoted to Debt Repayment #The taxpayer could be helped over the immediate emergency and given time to reduce his level of consumption without abrupt dislocation by allowing him to defer payment of the tax on that part of his income devoted to debt repayment. The deferment Jfli-gdt be^ for several years, say four or five. A low interest charge might be assessed on the delayed tax. If the deferment applied to the entire amount used for repayment of debt, the cumulated amount of postponed tax might easily grow into an embarrassing size. But there is no need to e overliberal in permitting the deferment of tax payments. In the first place, the individual's commitments for debt repayment are often small enough to represent no more than a normal amount of saving,- even when we scale down the term normal to take account of the heavy drain on income by the taxes proposed in^the pending revenue bill. In these cases no tax postponement is necessary, provided the taxpayer is not expected to meet the standard set for the community in general in the voluntary purchase of War Savings Bonds. In the second place, where the commitments for debt repay ment are heavier than normal, only the excess amount calls for tax postponement. ff/ example used above,, the homeowner had an income of say, $7,000, he might be denied postponement of tax, on the ground that $700 is not an abnormal amount to expect a person to save, in^ these days, even under the prospective 1942 taxes, especially if he is not expected to put another $700 aside for War Savings Bonds.- But if the mortgage payment were $1,000, for example, then tax on the last $300 might be postponed. 3 In general,, a taxpayer might be allowed to defer, for Tour years, payment of tax on that part of debt repayment that exceeded 1 0 percent of his taxable net income (before deduc tion of personal exemption and credit for dependents). Cor porations could be granted a similar deferment, although the percentage might be somewhat higher. To avoid abuse of the provision, it should be limited to debt repayment under commitments entered into before, say, January 1 , 1942, and involving the purchase of h omes’and perhaps other specified articles (e.g., automobiles,, or install ment-purchased goods generally). It may be doubted that insur ance premiums should be included, for reasons given in the concluding section of this statement. In at least two respects postponement of tax payment is unsatisfactory. First, in a few instances the commitments for debt repay ment might be so very^large that the taxpayer would have little prospect of accumulating enough money to pay the tax even after four years had passed. Second, simple deferment might turn into outright exemp tion after all, as the home owners and other debtors exerted pressure in the post-war period to forgive and forget. The discrimination against the purchaser of War Savings Bonds and the savings bank depositor is none the less real, even though it might^somehow seem less rank, if carried out in this way retroactively rather than directly during wartime. Exemption of All Forms of Saving — A "Spendings Tax" If tax deferment is not enough, individual taxpavers could be granted deduction for all forms of saving, in"computing the amount subject^ to the income tax. Savings-bank depositors and purchasers of War Savings Bonds would have no cause for complaint, as they would have if outright exemption were granted for debt repayment alone. But complete deduction for all saving would surely be too much. The deduction could be made applicable only with respect to the increase in tax rates above the 1941 level or above the 1942 level -- or, still more narrowly, only with respect to part of the rate increase. Better yet, perhaps, a separate income tax could be imposed, with its own rate scaxe, granting complete exemption to all saved income. Then the regular Income tax could be increased somewhat less severely than it otherwise would need to be. This new income tax would be known as a "spendings tax," since it would apply only to that part of the income that was spent. Even under this separate 4 tax, a complete exemption of all savings might he unnecessary; one-half or three-quarters, or some other fraction, of the saved income could he exempt. This spendings would differ from a sales tax m at least three respectsi (1 ) It would he collected directly from the consumer, not from business firms; (2 ) it would grant personal exemptions and a credit for dependents; and (3) it would have a progressive rate scale, graduated hy spending brackets. In general, this plan would call for pushing the regular income tax as high as it could go without imposing excessive hardship on debtors, and then using the spendings tax to get the rest of the Income-tax money that was needed. This solution, of the debtor problem is in many ways the most promising of all. The staff^is now studying the spendings tax to ascertain what difficulties might be encountered with it in practice. The spendings tax approach would not apply to corporations; it would be too erratic in its effects and might seriously impede the war effort unless an almost unmanageable series of complete exemptions from the tax were devised. For an individual proprietor or partner, "spendings" would include only his personal expenditures; the profits retained in the business or saved by him after being taken out of the business would be exempt. The spendings of the business itself would of course not be taxed. 8 4* % Complete exemption under regular income tax for debt repayment and purchase of War Savings Bonds Complete exemption for debt repayments only would dis criminate against other forms of savings* Complete exemption for all forms of savings, as previously described, might be considered too great an advantage for savers in general'. In intermediate plan Is to exempt amounts devoted to debt repay ment and one other general category of saving to which virtually everyone else could turn if he wished. The logical category is the purchase of War Savings Bonds. Thus an individual’s income would-be exempt to the extent that it was devoted either to repaying debts or to purchasing War Bonds. But it would not seem right to put all debt repayments whatsoever on a par this way with War Bonds. Bather, the same limitations on the kind of debt repayment that would be given this special treatment would be observed as in the deferred-taxpayment plan described above. Even stricter limitations might be in order. Savings bank deposits and other forms of saving would not, under this plan, be exempt. To avoid a feeling of too much discrimination against those who must save some amounts in these other ways, the exemption of debt repayment and of amounts devoted to War Savings Bond purchases should be limited to an amount not greater than* say, 1 0 percent of income. Another kind of limitation would be to exempt only one—half, or one*-third, of the debt repayment and the War Savings Bond purchases* The two kinds of limitation could be combined. This plan has the disadvantage of giving some relief -at least relief from buying a War Bond — to all homeowners, even in cases in which their debt repayments are so small a part of their^incomes as to constitute no serious problem. This defect might be remedied by refusing exemption until the debt repayment plus the War Savings Bond purchases reached, say> 1 0 percent of the net income and allowing exemption only to the debt repayment plus War Savings Bonds in excess of that amount* Thus if Taxpayer A ’s net income was $5,000 and he was paying^off $400 *a year on a mortgage, he would be allowed no exemption; if > in addition* he bought $100 of War Savings Bonds, he would still be allowed no exemption; if he instead bought $300 of Bonds, he would be allowed a deduction of $200 in computing net income -- ($400 debt repayment plus $300 War Bonds bought) -- 10 percent of $5,000 - $700 - 500 = $200 exempt. And the limitations previously noted could be applied; only half (or one,-third, or some other fraction) of the $200 would be exempt; and in no case could the exempt amount exceed, say; 10 percent of the net income -- in this case, $ 5 0 0 > Limitations like this would probably be necessary to avoid giving those with accumulated capital too great an opportunity to escape income tax^ simply by shifting their assets into War Savings Bonds. Perhaps, indeed, such shifted funds would have to be made completely ineligible for the exemption* This would require a check on all the taxpayer’s assets, including his cash holdings, at the beginning and the end of the year* In any case, the homeowners and other debt repayers come out well in comparison, since they are probably getting a much higher interest return on their money than is given by War Bonds* (A debtor who devotes $1,000 to repaying part of a 6 percent mortgage is, in effect, getting 6 percent on that $ 1 ,0 0 0 *) This plan might be applied, with some further qualifica tions,^ to corporations. But it might induce an undue shrinkage of dividends; and it might tempt corporations into an unsound working capital position owing to an eagerness to pay off debt as rapidly as possible.. There would also be the problem of corporations that would not only shift cash holdings into War Bonds, but also borrow to buy. 6 ^• Debt Moratorium Finally, the problem under discussion could be dealt with .from a much wider point of view ty some sort of more or less general moratorium on debt payments, at least for home owners, with relief to needy creditors through the Home Owners» Loan Corporation, Tax relief alone could scarcely justify a moratorium. But the pressures of a war economy on debtors who contracted into their present position before they expected a war are not tax pressures alone. Priorities and drains on personnel that force^business firms to close or operate at a loss for the duration of the war illustrate the other forces that may make s°m e <sort of moratorium advisable. Proper safeguards for the creditors» interests would of course be necessary.* Prom the tax point of view, this solution would be the best of all. The tax system could operate without having to make^ special and perhaps difficult adjustments to situations in which some persons have contracted to save at a faster rate than is compatible with an all-out war economy and who cannot escape from tne contract without considerable embarrassment or loss, 6, Insurance Premiums Payments on insurance contracts offer a special problem. Premiums on pure term insurance involve no element of savings; to this extent the policyholder could not claim discrimination if the homeowner debtor were given relief and he were not. The holder of a term policy has a contractual obligation, to be sure; but^he can escape from it. The straight life insurance premium combines the elements of saving and insurance. The endowment contract may be virtually nothing but saving. It W 1 ^l.not be easy to distinguish these elements, in each case, but it may not prove impossible. If a spendings tax is adopted, this issue must be faced. If, instead, payment of the regular income tax is deferred on account of certain kinds of debt obligation, all insurance payments could be left out of account, on the grounds that the policyholder does;, after all, have a certain amount of leeway on that score — he can borrow on the policy, or readjust his Insurance program to a lower level,. Por the same reasons, under a deduction for War Savings Bonds, and so on, all insurance premiums could be disregarded in setting the quota of savings. A general moratorium would presumably not apply to any insurance premiums. -0 O 0 - TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, June 30, 1942. 6/29/42 Press Service No, 32-25 The Secretary of the Treasury announced last evening that the tenders for $300,000,000, or thereabouts, of 91-day Treasury bills to be dated July 1 and to mature September 30, 1942, which were offered on June 26, were opened, at the Federal Reserve Banks on June 29, The details of this Issue are as follows: Totbal applied for - $671,366,000 Total accepted - 301,758,000 Range of accepted bids: (Excepting one tender of $1,000,000) High - 99.940 Equivalent rate approximately 0,237 percent Low - 99.907 * " " 0.368 . • Average Price - 99,909 ” M Tf 0.360 • (39 percent of the amount bid for at the low price was accepted) TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, July 1, 1942» Press Service No. 32-26 The Bureau of Customs announced today that preliminary reports from the collectors of customs show imports of 49,786 head of Canadian cattle weighing 700 pounds or more each (other than cows imported specially for dairy purposes), during the period April 1 to June 20, 1942, inclusive, under the tariff rate quota of 51,720 head for the second quarter of the calen dar year 1942, provided for under the trade agreement with Canada• -oOo TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, July 1 , 1 9 4 2 . Press Service N o . 32-27 With Congress laboring on the largest tax bill in history and the war expenditures of the Federal Government soaring to better than three and a half billion dollars monthly, the Bureau of Internal Revenue today celebrated its eightieth anniversary* Commissioner Guy T. Helvering, upon whose^Treasury bureau rests the responsibility for collecting all Government taxes, thumbed the Revenue Service’s historical records to reveal the growth of the American tax system since George S* Boutwell cf Massachusetts was appointed the first Commissioner by authority of the act of July 1, 1862* The Revenue Act of 1862, which created the Bureau of Inter nal Revenue as it exists today and authorized the appointment of a Commissioner to administer its provisions .under the direction of the Secretary of the Treasury, was sweeping in its scope* The War Between the States had drained the Treasury of funds derived from customs duties, and Congress set about th^ task of writing a tax measure which, for the third time, imposed internal levies* The Act excluded from its provisions a trifling few items in the American economy. Taxes were imposed upon distilled spirits, malted and fermented beverages; license taxes on trades vocations and occupations; specific and ad valorem duties on manufactures and products of various kinds, including cotton, tobacco, cigars and cigarettes; taxes on auction sales, on carriages, yachts, billiard tables, and plate; on cattle, hogs, and sheep slaughtered for sale. The income tax, considered by many to have been a product of the first World War period, was not overlooked in the Revenue Act of 1862. It imposed a tax on salaries and pay in excess of $609 of officers and persons in the service of the United States and duties on incomes received by individuals in excess of $600. Taxes were also levied on interest paid on railroad bonds; on surpluses accumulated by banks, trust companies, savings insti tutions and insurance companies; on advertisements, ^nd an legacies and distributive shares of personal property. 2 Stamp taxes were not overlooked in the drafting of the Civil War tax measure. These levies were imposed on various documents, medicinal preparations, perfumery and cosmetics, and playing cards. If any article or business was overlooked, it was apparently an oversight on the part of Congress. It had been 44 years since the citizens of the Nation had been sub jected to an internal tax; a new generation was on the scene to bear the tax burden of war. By January 1, 1863, Commissioner Boutwell’s task of organs izing the Bureau was practically completed. The field service was composed o f #3,822 employees. The Washington administrative staff numbered 60 persons, including the Commissioner. Tax col lections for the fiscal year of 1863 amounted to $41,300,192.93... While the records of the Bureau are not exact for the first four years of internal revenue laws, figures for succeeding years indicate that the cost of collecting each % 10 0 exceeded three dollars. Commissioner Helvering stated that the Bureau now has in its employ a personnel of 29,264, administrative and field. Collections for the fiscal year of 1941, amounted to $7,370,108,377.66. The cost of collecting each $100 had dropped to an all-time low of 89 cents. The first complete fiscal year under the Revenue Act of 1862 was fiscal 1864, during which period a total of $116,985,578.26 was collected. The tax on manufactures and products, which included excise taxes, yielded the greatest revenue, amounting to $36,222,716.67. Distilled spirits came next with a total of $30,329,149.53, while the tax on incomes netted the Government $20,294,731.74. Treasury officials estimate that the Revenue Act of 1941 will bring in net receipts, general and special accounts, for fiscal 1943 totaling about $17,000,000,000. The Revenue Bill of 1942, tentatively adopted by the House Committee on Ways and Means, is expected to yield an additional $5,047,300,000, which will bring the Government’s .anniaal receipts to approximately $22,000,000,000 when the law is fully operative. An estimated 29,000,000 American citizens are expected to pay income taxes under the provisions of this measure, a number slightly less than the total population of the United States in the year 1862, As the Bureau of Internal Revenue enters the eighty-first year of its existence, Commissioner Helvering and his large staff of assistants in Washington and the field are evolving 3 plans and procedures for collecting the enormous acditional sums of revenue provided for in the Ways and Means Committee draft of the 1942 tax bill, which will be presented to the Congress next week. While greatly enlarged in size and scope, the organization of the Internal Revenue Service resulting from the Acvi of July 1, 1862, remains basically unchanged. Procedures have been altered district after district created, but the serious responsi bility of garnering the revenues necessary to meet the Nation* s normal and war needs are much the same as they were in the tragic days of the Civil War period, which witnessed the birth of the Bureau of Internal Revenue as It exists today. -oOo- TREASURY DEPARTMENT - , Washington FOR IMMEDIATE RELEASE, Thursday, July 2, 19*4-2 Pres^ Service -Ho. 32 - 26 • The following statement was made today "by Secretary Morgenthaur ■ ' '• r ,1• "-. ‘r'fx '■ 'ik■ ^ 'V',v\ •' *1 -. V. \ -- ■- , .A. r'. , '• , •->y’‘i/ Total "budgetary expenditures of the United States Government during the fiscal.year ended June 30, 19*42, were $32,397*000,000, as reflected in the Daily Treasury Statement released today. Of these expenditures $25,95*4,000,000, or 60 per cent, were for war activities, ’• . The rate of expenditure for war purposes has risen rapidly, jponth by month, reflecting the steady expansion of our war production. In June, 19hl, we spent on national defense $63.2,OOOyOOO, or approximately ten per cent of the estimated national income for that month. In June, 19*42, we had sue-* ceeded in increasing war production so that war expenditures Had risen nearly fivefold to $3,623,000,000, or about *40 per cent of that month’s estimated national income. In the entire fiscal year Just closed we expended‘approxi mately 25 per cent of the national income for the war effort. In 19*43 the con templated war expenditures vill represent approximately 55 P®? cent of the national, income, avenue receipts of $12,799.000,000 during the fiscal year were oS per cent higher than those of the preceding fiscal year, which were the highest up to that time. Despite this rapid increase in revenue, the net deficit for the year amounted to $19,596,000,000, . If only the receipts from taxes now-on the statute books are taken into account, the deficit for-the fiscal year which has just begun will be about $56,223,000,000, The magnitude of this figure emphasizes the urgency of obtaining additional revenue* This indicates clearly that the tax bill now before Congress should be the start, and not the conclusion, of the wartime revenue program. It is evident, however, that no matter how vigorous the tax policy,.it will still be necessary to borrow many billions during the fiscal year 19 *43, It is of the utmost importance that as’large a proportion of this money as possible be borrowed from,the current savings of the people-, and that the remainder be raised with a minimum of pressure upon price ceilings and of disturbance to the credit structure. It is also important, in order to minimize, the post-war burden of the debt, that the necessary funds should be borrowed without depart ing from a policy of lpw~ interest rates. As a matter of fact, the Government *9 market financing for this period has been carried out at rates no higher than 3/6 of one per cent on the shortest term borrowings and. 2-l/2$ for long*»term issues. In order to achieve its objectives-the Treasury has issued a series of obligations of a restricted character intended to appeal to the current savings of particular classes of investors. The sale of United States Sav ings Bonds, for example, has been consistently pressed and has been recently intensified. Thirty per cent of the deficit of the year just ended was financed from this source. These Savings Bonds are now held by mil lions of individuals, most of whom have never owned a Government security - 2 - before. While these carry with them the right of redemption, the redemptions during the fiscal year amounted to only about 3i“l/2 pe* cent of sales for that period. A new instrument — the fax Savings Hote — was devised during the year* This security provides taxpayers with a convenient means of accumulating money in anticipation of taxes. Fet sales of these notes provided for financing more than 1 5 per dent of the deficit during the fiscal year just ended. Funds of a non-inflationary character are also provided by purchases of the regular forms of Government obligations by individuals and trust accounts and by insurance companies and other corporations from their current savings. A further source of such funds lies in un invested depreciation and depletion reserves and in the funds accumulated in all classes of business enterprises by the diminution of inventories and by the postponement of capital expenditures. Sales of Government securities to commercial banks do not have an inflationary effect to the extent that they are offset by a diminution in the other assets of the banks, or by.the accumulation of individual and corporate savings in . the form of bank balances. It has been the policy of the Treasury Department throughout the fiscal year to plaice a sufficient proportion of new issues of, Govern ment securities in long maturities to provide an ample outlet for all of the savings desired to be invested at the long-term interest rate* In May, the Treasury made a new departure in borrowing policy by offer ing a long-term registered 2-1/2 per cent security eligible for purchase only by non-banking investors* By means of this type of security, it is hoped to make the maximum appeal, to savers of long-term funds, while avoiding the difficulties incident to the sale of long-term .securities to the banks. During the latter half of the fiscal year, an increasing pro portion of short-term securities was offered by the Treasury*. This was done for the .twofold purpose of providing an attractive medium of in vestment for unabsorbed depreciation and depletion reserves and other business funds likely to be unemployed only for the duration of the war, and of providing a greater fluidity in the money market* The objective of fluidity also was furthered and the short-term rate of interest stabilized by the posting by the Federal Beserve Banks, on April 30, of a 3 /S of one per cent buying rate for Treasury bills. The following tables show the net amount of public debt ac quired during the fiscal year and in each half thereof by each of the principal classes of investors for which data are available, and the distribution of the ownership of the public debt at the beginning and at the end of the fiscal year. Figures for June, I9U2 , are estimated* As will be noted from the table, reporting commercial banks (holding about 95 per cent of the Government securities held by all commercial banks) acquired 19 per cent of the increase in the total public, debt during the first half of the fiscal year and 32 per cent during the second.half. This is equal to 26 per cent of thp increase for the entire year. In other words more than two-thirds of the Treasury . securities issued during the fiscal year 19^+2 to finance the deficit were sold to investors outside of the Commercial banks* Absorption of the Increase of the United States Government Debt 1/ Daring Fiscal Tear Ended June 30, 19*2, and Each Half of the Fiscal Tear Classified by Type of Investor * Amount Absorbed : : : ¡Full year:July : :Dec. : Percent Absorbed 1 , 19 *11-:Jan. 3 1 , 19*1 :June : l| 19* 2 July 1* 19 * 1 - :Jan. 1, 19*230,19*2£/ Full year Dec. 31, 19*1 :June 30, 19*22/ : (In millions of dollars) I. Total Debt ¿/ Commercial banks...... Mutual savings banks*. Insurance companies... Federal Beserve Banks. Government agencies and trust funds....* All other investors */ Total............. 5.725 *76 2 ,02*1 * 6l 1.672 305 1,036 *.053 171 988 Total............. 9 71 390 2 i,o*s 10 19 3 32 1 8 11 1 3 2 ,1 2 1 10,962 *,888 1,073 6,07* 51 12 5* 8 *8 21.770 9.021 12,7*9 100 100 100 * *1 8 18 27 * 2 56 2 1* II. Marketable Debt Commercial b a n k s ..... Mutual savings banks.« Insurance companies... Federal Beserve Banks. Government agencies and trust funds.... All other investors */ 26 2 \ 5.609 U 56 1,981 *. 03* 157 96* 390 51 *61 1.575 299 1.017 71 35* 2,187 186 168 658 3 1,529 20 5 17 2 21 11,050 3.806 7,2** 100 100 100 116 20 97 1 2 *3 19 1? 1* 2* • * * • * 5 III. Non-ma ricetable Debt ¿/ Commercial b a n k s ..... Mutual savings banks*. Insurance companies.•* Government agencies and trust funds.... All other Investors */ Total............. Sourcei Note: * 1/ 2/ ¿/ */ 6 * * 1.76 7 862 8.775 *,230 905 *,5*5 17 82 17 81 17 83 10,720 5.21* 5.506 100 100 100 Treasury Survey of Ownership of Government Securities* Figures do not necessarily add to totals due to rounding. Less than 0*3 percent. Includes securities issued or guaranteed by the United States* Estimated. In general, ownership estimates on June 30* 19*2, were arrived at by applying preliminary figures on the percentages of the public debt held by the various classes of investors on May 31 » 19*2, to the increases in each class of security which occurred during the month of June. United States savings bonds are shown at current redemption values, except for Series G which is stated at par. Comprises holdings by individuals, trust and fiduciaries, corporations other than banks, and the holdings of banks and insurance companies not covered by the Treasury Survey* The latter holdings are small. Ownership of United States Government Debt 1/ As of June 30, 1941 and June 30, 1942 Classified by Type of Investor I. II» Total Debt 2/ Commercial banks.......... Mutual savings banks... Insurance companies.... Federal Reserve Banks.. Government agencies and trust funds................ A ll other investors {J 19,149 3,361 6,871 2,184 35 6 13 4 24,874 3,837 8,895 2,645 32 5 12 3 8,481 14,702 15 27 10,602 25,664 14 34 Total....................... 54,747 100 76,517 100 19,0U 3,342 6,8a 2,184 10,332 44,072 43 8 16 5 5 23 100 24,623 3,798 8,822 2,645 2,7U 12,519 55,122 44 7 16 5 5 23 100 135 19 30 1 * * 251 39 73 1 * # 58 Marketable Debt Commercial banks.......... Mutual savings banks... Insurance companies.... Federal Reserve Banks.. Government agencies and trust funds................ A ll other investors lJ Total...................... III. Amount held: :Amount held: June 30, .Percent of: June 30, Percent of total , total 1942 U. JâèL (In m illions (in m illions of dollars) of dollars) 2,360 Nan-marketable Debt 2/ Commercial banks.......... Mutual savings banks... Insurance companies.... Government agencies and trust funds............... A ll other investors lJ 6,121 4,370 a 7,888 13,U 5 ft Total...................... 10,675 100 21,395 100 62 Source: Treasury Survey of Ownership of Government Securities. Note: Figures do not necessarily add to totals due to rounding. * Less than 0,5 percent. 1/ Includes securities issued or guaranteed by the United States. £/ Estimated. In general, ownership estimates on June 30, 1942, were arrived at by applying preliminary figures on the percentages of the public debt held by the various classes of investors on May 31, 1942, to the increases in each class of security which occurred during the month of June. 2/ United States savings bonds are shown at current redemption values, except for Series G which is stated at par. lJ Comprises holdings by individuals, trusts and fiduciaries, corporations other than banks, and the holdings of banks and insurance companies not covered by the Treasury Survey. The la tte r holdings are small. - 5~ BBQEIPTS AiH) EXPMDITURES The following table shows (1) receipts and expenditures for the fis cal year 19 ^1 ; (2 ) receipts and expenditures for the fiscal year 19 *+2 ; (3 ) the Increase or decrease in 19^2 receipts and expenditures as compared with the fiscal year 19 ^1 } and (k) the increase or decrease in 19^2 receipts and expenditures for the first and second halves of the fiscal year, roughly cor responding to the pre-war and war periods of the year; RECEIPTS AMD EIPEHDITtTBFS FTSOi>L TEARS 1941 AND 1942 (in millions of dollars) Receipts: Internal revenuet Income tax ...................... ....... . Miscellaneous internal revenue .................. Social Security taxes......... ............... Taxes upon carriers aid their employees ...... ..... Railroad unemployment insurance contributions ......... Customs ............ ..... .................... Miscellaneous receipts: Return of surplus funds from Governmental corporations Other .................................... . Total receipts ................. . Deduct net appropriations for Federal old-age aid survivors insurance trust fund ................... . wa 1942 3,470 2,967 788 137 7 392 7,960 3,847 1,016 170 8 389 ♦ 4,490 880 ♦ 228 ♦ ♦ 33 1 ♦ • 3 ♦ ♦ ♦ «♦ ♦ 783 385 99 11 1 46 ♦ 3,707 ♦ 495 ♦ 129 22 ♦ 319 189 8,269 22 2« 13,668 297 66 ♦ ♦ 5,399 5 ♦ 24 ♦ 1,343 292 + 42 ♦ 4,056 661 869 ♦ ♦ 7.607 12.799 676 ♦ 208 102 106 743 ♦ 67 ♦ 6 ♦ 61 824 56 6 786 190 6 ♦ 38 134 v 108 125 - ♦ ♦ 70 9 257 90 423 66 163 88 473 75 ♦ ♦ 94 2 50 9 ♦ ♦ ♦ 33 15 36 5 • ♦ ♦ 61 17 U 4 1,285 347 882 242 • • 403 105 - 173 91 • - 230 14 86 17 29 30 7 219 51 91 18 38 18 10 191 127 ♦ ♦ ♦ 5 1 9 12 3 28 76 ♦ ♦ ♦ * 9 3 4 20 2 25 34 ♦ ♦ ♦ ♦ 4 2 5 8 1 3 42 1,111 90 __552 6,221 1,260 94 ♦ ♦ ♦ ♦ 6,050 149 4 2 171 35 4 1 179 ♦ ♦ ♦ ♦ 114 8 1 8 63 6,301 12,014 7,945 198 152 50 4,077 282 33 598 88 200 31fi 25,954 ♦ 8,378 ♦ 5,679 ♦ 95 ♦ 44 ♦ 50 ♦ 4,056 240 ♦ ♦ 15 ♦ 554 ♦ 88 200 ♦ ♦ 255 ♦ 19.653 ♦ 3,389 ♦ 1,680 ♦ 66 ♦ 52 ♦ 5 ♦ 889 ♦ 167 v 11 * 77 • ♦ 65 1 6,401 59 7 ♦ 66 v ♦ ♦ 100 12 154 3,636 2,266 103 106 21 42 18 44 • ¡J fi/ a/ 555 ♦ .. ♦ ♦ v ♦ 4,989 ♦ 3,999 ♦ 29 8 ♦ 45 ♦ 3,167 ♦ 73 ♦ 4 ♦ 477 88 ♦ 200 ♦ + 190 ♦ 13,252 70 100 23 136 11 18 10 « ¿a 10 91 93 ♦ ♦ ♦ ♦ 35 10 1 17 ♦ v 38 10 v 2 ♦ 3 50 ♦ ♦ 54 4 ♦ 100 6 88 _ 10 - 3 ♦ ♦ 1 15 ♦ ♦ 4 66 124 126 103 1 141 7 ?25 4 375 Total expenditures (excluding public debt retirements) ............. ..... . 12.711 32.397 ♦ 19.686 ♦ 6.342 Net deficit ..................................... 5,103 19,598 ♦ 14,495 ♦ 5,101 Excess of credits, deduct. Motet- Figures are rounded to the nearest million and mi.ll not necessarily add to the totals shown. 49 ♦ 3.951 IV. Transfers to trust accounts, etc.: Adjusted service certificate fund ................... Agricultural Marketing Administration (surplus commodity stamps)........... ......... . Government employees' retirement funds (W. S. share) National service Ilf*.insurance- fund............. Railroad retirement account.............. . Railroad unemployment insurance administration fund transfers to unemployment trust fund (act Oct. 10, 1940) .......................... Subtotal... ........................ %/ « 4- 1 .2a II. War activities: War Department ........... ............. . Navy Department..... ...................... Emergency funds for the President.... ......... Federal Security Agency ......... ............. Federal Works Agency .... ..... .............. Lend-Lease...... ................... . National Housing Agency ...................... Selective Service (administrative expenses) ......... United States Maritime Commission ......... . War Shipping Administration ........... Aid to China ........ .... ........ . Other ........... ....... ................ . Subtotal........... ............ . HI. Revolving funds (net): Farm Credit Administration .<>........ . Federal Farm Mortgage Corporation (capital stock reduction, act June 25, 1940) ............... Public Works Administration... ............. . Subtotal ............................ («•) Decrease (-} : Jan. 1, 1942 t to : June 30. 1942 t 5.192 Net receipts .... ........ ........... . Expenditures: I. General: Departmental (not otherwise classified) ........... Agriculture Department: Agricultural Conservation and Adjustment Administration ..................... .« Other.......... ................ . District of Columbia (United States share) ..... Federal Security Agency: Civilian Conservation Corps ......... .... . National Youth Administration ............. Social Security Board....... ............ Other........ .................. . Federal Voiles Agency: Work Projects Administration ............. . Other ............... ... ...... .... . Interior Department: Redamati on projects ....... ............ . National Housing Agency ..... ............. . Panama Canal ...... ....... ......... . Post Office Department (deficiency) ...... . Railroad Retirement Board...... ....... . River and harbor work and flood control ....... . Tennessee Valley Authority ..... ....... ..... Treasury Department: Interest on the public debt ..... ........ .. Refunds of taxes and duties ......... . Veterans1 Administration .................... Subtotal ........................... . fiscal year 1945 - Increase i July 1, 19a Total : to : Dec. 31. 19a A 7 4 ♦ 13,344 ♦ 9,394 U — The total increase of $5 *1 ?2 ,000,000, in receipts, for' the *f.iscal year 19^2 over those for 19^1 Was largely .accounted for by an in crease of $H,1+90,000,000 in income taxes* In addition, miscellaneous internal revenue increased $880,000,000; Social Security taxes increased $228 ,000,000; taxes upon carriers and their "employees increased $33 ,000,000; customs receipts were ¡only $3 ,000,000 less than in 19 *&, Miscellaneous receipts, excluding the return of surplus funds from certain governmental corporations* .increased approximately $66,000,000# The net receipts for the fiscal year 19 *+2 , which amounted to $12,799»000,000, were $$95,000,000 more than the estimated receipts, of $11,9^4,000,000 for this period as contained in the Budget Message of January 5» 19^2* * ' ^.1 Mp| v;! • ’ The total budgetary expenditures for the fiscal year 19^2 {exclusive of debt retirements) amounted to $32 ,397 »000,000, an increase 6f $1 -,8 21 ,000,000 over the estimated expenditures for this period as, ; contained in the Budget Message of January 5» 19 ^2 # Total expenditures on a comparable basis were estimated in the Budget Message at $30,576,000,000 and the. increase over budget estimates was accounted for by the acceleration of expenditures for war activities# The general expenditures which include most of the ordinary operations of the Government amounted to $6 ,050,000,000 for the fiscal year 19*+2 as compared with $6,2 2 1 ,000,000 for the fiscal year 19 *+1 , a decrease of $171',000,000# General expenditures, for 19^1 included credits of $l60,000,000 on account of the return of surplus funds of governmental corporations and expend!tures,for the fiscal year 19*+2 include $55 ,000,000 of such funds repaid to governmental corporations# If these transactions áre eliminated for purposes of comparison, general expenditures for 19^2 were $386,000,000 less than those in 19*+1* This adjusted reduction was accounted for in a large part by a decrease of $1 1 9 ,000,000 under the Department of Agriculture; $508,000,000 under the Federal Works Agency, of which $h03,OCk)tOOO represented a reduction in the expenditures of the Work Projects Administration; and $28,000,000 of the River and Harbor work and flood, control program; $9*4,000,000 under the Civilian Conserva tion Corps, and $12,000,000 in the Postal deficiency* On the other hand, general expenditures of certain "agencies, close3.y integrated with our war program, showed substantial increases during 19*+2 over those for 19 ^1 * The principal items in this category are the Tennessee Valley Authority, with increased expenditures of $76,000,000; Departmental, $67,000,000; the Panátía Canal, $9»00Q,000, ^¿1 reclamation projects, $5 ,000,000# .Interest on the public debt increased $1 ^9,000,000. ■v , Expenditure^ for. war activities amounted to $25,95*+,000,000 for th© fiscal year 19*+2 as compared witlr $6,3 0 1 ,(X)0 ' #000, on a com#» parable basis, for the fiscal year I9U1 , an increase of $19 ,653 ,000,000. All classifications of expenditures, for war activities showed great increases for the year# . - sIn addition to direct budgetary expenditures, transactions in checking accounts of governmental agencies reflected substantial net expenditures primarily attributable to war activities. The principal item in this category was net expenditures by the Beconstruction Finance Corporation of $ 1 ,9 3 6 ,0 0 0 ,0 0 0 as compared with net expenditures of $725,000,000 for 19^1, an Increase of $ 1 ,2 1 1 ,0 0 0 ,0 0 0 . a At the end of the fiscal year 19*+1 monthly expenditures for defense activities were at an annual rate of approximately $10 ,000,000,000, Monthly expenditures for war activities at the end of the fiscal year 1942 had increased to the point where they were equivalent to an annual rate of approximately $1+6,000,000,000* Current budget estimates for the next fiscal year place war expenditures at $67 ,000,000,000, and in addi tion, governmental corporations, such as the Beconstruction Finance Corporation, etc., contemplate spending $ 3 ,0 0 0 ,0 0 0 ,0 0 0 for war purposes. The monthly trend of defense and war expenditures during the fiscal years 19^+1 nud 19^+2 are shown in the following table! Fiscal year fin millions of dollars) 1 / * Month • duly August September October November December January February March April May June Total '4iSL iaje 199 223 966 1 ,1 2 9 1)95 589 1,327 1,531) l.Ui+6 1,81)7 2,101 2,201 2,797 3,231 2*+I 3H 393 6l0 769 782 857 832 6,301 3 .5 5 3 3,823 25.951) ancing net deficit and other recruirementi The following table shows the sources which provided the funds to finance the net deficit of $19 ,‘598,000,000, the excess of expenditures in checking accounts of governmental agencies, etc., of $3 ,505 ,000,000, and the increase in the general fund balance of $358 *000,000. 1/ Figures are rounded to nearest million and will not necessarily vadd to totals shown. - 9 (In miliions of dollars)i/ $19,590 Net deficit, excluding debt retirements ................. Excess of receipts (-) or expenditures (/) in (a) , Chocking accounts of governmental agencies! ' General / Î.S15 Sales and redemptions of obligations £ in market (net5 *#»*#**«i»♦*•♦•#***»»*,, ^ 6O5 00. Trust and other accounts Increase in general fund balance i *. 119 / 35S 3,863 f., $23,k6l Wotal requirements • Means of financing; •'-. ; Public debt receipts (net) fro» (a) (b) **nrt ^* -* ?•■ ‘ f ^ * '; Public issues! *■**• treasury Bills *♦** $ >***.»«»•• «v.vi*. *M treasury Certificates of Indebtedness «f S. Savings. Bonds (net) Treasury Notes - Tax Series (net) ♦*#«** Other issues • « • • • • * « , < • « « , ' ;Hf$ " . |•',.H B tj. ^‘ 235 3,095 5 \ $ j k 3#01$ 8,878 $ 21,696 Special issues; Unemployment Trust Pond ..... .* Ski Federal Old-Age and Survivors '' *“ 4 Insurance Trust Fund •"#*., *v «7 ». 753 Other accounts .l *... ,> .*«., i* * #V* i.•»... . 171 1 .765 Total ¿4****«»»*. $231^61 THE PUBLIC SE3BT . The gross public debt on dune 30, 19^2; amounted to $72,^22,000,000 as compared with $kS,961,000,000 on June JO,t 19% , an increase of $23,k6l,000,000*. The following stoat'ement' shows the public debt as of June 30, 19^1» end June 30, 19^2, classified by character of issues, as between regular issues sold on the market* and special issues held for account of Covemment trust and special funds# The table, also shows the increases in the debt from July 1 to'BedeiKbe^'Jl, i9kl (for all practicable purposes, the pre-war period) and ffoA January l to June 30, 1942 (first six months of war financing)» It should be noted that of the net increase of $23,461,000,000 in the amount of the public debt during the year, $21,69^,000,000 represented an increase in tbe «tioount of outstanding public issues, and $1 ,|65,000,000 an increase in special issues« ''' ■' , s T 1 ' * * *.s N * ~ l ' rm I j figures are rounded to the nearest million and will not necessarily add to the totals shown« - 10 - Stat ement of the out standing public debt on .June 30« 19**1. and June 30» 19^8 '‘ (in millions of dollars) Issues 1 19 U1 co:Kd ïai loipates*. # T ■ Change during fiscal year ïql f ïduly i-, 1941 îJan, l,ic s î lÿi2 • • Total t to î to" ♦ ♦ • îDec,31# 19^1 »lune ^0,1 1 IÉ 1 O^1 Public issues Prewar and postal savings bonds 196 196 Treasury bonds ,„.4,,*,..,..... 3 0 ,2 1 5 38.085 United States Savings bonds U,3 lU 10,ISS Depositary bonds .............. -79 Adjusted Service bonds • * ♦ * * # • « # 2kl 229 Treasury notes ....... 5 ,69 s 6 ,6 8 9 Treasury notes (Tax series) .... ..— 3.015 Certificates of indebtedness .,,, — 3 ,0 9 6 Treasury bills 1 ,6 0 3 2 ,5 0 8 Matured debt on which interest has ceased 98 205 Debt bearing no interest ....... 3.69 ^ 356 991 3,015 / 3,152 / 1 .8 2 6 / 6k 1* s / 29 s ¿ 2,1+71 3 ,0 9 6 905 «M* A 39 s ** 107 - __ 13 so . - ...7 6^,537 ¿ 2 1 ,6 9 6 / 8 ,1 1 5 "**Debt bearing no 4ntere si1 ....... Subtotal *,.... . k 2 t &kl 7 ,8 7 0 4 - Special issues Government Life Insurance fund . 531 537 / - federal Old-Age and Survivors Insurance Trust fund V.V* ' 2.381 3.133 4 Railroad Retirement Account fk 91 f Civil Service Retirement* fund 6*6 7S3 / foreign Service Retirement fund. 5 5 Canal Zone Retirement fund 5 7 4 Alaska Railroad Retirement'fund; 1 1 Postal Savings System .......... SS 55 m Canal Zone Postal Savings System . — 1 A national Service Life In surance fund 3 39 / federal Deposit Insurance Corporation ....* 90 95 4 federal Savings & Loan Insurance Corporation 5 ’ 5r Adjusted Service Certificate fund.. . . . . . . . . . . . . . . . 1S «. 19 Unemployment Trust fund 2,273 A t ó f Subtotal «*...........f 6*120 te, 961 5,87U 79 12 «m « 2? Ir pury Ceri ìcates 1*12 6 / 13,5a ¡4 2k / 30 356 17 / 96 / 1 / 1 «*«. 25 —► / 396 / ~ / !+2 1 1 •N, / 1 7 * 4 29 25 / 30 6 752 17 13s 2 — 33 1 36 4 4 / 5 1 S'41 4 23 ,tel g -M* A 1 1+59 / 862 4 8,977 w¡ mm — 7.SS5 / 1 ,7 6 5 7 2 ,te2 / U,7ig / 4,0l«î A M < / 693 5% / 3,095 / 50? IlIfejtaj litei |tes Ssyjn Iota! ,/ 382, p for § 9O3 Igeifori . 'f il»,Wt ito! Ini Les ?-1 li n K ^ f Ko^ei figures are rounded to the nearest million and will hot necessarily add to totals shown. . - • . '/ :! 11 “6use« Ife ¡jg« < - 11 - The computed rate of interest dh the total interest-hearing debt continued its downward trend during the y$ar* principally because of the fact that a large amount of the new debt, Was of a short-term character at low rates,. The average hate wag' 2,285$ oh June 30, 19h2# as compared with 2,518$ on June 30, 19hl. The following table shows market issues of Treasury certificates of indebtedness, treasury notes, ¡Treasury bonds, and United States Savings bonds offered by the Treasury during the ‘ fiscal year 19h2 , including re funding operationsx ¡iI*t; oc . P 01 i Issue Date Maturity Date tyi 5/ifè 11/1/92 s/:1/1+3 Rate Eace Amounts Issued (In millions) Exchanges Cash Total 29S I 'M - Treasury I Certificates I of Indebtedness 398 I 80 . A-19h2 A-l9h3 6/25/112 - L j. :,U5 il 2H ( 35Î 11 ü 1 1 1 t 25 ; 1 ? oc 25 J i/a# 1,507.1 1,507.1 5/$ 1,588.5 1,588,5 Treasury Notes A-19U6 B-19U6 11/1/ui 6/5/h2 3/lp/h6 12/15;/h6 1$ 1-1/2$ 9/15/72 9/15/72 12/15/55 6/15/51 6/15/55 6/15/67 9/15/51 2~l/2$ 2$ 2$ 2-i/h$ 2- 1/2$ 2$ 502,9 1/ 1 ,118.9 2/ +» — 502,9 l,ns,h Treasury Bonds 1967-72 1967-72 1951-55 19U9-51 1952-55 1962-67 19^9-51 10/20/hi 12/15/912/ 12/15/hi ' 1/15/92 2/25/h2 5/5/92 5/ 15/92 Treasury Notes (tax series) l1 5/ 2-1/2$ 189.0 1,596.5 1,119.6 532.7 l.oih.o h/ 532.7 i,o ih ,o — 1,510,8 862,3 1,292,^ 1,510,6 662.3 1.292.U — h,136.9 h, 138,9 , 6,081.6 6,081.6 2 0 ,06 l.h 22,885,7 United States Savings Bonds 6/ Total l,h07.5 1,119,6 2.82hf3 Exchanged for $299*h of REC notes and $203,h of COG notes. Exchanged for $SU6 .t of H0LC bonds and $272,3 of REC notes. Additional to 10/20/hi issue. Includes exchanges for $299.1 of EEMC bonds and $308,6 of REC notes. Redemptions during the year were $l,12 h,h. Including discount accrued during the year* Redemptions during the year were $2 0 7 .h. (Elgures are rounded to nearest million and will not necessarily add to totals shown,; Under the Public Debt Act of 19*12, approved March 26, 19^2, the limitation on the general borrowing power under the SecOnd liberty Pond Act, as amended, was increased from $65 *000,000,000 to $125*000,000,000, As, of ' June 30, 19^2» the unused borrowing authorisation under the limitation in effect on this date was $50 ,6*16,000,000, as shown by the following state» raentt STATUTORY DEBT LIMITATION a s o f rong 3 0 « 1942 ~ Section 21 of the Second Liberty Bond Act, as amended, provides that t h e ‘¡face amount of obligations issued under authority of that Act, 0shall not exceed in the aggregate $1125,0 0 0 ,0 0 0 ,000 outstanding at any one time. 11 The following table shows the face amount of obligations out standing and thè face amount which can still be issued under this limitation: Total face amount that may be outstanding at any one time ' . Outstanding as.of June 3 0 , l$4at In tere st-bearing: Bonds * Treasury $38 .0814-,533,250 Savings (Maturity value)* 12,'482,903,100 Depositary 78,953,000 Adjusted Service 728,665>857 Treasury hotes Certificates of indebtedness Treasury bills (maturity value) • $1 2 5 ,0 0 0 ,0 0 0 ,0 0 0 , $51,375.061,207 13.955*776,350 6 ,228 ,013,000 2,508,298,000 Matured obligations, on which interest has ceased 22,692,087.550 $74,067,148,557 1 L 3 P 9 ,0 5 0 _14, 154,457.607 Face amount of obligations issuable under above authority 50,8H5 ,5>K, 393 jteOQhcilQment with Daily Statement of the United States Treasury June 30, 1942 Total face amount of outstanding public debt obligations issued under authority of the Second Liberty Bond Act, as amended Deduct, unearned discount on Savings bonds (difference between current redemption value and maturity value) 714,1514,1457,607 . 2 ,2914,7 2 0 ,6 5 9 .71,859.736,968 Add other public debt obligations outstanding but not subject to the statutory limitation: Interest-bearing (Pre-War, etc.) $ 195.990,180 Matured obligations on which interest has ceased • «• 1 0 ,9 9 0 ,6 8 0 Bearing no interest 355,727.288 562,708,148 Total gross debt outstanding.as of.June 3 0 * 1942 $7 2 .4 2 2 ,4 4 5 ,1 1 6 * Approximate maturity value, Principal amount (current redemption value) according to preliminary public debt statement $1 0 ,1 8 8 ,1 8 8 ,4 6 1 , - '~THD' GUAllAIîTESD,:DEBT On October 16, 19^1, the Secretary of the Treasury announced that thereafter the Treasury would provide the funds needed by governmental cor porations and credit agencies and that the previous practice whereby such agencies and Corporations sold their guaranteed obligations in the markei would be discontinued* As a result of this change in policy, the contingent liabilities of the Government on account of outstanding market issues of ob ligations Of governmental corporations and credit agencies, guaranteed as to principal and interest, decreased from $6,370,000,000 on June 30, 19^1, to $^,568,000,000 on June 30, 19^2 , a decrease of $1,802,000,000. During this period the securities of governmental corporations and credit agencies hèld directly by the Treasury increased from $302,000,000 to $U,079,000,000, an increase of $3,777*000,000* A statement of guaranteed obligations as of June 3 0 , 19^1, and June 30* 19^2, is as follows: STATEMENT Off AMOUNT OF OUTSTANDING OBLIGATIONS GUAJL^rS) AS TO PKINCIPAL 'AND INTEBSST BY TH3 . UNITED STATES AS O F JUNff 30* 19^1 A N P " ^ JUNE 30. 19*4-2 (In millions of dollars) Market Issues: Commodity Credit Corporation Federal Farm Mortgage Corporation .. federal Housing Administration ....* Home Owners* Loan Corporation ..... He construction Finance Corporation . Federal Public Housing Authority ... Subtotal Issues held by Treasury: Commodity Credit Corporation Federal Farm Mortgage Corporation Home Owners* Loan Corporation Heconstruction Finance Corporation . Tennessee Valley Authority Federal Public Housing Authority ,.. Subtotal Total ............... Note: 19^2 , Increase (+) Decrease (-) i2 ia 12 H2 696 IT 2 ,4 1 9 701 $kU 26 1,563 + -, + 1,7^1 1 ,2 1 9 - 1,270 226 114 6.370 1^,568 - ibo .« 20 koo + + 57 85 302 6,672 263 112 551 2,5311 57 2 jk M 79 8 ,6^ 7 5 326 9 856 522 + 1 ,8 0 2 260 263 551 a , 5 i>t 1 S9 3.777 _ ★ Figures have been rounded to the nearest million and will not add to totals shown. 1 ,9 7 5 J necessarily Between July 1, lghl, and October l6, l$ki; the Treasury offered on behalf of governmental agencies the following market issues . ' Of ^guaranteed obligationst ■ ■ '’ a , Issue t Bate Maturity Bate Commodity Credit Cor* . -■ poration Notes* Series S l/SX/kl 2/15/U5 ' Reconstruction FinanceCorporation Ho test Series.W * 7 /3 / ^ kfl^fkk Face Amounts Issued (In,millions) , Kate ,- Exchanges" Cash . Total •• . - '* \• ^d : 1- 1 /g# $2 0 0 .8 .' $2 1 0 .8 ' $Ull. l£ . total 2 0 8 ,7 $U09»$ ... ... . . 36a»?V- 5 7 1 A $5 7 3 .9 LOANS AND IITOSTMENTS* $9^3.0 ^ \ '3?he Government *8- interest in the net assets (excluding cash on deposit with.the Treasurer'of the United States).represented by loans, other investments and properties of governmental corporations and credit agencies amounted to $6,20^,000,000 as of May 31,. 1942, as compared with $3 *022-,000*000 as of May 31, 1 9 4 1 , a net increase of $3,162,000,000# This incfea.se is accounted^forain large measure by the Treasury*® purchase of securities issued by governmental corporations rather than having such securities sold in the market# The amount of such net purchases during the fiscal year ended June 3 0 , 1 9 ^2 , was $3,777/000,000. '-V 4 ; TREASURY HIUKCING OPERATIONS' During the'fiscal year 19 ^2 , sales.of new ;marketable issues of Treasury certificates of indebtedness, Treasury notes, Treasury bonds, and United States'Savings bonds (including discount accrued during the year) aggregated $22,8S5 ,600,000 as .compared'with' $7,781,600,000 during the fiscal year 19 ^1 . The computed rate of interest on all such new, issues was 1.7*$ as compared'with the Computed rate of 2,lh$ on similar issues for the fiscal year I9U1 # • The amount of Treasury bills outstanding increased from ' $1,603,000,000 on June'3 0 , I9UI, to $2,§08,000,000 on June 30, 1 9 ^2 . • The Treasury refunded the following issues maturing or called •for redemption'during the fiscal year 1 9 ^2 : 2 issues of Treasury notes, 3 issues of Reconstruction Finance Corporation-notes, one of which matured on July 1, I9H2 ; 1 issue of Commodity Credit Corporation notes? 2 issues of Federal Farm Mortgage'Corporation bonds called for redemption on January •^■5# 1 9 v2 , and March 1, 1 9 ^2 } and one issue of-Home Owners* Loan Corporation bonds called for redemption on July 1, I9U2, aggregating $2,936,000,000-. Of this aggregate amount of maturing and called issues $2,825^000,000 were exchanged for* an equivalent amount of new treasury notes and treasury bonds, the balance; was redeemed for cash, The annual interest qharge on the maturing j or called securities exchanged amounted to $^7*236,000, equivalent to an annual | rate of 1.68$, whereas the annual interest charge on the new treasury issues amounts to ,819*000, equivalent to an annual rate of 1.66$. During the year, especially after the beginning of hostilities in Be*» cember, 19^1, the Treasury expanded its program for the sale of United States Savings bonds.s} | The following table shows cash receipts and redemptions during 19^2 as compared with prior years and the current redemption value of outstanding Savings bonds at the. end of each fiscal year, since the first issue of such bonds In March 1935* Outstanding ' fiscal Year Receipts Redemptions at end of year. 19^2 19hl 19 H0 1939 193 s 1937 1936 1935 $6 , 0 2 2 , 0 0 0 ,0 0 0 1,551t0QQt0Q0 1 ,1 5 1 ,0 0 0 ,0 0 0 7 1 2 .0 0 0 . 5 0 5 .0 0 0 . 5 2 6 .0 0 0 . 2 6 5 .0 0 0 . 6 3 ,0 0 0 ,0 0 0 $2 0 7 ,0 0 0 ,0 0 0 $1 0 ,1 2 9 ,0 0 0 ,0 0 0 ihs, o o o ',o o q h,3iU,ooo,ooo 2 ,9 0 5 ,0 0 0 ,0 0 0 , 1,862,000,000 1 ,2 3 8 ,0 0 0 ,0 0 0 8 0 0 ,0 0 0 ,0 0 0 000 3 1 6 ,0 0 0 ,0 0 0 000. 6 2 ,0 0 0 ,0 0 0 nh, 0 0 0 ,0 0 0 000 000 000 000 22,000,000 6 7 j0 0 0 ,0 0 0 3 6 .0 0 0 . 11.000. 1 , 000,000 t On JUly 3, X9^4-X the Treasury announced a plan to make it easier for taxpayers, large and small,, t o ‘meet the unprecedented tax bills required by the Kational Defense program which was then gaining momentum. Under this plan two series of Treasury notes,.were issued, both dated August 1, 19^1 end maturing August 1, I9 U3 . The plan contemplated that on January 1 of each year there after two new series would be provided so that a taxpayer could always pur chase notes during the entire tyear in which ;he. is receiving his income, to be used in payment of taxes due'in the following year* Dne series of notes, designated Tax Series A, provide a return of about 1.92$ a- year if-the notes j are used in‘payment of taxes, but if they are redeemed for cash only the issu* price will be paid to the holder. A limitation of $ 1 2 0 0 was placed upon the amount of Tax Series A notes which could be used in payment of income-taxes by any one taxpayer in any one tax year.* The other series of notes, des gn& Tax Series 3, provide a return of about .U8$ per year if the notes are dse | •payment of taxes, but if they are redeemed for cash only the issue price WUi be paid to the holder, Ho limit has been placed on the amount of Tax Series ^ notes which may be used by taxpayers in meeting their tax payments. /l fiscal year 19^2 $72,000,000 of Tax Series A notes and $a,0 6 7 ,0 0 0 ,000 oi m Series 3 notes were sold. -Substantial amounts of these notes were deed in connection with the payment of the .March and June, 19^2 tax installments. During the fiscal year $1,10^,000,000 of these notes were received for taxes, of which $17¿000,000 were Series A notes and $1,087,000,000 were Series n * notes. Only $ 2 1 , 0 0 0 , 0 0 0 of these notes were presented for c a s h Redemption, of w^ich less than $ 1 , 0 0 0 , 0 0 0 were Series A notes and $ 2 0 , 0 0 0 / 0 0 0 Series 3 notes. As of the end of June, 19*41f United States Government agencies and trust funds held $8 ,*481*000,000 of direct and indirect securities issued by the United States, of which $2,360,000,000 consisted of public marketable issues and $6 ,1 2 1 ,0 0 0 ,0 0 0 of special issues sold direct to such agencies and trust funds, During the year ended June 30# 19*42» total holdings of such securities by Government agencies and trust funds increased $2,121,000,000, of which $3. 5 6 ,0 0 0 ,0*00 represented the net increase in marketable issues and $1 ,7 6 5 ,0 0 0 ,0 0 0 represented the increase in special issues* Total holdings of' securities on June 3 0 * 19*42, amounted to $10,602,000,000 as compared with the total outstanding direct and’indirect securities issued by the United States amountin? to $76,517*000,000 on that date* TREASURE ISSUES The financing on October- 20, 19*41» -the first since .the beginning of the fiscal year, was announced on October 9 » 19*41# and consisted of an offering to the public for cash, at par and accrued interest, of $1,200,000,000, or thereabouts, of 2-l/2$ Treasury Bonds of 1967-72» maturing September 15» 1972» *In addition to the cash offering, the holders of $20*4,*425**400 outstanding l-l/*4$ Treasury notes of Series 0-19*41, maturing December 15* 19*41» were offered the privilege of exchanging such notes for the Treasury Bonds mentioned above, the notes exchanged being accepted at par with interest adjustments as of October 20, 19*41. Also, in addition to the cash offering for public subscription, $100,000,000, or thereabouts of 2-1/2$ Treasury Bonds of 1967-72 were made available for allotment to Government investment accounts against cash payment* The amount of Treasury Bonds 01 1967-72 issued on cash subscriptions, including $100,000,000 allotted to Government investment accounts, was $1,*407*503*200* Of the l-l/*4$ Treasury note's of Series 0-19*41, $188,971*200 were exchanged for Treasury Bonds of 1967-7 2 . On October 2 3 , 19*41, there was announced an offering of 1$ Treasury Notes of Series A-19*46, dated November 1-, 19*41, and. maturing M a rch'15. 19*46» The Treasury offered to accept in payment for these notes the proceeds of redemption from the.holders of $2 9 9 »339»000 of 7/8$ Reconstruction Finance Corporation Notes of Series P, maturing November 1, 19*41, and also offered to purchase at par and accrued interest $20*4,2*41,000 of 1$ Commodity Credit Corporation Notes of Series E, maturing November 15» 19*41, to the extent to.which the holders thereof subscribed fdr Treasury Notes of Series Ar 19*46, Subscriptions from.others were not invited, A total of $502*■8 6 6 ,000 of the Treasury Notes of Series A-19*46 was issued* $299**4*4^,000 of the maturing Reconstruction Finance Corporation Notes of Series P and $203,*422,000 of the Commodity Credit Corporation Notes of Series B were tendered and accepted as payment for the Treasury Notes of Series; A-19*46» The financing on December 15, 19*41, announced December *4, 19*41, consisted of an additional offering of $1,000,000,000, or thereabouts, of 2*l/2$ Treasury Bonds of 1967-72* dated October 2Q, 19*41, maturing September 15» 1972; and*ah offering of $500,000,000, or thereabouts, of 2$ Treasury Bonds of 1951-55* dated December 15, 19*41» maturing December 15» 1 9 5 5 ; both issues being offered to the public for cash, at par and accrued interest. Xn addition to the public offering, provision was made to sell $50,000,000 of the Treasury Bonds of 1967-72 to Government investment accounts. IS - For the "benefit of small investors preferential allotment was given under each issue to subscriptions for $5 *000 and under, where delivery in regis tered bonds 9 0 'days after the issue'date was specified* A face amount of $1 ,1 1 9 ,5 7 0 ,7 5 0 of Treasury Bonds of 1567-7 2 , including $5 0 ,0 0 0 ,0 0 0 -sold to Government investment accounts and about $2 6 ,0 0 0 ,0 0 0 on preferred allot ments, was issued. Of the Treasury Bonds of 1951-55 the amount issued was $532,667,950 which included about $1 3 ,8 0 0 ,0 0 0 sold on preferred allotments. The December financing was the first occasion on which the Treasury announced a definite basis for subscriptions from all classes of subscribers. It is felt that this action resulted in more equitable allotments for the legitimate investment requirements of subscribers. Subscriptions were grouped br&adly into four classes, as follows? * . Banks and trust companies for their own account - not to exceed 50 per cent of- capital end surplus, .*Mutual savings and cooperative banks, federal Savings and Loan Associations, trust accounts and investment corporations, pension funds, insurance companies, and. similar institutions and funds t* not to exceed 10 per cent of total resources. Corporations organized for profit, and dealers and brokers - not to exceed 5^ per cent of net worth, Individuals - not to exce-ed 5 0 per cent of net worth or 100 per cent of cash deposited with subscription. ' (Note: No preferred allotment was made on such fullpaid subscriptions.) . The Treasury announced on January 11, 19^2* an offering of 2$ Treasury Bonds of 19^9-51, dated January 1 5 , 19^-2, and maturing June 15, 1951» amount of the offering being limited to the amount of securities tendered and accepted, as follows: 1. The holders of $^26,3^9,500 of 1-3/^$ Treasury Notes, Series A-19^-2, maturing March 15, 19^-2, were invited to exchangee such notes for Treasury Bonds of 19%-51. $^06,38-7,700 of these notes were exchanged for a like amount of Treasury Bonds of 19^9**5^* 2. The Treasury offered to apply the proceeds of payment of $236,^76,200 outstanding 3$ Federal Farm Mortgage Corporation Bonds, of 1 9 I42-U7 , called for redefinition on January 1 5 * 19*+2, to payment for Treasury Bonds of 19^9-51. $203,251,900 of these bonds were redeemed and the proceeds applied in payment for a like amount of Treasury"Bonds of 19^9-51. 3* The Treasury offered to purchase, at par and accrued interest, $103,1*4-7,500 of outstanding 2-3/*$ Federal Farm Mortgage Corp.ora.tion Bonds of 19*42-*47, called for redemption on March 1, •19*42, to the éxtent to which the holders thereof subscribed for Treasury Bonds of 19*+9^51. $95.^29v3°° of these bonds were pur- ' chased and that amount was subscribed b y •the holders to the pur chase of Treasury Bonds o f 19^9-51« *4* The Treasury offered to apply the proceeds of payment of $310,090,000 outstanding 7/8^ Reconstruction Finance Corpora t i o n Hotes of Series R, maturing January 15, 19*42, to payment for Treasury Bonds of 19*49-51« $30S,550»000 of these notes were tendered for payment and the proceeds 'accepted in payment for a like amount of Treasury Bonds of 19*4*9-51« * The total amount of Treasury Bonds of 19*49-51 issued under the above-mentioned provisions was $1,01*4,016,$00* On February-. 13, I9 U2 , there was announced '.an offering to thé public for cash, at par and accrued interest, of $1 ,5 0 0 »0 0 0 ,0 0 0 , or thereabouts, of 2-1/*4$ Treasury Bonds of 1952-55» dated February 2 5 , 19*42, and due June-15» . I9 5 5 * Subscriptions were- entertained from.the various classes of subscribers on "the basis inaugurated in the financing of December, 19*4-1* For the “ benefit of small investors,(preferential allotment was given to subscriptions for $5,000 and under, where’delivery in registered bonds 90 days after the issue date..was* specified, A face amount-of $1,516*795»3^0 of Treasury Bonds of 1952-55, including about $1 3 ,1 3 2 ,0 0 0 on preferred allotments* was issued. The -financing, on April 15, 19*42, announced on April 6, 19*42, con sisted of an offering to the public for cash, at par,and accrued interest, of $1,500,000,000, or thereabouts, of l/2$ Treasury Certificates of indebted ness of Scries A-19*42, -dated April 15,- 19*42, due Hovemben 1, 19*42* Subscript tions were entertained >on the .same basis asunder the December, 19*41» and February, .19*42*,.- issues of Treasury Bonds* The face- amount of Treasury Certi ficates of Indebtedness of Series A-I9 U2 issued was $1,507,083,000, including about $66,600,000 of subscriptions,in amounts up to and including $25.000, which were allotted in full* On Hay *4, 19*42, there was announced an offering for cash, at, par and accrued interest, of two series'of Treasury Bonds, consisting of $1,250,000,000, or thereabouts, of 2$ Treasury Bonds of 19*49-51, dated • May 15, 19*!-2, due September 15, 1951;and an unspecified amount of- 2-1/2$ ’ Treasury Bonds of 1962-6 7 ,•dated May 5,. 19*42, due June* 15, 19^7 . ' The rules inaugurated in December, 19*41, and followed in February and April, 19*42, governing the basis of subscriptions to Government securities, were not made applicable and no limitation was placed upon amounts of sub- . scriptions to tnese issues* ( All subscriptions up to and including $10,000 for that issue were allotted'in full* The-face amount issued of Treasury Bonds of 1 9 % - 51 was $1,292.,*4*4*4,100, including about $69,000,000 of sub scriptions of $10,000'and under, which were allotted,in full* 20 *• The announcement provided that the 2-1/2$ Treasury 3onds of 1962-67 would not he available for vsub script ion, for their own account, by commercial banks which accept demand deposits. It was provided that these bonds would not be transferable before July 6, I9 U2 , and that they would not be trans ferable to commercial banks which accept demand deposits before May 5» 1952. However, these bonds may be pledged as collateral for loans, including loans by commercial banks which accept demand deposits, but any such bank ac quiring such bonds before May 5» 1952» because of the failure of- such loans to be paid at maturity will be required to dispose of them in the same manner as they dispose of other assets hot eligible to be owned by banks. As the offering was not specific in amount, it remained open for a period longer than customary. The face amount issued of Treasury Bonds of 1 9 6 2 -6 7 , in cluding $52,618,000 sold to Government investment accounts, was $882,306,500. The Treasury announced on May 2 5 , 19^2, an issue of l~l/2$Treasury Notes of Series B*-19ty>, dated June 5 , 19^2, due December 15, in pay ment of which there might be tendered only 2-1/1+$ Home Owners* Doan Corpora-» tion Bonds, Series G I9 I+2-I+I+, called for redemption on July 1, 19.1+2, of which $£7 5 ,^3 8 ,6 2 5 were outstanding; or 1$ Reconstruction Finance Corpora tion Botes of Series S, maturing July 1, 191+2 , of which $275,868,000 were outstanding# Exchanges were made par for par with an adjustment of accrued interest to June 5 , 19^2. A face amount of $1,118,353,1+00 of the Treasury • Botes of Series B—I9I+6 was issued, for which there were exchanged $81+6,081,1+00 of Home Owners1 Loan Corporation Bonds , Series. G 191+2-1+1+* and $272,272,000 of Reconstruction Finance Corporation Notes, Series S. The financing on June 25, 1 9 I+2 , announced June 18, 19 I+2 , consisted of an offering for cash of $1,500,000,000 or thereabouts, of 5/8# Treasury Certificates of Indebtedness of Series A~19^3, dated June 25, 19fe, and maturing February 1, 1 9 I+3 * There were no restrictions as to the basis for subscribing to this issue. Subscriptions up to and including $25,000 were allotted in full.- A face amount of $1,5££»^95»QOG of the Certificates of Indebtedness of Series A-191+3 Vas issued, including about $61,000,000 of subscriptions in amounts up to $2 5 ,0 0 0 , allotted in full, guaranteed issues Due to the policy adopted in October, 191+1, of financing Government corporations and credit agencies through the Treasury, there was very little financing activity during the fiscal year 191+2 with respect to the sale of new guaranteed market issues. However, the following financing transactions were consummated during the early part*of the fiscal year! Reconstruction Finance Corporation!. On June 2l+, X9 I+X» the Secretary of the Treasury, on behalf of the Reconstruction Finanoe Corporation, invited subscriptions from the public, at par and accrued interest, for $5 0 0 ,0 0 0 ,0 0 0 , or thereabouts, of 1$ notes of Series V of the Corporation, dated July 3» 19^1» and maturing AprXX 15# I9 I+U, This financing was designed to provide nev; cash for the Corporation h c lu ^ y ¿aManiac. I ®oilsuchl^|| Bfe«J aanksi | | jij period lflM | ‘ 19fe-67,it| • l/$ Sreasajjp 19^6; inp^j s1Xoaa» l,%of nance Cop! ,S5g,000 w l centofaccndfi and to refund the Corporation^ 7/8$ notes of Series maturing July 20, 19^1, of which there were $211,^60,000 outstanding* A total of $571*363*000 face amount of Series W notes was issued; $205,668,000 being exchanged for Series H notes and $362,695*000 being sold for cash* Commodity Credit Corporation: On July 10, 19'41, the Secretary of the Treasury, on behalf of the Commodity Credit Corporation, announced an offering, at par and accrued interest, for $^00,000,000, or thereabouts, of 1-1/8$ notes of Series 0 of the Corporation, dated July 21, 19^1» and maturing February 15* 19^5* This financing was designed to refund the Corporation*s 5/8$ notes of Series D, maturing August 1, 19HI, of which there were outstanding $202,553*000, and to provide additional cash for the Corporation* A face amount of $hll,596,000 notes of Series 0 were issued, including $200,515,000 exchanged for notes of Series D and $210,781,000 sold for cash* TREASURY DEPARTMENT Washington July 2, 1942. MEMORANDUM FOR THE PRESS; Stories appeared yesterday in various newspapers that Cana dian troops, rushing to the defense of Alaska in accordance with an international agreement, were delayed at the border by demands of Customs officials for payment of duty on their spare uniforms and fighting equipment, that when the matter was reported to Washington it was found by Treasury and State Department officials that the law required payment of duties on the soldiers’ effects, and that a solution was not found until the Secretary of State re quested that the troops of our ally be regarded as "distinguished visitors” and thus be permitted to enter their baggage without examination. There is no information in the possession of the Treasury Department which would support any of these statements. No instances of delay in the passage of Canadian troops into Alaska or any other part of American territory on account of Customs formalities have been reported to the Bureau of Customs, nor have there been any reports that Customs officers have demanded pay ment of duty on effects or equipment carried by these troops or brought to America with them. The law does not require payment of duty either on the clothing and personal effects these troops may bring with them or on their arms and equipment. The only question of Customs law brought to the attention of the Treasury Department in connection with the presence of Cana dian troops on American soil was the question whether goods con signed to individual members of Canadian forces and sent to them after their arrival on American soil could be delivered to them without payment of duty and taxes. The State Department expressed its desire to find some way to grant this privilege to individual Canadian officers and soldiers since a like courtesy was being accorded to United States troops on Canadian soil. The only specific instance which come directly to the attention of the Bureau of Customs in this connection was in a letter and telegrams from the Collector at Juneau which asked whether liquor, cigarettes, and tobacco for sale in an officers’ bar could be imported into Alaska from Canada v/ithout payment of tax. To the general request from the State Department for free entry for packages sent to individual officers and soldiers after their arrival in United States territory, informal reply was made that the only way it seemed possible under existing law to grant such a privilege would be by designating all the Canadian troops on American soil as "distinguished foreign visitors." This solu tion was not considered wholly satisfactory either by the State 32-29 2 Department or the Treasury Department* Nevertheless, the Secre tary of State acted upon it and on June 19 addressed a letter to the Secretary of the Treasury so designating the Canadian forces in A la ska* Realizing that this could be only a temporary expedient and an unsatisfactory one at best, the Treasury Department caused to be introduced in Congress on Wednesday, June 24, a joint reso lution (H.J. Res.327) which would accord free entry and freedom from internal revenue tax to any articles imported into the United States, its territories or possessions, for the personal or official use of members of the armed forces of any of the United Nations on duty within American territory. On represen tation by the Treasury Department that the matter was one of great urgency, the resolution was passed by both houses within three days and has been approved by the President. The ”distingui shed foreign visitor’* privilege has not been invoked in any instance in behalf of the Canadian forces in Alaska and its employment is now unnecessary in the light of the joint resolution. -oOo- TREASURY DEPARTMENT Washington JOE RELEASE, MORNING NEWSPAPERS, Friday, July 3> 19^2._________ _ The- SCcreta/y of the Trea sury,,*by this public no t ice , i h vi t.es.'.tenders: for $300,000,000, o.r. -thereabouts, of ^1-dry Treasury'hilLs,. to he issued, on a discount basis under competitive- bidding. 'The.'bills of this series .• will be dated July . 8 ,. 19.U2,'rand will mature October 7» 19^2, when,the face amount will" be payable without.interest. ;.They will be issued in bearer .form only, and in denominations of $1 ,0 0 0 , ,$5 »0 0 0 i $1 0 ,0 0 0 *, $1 0 0 ,0 0 0 » $5 0 0 ,0 0 0 , ?. and $1 ,0 0 0 ,0 0 0 -(maturity value). «■ - * . /' Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o*clock p. m., Eastern wan time, Monday, July 6 , 19^2.- •; Tenders will not be received at the' Treasury Department, Washington. Each tender must; be for an even multiple of $1 ,0 0 0 , and the, price offered must be. expressed on the basis of 1 0 0 , with not more than three decimals, -;e. g., 9 ^ 9 2 5 . Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit ’from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment 0 f 10 percent of the face amount of Treasury bills applied for:, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount-end price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole 0 r in part, and his action in any such respect shall be final, payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on July 8 , 19^-2, The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treatment, as such, under Federal tax Acts now or here after enacted. The bills shall be subject to estate, inheritance, gift, or 32-30 (Over) other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hepeafter imposed on the principal or interest thereof by , any State, or any of the possessions of'the United States, or by any local ' taxing authority.. For purposes of taxation the amount of discount at which treasury hills are originally sold by the United States shall be considered to be interest. Under Sections k2 and 117 U ) (l) of the Internal-¿Avenue Code, as amended by Section 115 of the Revenue Act of 19^1, the amount of discount at which bills issued, hereunder are spld shall not be .considered to accrue Until such bills shall be sold, redeemed or otherwise'disposed of, and such bills are excluded from consideration as, capital assets. Accordingly/ the owner of Treasury bills ‘ (other than, life insurance com panies) issued hereunder need include in his income t&x return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale o,p redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss,. . . . Treasury Department Circular lo. UlS, ass amended, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any. Federal-. Reserve Bank or Branch. I flip® • g ■|•. - hOo - te Aprii %$ 2942. tetaMi Ite inlitd s%m%m flit ate Chim 9 m àm t thttfe th* limite Siate» StthUismiltn Fate tetettàtefe te p w à n i e C M n t t t jtmb * te ih» « t e m i te $J© millitm m à w tàm r «hieh te* StetaUAaaiteft M te Usti» m i tei t e e «Ktetete far * pirite te «ut ywor teytte t e Ite m&emim 3 0 f 1141® te Ite 1S41 Jgpimtel I» in Ite tetelttcntl pa2àef te tei fteuna^r te glting f t H Untateti « M I« Ite CMLmmni t e n t i l i «te te tapparting: Ite fertili «Kiteng* potutati te Ite Chi»»** i m &£/* £ » W 4 * r# O vn— ft / W M . f r * / A r E- * & * - * * * > " W V The Agreement of April 1, 1941, between the United States and China, under "which the United States Stabilization Fund ^ Su, 6-&0, Crty-C undertook to purchase Chinese yuan to the amount of^ipO m l l i U J ^ and under "which the Stabilization Board of China "was established, has been extended for a period of one year beyond June 30, 1942. The extension of the 1941 Agreement is in accordance "with U il of the Treasury of giving full financial aid *to the Chinese Government and of supporting the foreign exchange position of the Chinese yuan, < r " TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Thursday, July 2 , 1942. Press Service No. 32-31 The Agreement of April 1, 1941, between the United States and China, under which the United States Stabiliza tion Fund undertook to purchase Chinese yuan to the amount of .§50,000,000 and under which the Stabilization Board of China was established, has been extended for a period of one year beyond June 30, 1942. The extension of the 1941 Agreement is in accordance with the established policy of the Treasury of giving full financial aid to the Chinese Government and of supporting the foreign exchange position of the Chinese yuan. oOo- 'S ✓ The Secretary of the Treasury, Henry Morgenthau, Jr., and Minister Fernando Lobo, Charge d ’Affaires of the United States of Brazil in Washington, today signed an agreement extending to July 15, 194-7 the Stabilization Agreement entered into five years ago. Under this Agreement, as extended today, the United States mi l make dollar exchange available to the Government of the United States of Brazil for the purpose of stabilizing the Brazilian milreis-United States dollar rate of exchange up to a total amount of $100,000,000 and will sell gold to the United States of Brazil at such times and in such amounts as the Brazilian Government may request, also to a total amount of $100,000,000. In the Agreement as originally drafted these two amounts were $60,000,000. : ^The extension of this Agreement between the Treasuries of the United States of America and the United States of Brazil and the increase in the facilities made available to Brazil under the Agreement u 7/are a further evidence of tne close and friendly relations existing between the two countries and constitute an assurance of continued cooperation between the two Treasuries. iendship and understanding symbolized by this and other agreements with our great sister republic in South America promise much for both a joint attack on the problems of the war and/solution for our common problems in the peace .cJ o P o (This draft was approved by Messrs . White and B. Bernstein, by Mr. Gouthier of the Brazilian Embassy, and by the State Department throuf Mir. Luthringer.) TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Monday, July 6 , 1942. Press Service No. 32-52 The Secretary of the Treasury, Henry Morgenthau, Jr., and Minister Fernando Lobo, Charge d TAffaires of the United States of Brazil in Washington, today signed an agreement extending to July 15, 1947 the Stabilization Agreement entered Into five years ago. Under this Agreement, as extended today, the United States will make dollar exchange available to the Govern ment of the United States of Brazil for the purpose of stabilizing the Brazilian milreis-United States dollar rate of exchange up to a total amount of $ 1 0 0 ,00 0 ,0 0 0 and will sell gold to the United States of Brazil at such times and in such amounts as the Brazilian Government may request, also to a total amount of $100,000,000. In the Agreement as originally drafted these two amounts were $60,000,000. MThe extension of this Agreement between the Treasuries of the United States of America and the United States of Brazil and the increase in the facilities made available to Brazil under the Agreement," said Secretary Morgenthau, "are a further evidence of the close and friendly relations exist ing between the two countries and constitute an assurance of continued cooperation between the two Treasuries. "The friendship and understanding symbolized by this and other agreements with our great sister republic In South America promise much for both a joint attack on the problems of the war and a solution for our common problems in the pe a c e ." <DRAFT PRESS RELEASE 3 J jThe Secretary of the Treasury, Henry Morgenthau, Jr., and the Cuban Ambassador, Dr. Aurelio F. Concheso, today signed an agreement under which the Government of the United States undertakes to sell gold to the Government of the Republic of Cuba from time to time with payment to be made within 120 days after delivery of the gold provided that the unpaid-for amount of gold shall not at any time exceed $5,000,000. jrhe details of the Agreement were worked out between the Cuban and United States Treasuries on the occasion of a recent visit to this country by Dr. Oscar Garcia Montes, the Minister of Finance of Cuba. ^ This Agreement, evidencing the close cooperation that has existed between the Treasuries of the Republic of Cuba and the United States, will enable the Cuban Treasury to carry out operations designed to stabilize the Cuban peso-United States dollar rate of exchange. ~~ o O o (Approved by Messrs. Ihite and B. Bernstein, by the State Department through Mr. Luthringer, and te by Mr. Pazos of the Cuban Embassy.) FAS:dm:7/3/42 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Monday, July 6 , 1942. Press Service No. 32-33 The Secretary of the Treasury, Henry Morgenthau, Jr., and the Cuban Ambassador, Dr. Aurelio P. Concheso, today signed an agreement under which the Government of the United States undertakes to sell gold to the Government of the Republic of Cuba from time to time with payment to be made within 12 0 days after delivery of the gold provided that the unpaid-for amount of gold shall not at any time exceed ¿‘5,000,000. The details of the Agreement were worked out between the Cuban and United States Treasuries on the occasion of a recent visit to this country by Dr. Oscar Garcia Montes, the Minister of Finance of Cuba. This Agreement, evidencing the close cooperation that has existed between the Treasuries of the Republic of Cuba and the United States, will enable the Cuban Treasury to carry out operations designed to stabilize the Cuban pesoUnlted States dollar rate of exchange. -oOo TREASURY DEPARTMENT Viashington FOR RELEASE, MORNING NEWSPAPERS Tuesday, July 7, 1942.__________ 7/6/42 Press Service No. 32-54 The Secretary of the Treasury announced last evening that the tenders for $300,000,000, or thereabouts, of 91-day Treasury bills to be dated July 8 and to mature October 7, 1942, which were offered on July 3, were opened at the Federal Reserve Banks on July 6v The details of this issue are as follows: Total applied for - $646,058,000 Total accepted - 300,056,000 Range of accepted bids; (Except for three tenders total ing $75,000) High - 99.925 Equivalent rate approximately 0.297 percent Low - 99.906 ” " " 0.372 " Average n it Price - 99.908 0.365 » (15 percent of the amount bid for at the low price was accepted) TREASURY DEPARTMENT Comptroller of the Currency Washington FOR RELEASE, MORNING NEWSPAPERS Wednesday, July 8« 194.2________ Press Service 32-35 During the month ended June 30, 1942, authorizations were issued to receivers for payments of dividends to the creditors of eleven insolvent national banks. Dividends so authorized will effect total distributions of $1,945,662 to 53,915 claimants who have proved claims aggregating $25,429,901, or an ayerage payment of 7.65 percent. The minimum and maximum percentages of dividends authorized were 2.15 percent and 55*0 percent, while the smallest and largest payments involved in dividend authorizations during the month were $27,300 and $478,350, respectively. Of the eleven dividends authorized during the month, one was for a regular divi dend payment, nine were for final dividend payments and one was a final and partial interest payment. Dividend payments so author ized during the month ended June 30, 1942, were as follows: DIVIDEND PAYMENTS TO CREDITORS Of INSOLVENT NATIONAL BANKS AUTHORIZED DURING THE MONTH ENDED __________________ JUNE 30, 1942____________________ iïetture of Dividend Name and Location of Bank Date Authorized Number and Dietribution Percentage of funds "by of Dividend Dividend Authorized Authorized Hyde Park-Kenwood Nat’1 Bank Chicago, Illinois final 6/10/42 7th 6 .25$ first National Bank Tamaroa, Illinois final 6/8/42 2nd 8 .9$ 6 /2 3 /I42 6th 7.18$ 3 0 5 ,8 0 0 first National Bank Logansport, Indiana final Partial Int $ 1 4 4 ,3 0 3 3 6 ,9 2 3 Total Percentage Authorized Dividends to Date Number of Claimants Amount Claims Proved 1 0 ,6 6 8 $ 2,308,845 665 415,538 101.18$ 7 ,8 9 8 4,350,400 55-9$ 9 .2 7 6 4,006,700 6 9 .75$ 3 8 .9$ City National Bank Paducah, Kentucky final 6/20/42 7th 5 .9# 236,400 first National Bank of Brockport, New York final 6/3/42 4th 6.8$ 81,926 7 6 .1203$ 2,837 1,204,788 Larchmont Na.t’ 1 Bank & Tr.Co. Larchmont, New York final 6/17/42 4th 2.15$ 27,300 32-15$ 4,562 1 ,2 7 0 ,7 0 0 first National Bank Charlero i, Pennsylvania final 6/27/42 6 th 2 .22$ 32,500 82.22$ 3,017 1,462,600 Monongahela Nat11 Bank of Pittsburgh, Pennsylvania final 6 /19/42 5th 6.24$ 417,900 96.24$ 7,853 6 ,6 9 6 ,7 0 0 Natrl Loan and Exchange Bank Columbia, South Carolina final 6 /19/42 5 th 3.55‘ /> 59,300 73-55c > 3.446 1 ,6 7 1 ,6 0 0 Edisto Nat11 Bank of Orangeburg, South Carolina final 6/22/42 5 th 1 0 .65$ 1 2 4 ,9 0 0 7 1 .65$ 3 .3 6 0 1 ,1 7 2 ,3 0 0 first Nat*1 Bank of Dodgeville, Wisconsin Regular 6/3/te 1 st 55-0$ 4 7 8 ,3 5 0 5 5 .0$ . 333 8 6 9 ,7 3 0 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Tuesday, July 7, 1942. Press Service No. 32-56 Persons folding ordinary United States currency in the Territory of Hawaii must exchange such currency by July 15, 1942 for United States currency of a special series to be used only in the Territory of Hawaii, the Treasury Department announced today. The exchange may be made at any bank within the Territory of Hawaii without charge. The provisions of law governing the currency exchange are contained in regulations' issued on June 25, 1942, by J, B. Poindexter, Governor of Hawaii, and Brigadier-General Thomas H. Green, Executive to the Military Governor of Hawaii. Under the terms of these regulations, after July 15, 1942, no currency other than United States currency, Hawaiian series, may be held or used in the Territory of Hawaii without a license from Gov ernor Poindexter, and exportations of the new currency from Hawaii will be prohibited. ^Any person importing ordinary United States currency into Hawaii after June 25, 1942, must deposit immediately such cur rency with an official at the appropriate port of entry, and receive in return currency of the new series. Persons willfully disobeying these regulatory provisions will be sub jected to severe criminal penalties, under orders issued by Brigadier-General Green. Treasury officials explained that the new series is currency of the United States issued by the United States Treasury De partment as legal tender for Hawaii and that it is fully backed by the credit of the United States. A note of the new series differs from ordinary American currency only in that it bears the distinctive overprint "Hawaii” in bold-faced type on each end of the face and the word "Hawaii” across the reverse side. License applications to hold or use ordinary United States currency in Hawaii or to export United States currency, Hawaiian series, from Hawaii may be filed with Governor Poindexter on Form TFR-H28 in the manner in which Foreign Funds Control appli cations are filed. 2 ful ^ UrTGnCY rePlacement Program results from care iui study of Hawaiian currency problems by the Treasury DeoartW a f Depaft^ ent> Navy Department and Department of the In° n ^ ab2fatinn With Hawaiian civil and military auorities* Brigadier-General Green announced that the program oitizenf1« ^ 0^ 61, raeasures taken for the protection of Hawaiian citizens and the economic defense of Hawaii. 0 O0 V m i m to «leso ilio M » oo to any or oli »abseripüea« at any ti«» without noticcj and j any actios ho aay tako is thoao respects shall bo final* Subject to the»« raaaro. ! Uà»! subscriptions for amount« up to and l m M « | $25,000 «1U bo allotted in | full. Bio boato of tho allotment on «II othor subscriptions «III. bo publicly announced, and aXlotaant notices «SIX bo «ont out pioupOy upon allotaent, X« Payait at par «ad accrued interest, if any* far bond» allotted harte* ! amai bo nade or eeopietad oa or bofaro duly 15, 1942, or os labor allotment* la ovary «aao abara payment la not ao eeopleted, tho payment with application up ta 10 portant of tiw amount of banda applied far shall* upon declaration nada by tba Secretary of tba Treasury in M a diaeration, ba forfaited to M o United Stato«, Any qualified depositary «Ml bo parMttod to nabo payment by erodit for band» allottod to it fwr itself and it» asotanara tp to any amount for whioh it abaU b qualified in exeeea of ««latini deposita, whan aa notified by tho Federal Kesem Bask of ita diatrlet* j| t* X» mama, rmfums Aa fiatai agosta of tho Baited Stato», Foderai Keeerco Banka are author- iaod and requested to reeoive aubeeriptione, to nabo allotments on tho beala «ad up to tho amounts indicated by tho Secretary of tho Tboaaasy to tho Fodera! Sa* serva tete of iba raspartive districts, lo leene allotment notieee, to rette» papad far banda allottod, ta naha delivery af bouda on full-paid auhaciiptioM allotted, ted thay nay i m intarlai roeolpta ponding dolivory of tho daflaite* banda* 2, M o Secretary of the treasury any at «ay tine, er fro« tino to tin»» pre scribe supplemental or amendatory rules and rofdlotiono governing Ma off«risi# which «U1 bo coamnmlcatcd promptly to tho Foderai Reserve Basks. HEBET MORGENTHAU, JR., Secretary of Mo Treater« vom t t t m f W iapoaed. m >r other «xoii« bonda «hall b« »object io ««tat«* inherltanc«, whether F«d«ral or ¿»tat«* bat «ball b« «xcaspt fttm all Uxa- tion now or h«reaft«r lapoead im th« pilaetpel or Interest th«r«of $p any state, or »«y ©f th« poss«sslona of tho United State«* or by any looal taxlng authority, th« bonda will be aecoptahl« to «oour« d«po«it« of public ooneys, tut wiU not boar th« cireulaiion Privileg« «ad will not b« «ntitled to any Privileg« of eonver#ion. 4« B«ar«r bonda wlth int«r««t Coupons attached* «ad bond» regi«ter«d a* to Principal and internet, «111 b« l««n«d ln $1*000* $10*000 and $100*000» dmvoaimtima of $100, $300, $1,000, Provision will b« »ad« for tho int«rchange of bond« of different denominationa and of Coupon and registered bonda* and for th« trau«» far of roglatorod bonda* ustd«r rol«« and ragulatloci» preaoribed by th« üeeretaiy of th# Tre&auxy. $• 1h« bonda will b« subject to th« general regulatlon® of th« Treasury Departaont* now or horaaftor preaorlbad* governing United State« bonds. in« 1» ä MiowhT 3ubscriptiona will b« r«c«Iv*d at th« Federal Reserve Bank« and Brauch«« and at th« fraaaary Oepartaent* laahlngton. owbeerlber« must agree not to »«11 er otherwia« dlapoe« of tholr «ubscripUon»* or of th« «emiriUa« whieh thereom* prlor to th« olosing of th« «nbeorlptlon books. m y h« aUottd Banking institutioßs gen«rally »ay «nbnlt eubscription« for aeoount of euetoa«rs* bot o«Xy th« Fidersl Reserve Bank« and th« treaaury Department ar« «uthoriaed to aet a« offlolal ag«e«M Öth«r« than banking Institution« will not b« p«raitted to enter «ubaerlptlon« t** cept for th«ir o m aceount. Subsariptiona fron bank« and truet oonpani«« for tltsir 09m account will be reeelved without d«po«lt» h o aeooopanled 2« h y Sttbecription« fron all oth«r« m «t payment of 10 pereant of tho aaount of bonda applied for* Dio seeretary of tho Treasury roeorvo* tho right to rejeet any «ubterip- tlon* ln whol« or ln pari* to allot loa« than th« anount of bond« applied for* « me stma » axm i 2 ntBOMt W M BOMBS » 1949-51 Dated and bearing interest fra* July 15, 1942 ««nanuat.it *f » 3 M M f « W D m Deoenber 15, 1951 SttfSS it f M m B àffgSt mtsmaam X5, 1949 Interest payable 4m» X$ and CMABB «SW» Ibwanfear %$ mft^sar ìartsiiianr, 1942 Department Circular Io. 689 Offici of Hit Secretary, Washington, July 8, 19*1, Fiatai Sartie# Barata of tba Public Mki 1« CPfUUBQ 0F fWfftt X, Hit Saamtary of Hit fraaaary, paramani to tilt authority of Hit attend Liberty Bo H Aat, at amended, invitta »ubecriptiona, at par ani accrued Jtttnwt, trm Hit people tf tht Unitod Statar far bond« of Hit United Stata«, designataci 2 portoni Treasury Sonda of 1949-Si* Hi« aaount tf Hit affarista it 12,000,000,000, or thereabout«. XX. f i -v -V >1 PfXQIi OF SOSOS 1* Hit benda «ili be dattd Jaly 15, 1942, and «ili Saar interest Irta Hat data at Hit rata tf 2 paranti par «b u m , peyahle tu a seniarmual tati« m Uaembnr 15, 1942, and tbereaftar on Sana lf and Ototnbtr 15 in eaah ytar «mUX Hit ^rlntiptl «nomi beeemea payable« Xhey «ili natura Elttaabtr 15 , 1951, but may be radanani H tbt optimi tf Hit United Stata« ma and aftar Stiantar 15, 1949, in «bela « i» P*Hi at par and attnttd interest, on any intere«! day or day«, on 4 nonths* natie« of rtdanptimi giraci in «ueh naaner at tbt Seeretary tf Hit freaaasy «ball preterita, la tata tf partiti n b n p U m tbt banda to bt rtdttntd « I H bt dtttftdntd fey aedi «ethod «a nay bt prtttribtd by tbt Seeretaiy tf tbt Haimiy, radanpUtn deaignated in «ny «neh ntiiot, intmraat m tbt M b Fron tbt data al ttlltd for radar timi fbtll gatta. . 2* Ibi income derired trm tbe banda «hall bt «nbltti to all Fedirti taxa», Traaaupjr D«:*rtraant are authopixad to aot es offlclal agenelaa. Subearlp. »loae fros banke and tauet ooapaniea fop thalp o w aeoount »111 ba reoalp»ä wltboat dejxwit, bat aubaorlptlona fräs all otbere suet be aeoosoaalad by payment of 10 ptreeal of the «nount of boads applied for. A ll aubeorlptioas t o r amounta up to «ad laeludlßf $85,000 will be allotted in fall; other subscriptiona will be reeeived aubjoet to allotasnt, *nd the b u l « of th&ir aUotaaot will be publicly announccd. Payment for aay boada allotted «net be maöa or com leted o b or before July 15, 194g, 0r oa later allotmect, T h * test of tbe offieial circular followa: TR£AS9RY DIPASTifOT Washington r m RILSASS, u q s w i n c Wednesday. July ?/?/4 a w m v m rr*” s a , — ?* rTi 8* _ o, ,0# ^ ^ 7 ! Secretary of the Tr«»«ury Morganthan today announced ttoe offering, through the Federal Keesrve B u b , for o«*h sjbaorlptlon at par <®a accrued Interest, of 18,000,000,000, or thereabout«, of 8 percent Treasury Bond» of 1948-51. Tb order to Insure full pertiot potion of banka, corporation« and otbera aho nay be Interested In the offering, the aubacrlptlon hooka alll raaiain open too day«. Thera will be no raetrlotlona aa to the baele for eubeoribinf to thla laaue. Ihe Treaeury Bond« of 1943-51, no» offered for subscription, »111 ba dated July 15, 1948, and «111 bear Internet fro« that data at the rate of 8 peramt per annua payable »aaiannually »1th the first coupon due Deaesber 15, 1948, for a fractional period. The bonda will natura Oeaeisber 15, 1951, but nay ba redeaud, at the option of the United State«, on and after December 15, 1949. The bond« •111 be issued la two for»»: bearer bonde with internet coupons atteehed, end registered both as to prlneipal end Interest. Both forms will be lesued la denomination« of 1100, |500, *1,000, *5,000, *10,000 and *100,000. Pursuant to the provisions of the Public Debt Aot of 1941, Interest upon tb» bonds now offered «hall not have any exempt Ion, aa such, under Federal Tex Act« now or hereafter ansated. The full provisions relating to taxability ere eel forth In the official circular rslaaaad today. Subscriptions will ba received at the Faderal Hasarra B«nk# and Branch»», «* at the Treasury Danartnent, Washing ton* Banking institutions generally *®y «ubaoriptlona for eooount of auetimers, but only the raderal Reserve Bank* *ni «• TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Wednesday, July 8, 1942. 7/7/42 Press Service No. 32-37 Secretary of the Treasury Morgenthau today announced the offering, through the Federal Reserve Banks, for cash subscrip tion at par and accrued interest, of #2,000,000,000, or there abouts, of 2 percent Treasury Bonds of 1949-51. insure full participation of banks, may be interested in the offering, remain open two days. In order to corporations and others who the subscription books will There will be no restrictions as to the basis for subscribing to this issue. The Treasury Bonds of 1949-51, now offered for subscription, will be dated July 15, 1942, and will bear interest from that date at the rate of 2 percent per annum payable semiannually with the first coupon due December 15, 1942, for a fractional period. The bonds will mature December 15, 1951, but may be redeemed, at the option of the United States, on and after December 15, 1949, The bonds will be issued in two forms; bearer bonds with interest coupons attached, and bonds registered both as to principal and interest. Both forms will be issued in denominations of #100, $500, Si,000, #5,000, #10,000 and #100,000. Pursuant to the provisions of the Public Debt Act of 1941, interest upon the bonds now offered shall not have any exemp tions, as such, under Federal Tax Acts now or hereafter enacted. The full provisions relating to taxability are set forth in the official circular released today. Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington. Bank ing institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Subscrip tions from banks and trust companies for their own account will' be received without deposit, but subscriptions from all others must be accompanied by payment of 10 percent of the amount of bonds applied for. 2 All subscriptions for amounts up to and including $,25,000 will be allotted in full; other subscriptions will be received subject to allotment, and the basis of their allotment will be publicly announced. Payment for any bonds allotted must be made or completed on or before July 15, 1942, or on later allot ment • The text of the official circular follows: UNITED STATES OP AMERICA 2 PERCENT TREASURY BONDS OP 1949-51 Dated and bearing in te re st from Ju ly 15, 1942 Due December 15,1951 REDEEMABLE AT THE OPTION OP THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND APTER DECEMBER 15, 1949 Interest payable June 15 and December 15 1942 Department C ir c u la r No. 689 TREASURY DEPARTMENT, O ffic e of the Secretaiy, Washington,July 8, 1942. F is c a l Service Bureau of the P ub lic Debt I. OFFERING OP BONDS 1« The Secretary of the Treasury, pursuant to the authority of the Second L ib e rty Bond Act, as amended, in v ite s su b scrip tio n s, at par and accrued in te r e s t, from the people of the U nited States f o r bonds of the United States, designated 2 percent Treasury Bonds of 1949-51. The amount of the o ffe rin g is $2,QOO.OOO,000 , oat thereabouts. II. DESCRIPTION OP BONDS 1, The bonds w ill be dated Ju ly 15, 1942, and w ill bear in te re st from that date at the rate of 2 percent per annum, payable on a semiannual b a sis on December 15, 1942, and th e re a fte r on June 15 and December 15 in each year u n t il the p r in c ip a l amount becomes payable. They w ill mature December 15 r 1951, but may be redeemed at the option of the United States on and a fte r December 15, 1949, in whole or in p a rt, at par and accrued in te re s t, on any in te re st day or days, on 4 months* n otice of redemption given in such manner as the Secretaiy of the Treasury s h a ll p re scrib e . In case of p a r t ia l redemp tio n the bonds to be redeemed w ill be determined by such method as may be pre scribed by the Secretary o f the Treasuiy. Prom the date of redemption desig nated in any such n o tice , in te re st on the bonds c a lle d fo r redemption s h a ll cease. 2* The income derived from the bonds s h a ll be subject to a l l Federal taxes, now or h ereafter imposed. The bonds s h a ll be subject to estate, in h eritan ce, g if t or other excise taxes, whether Federal o f State, but s h a ll be exempt from a l l tax a tion now or h ereafter imposed on the p rin c ip a l of in te re st thereof by any State, or any of the possessions of the United S tates, or by any lo c a l taxing a u th o rity. 3. The bonds w ill he acceptable to secure deposits of p u blic moneys, but w ill not bear the c ir c u la t io n p r iv ile g e and w ill not be e n title d to any p r iv ile g e of conversion# 4, Bearer bonds with in te re st coupons attached* and bonds re g iste re d as to p r in c ip a l and in te re s t, w ill be issued in denominations of $100, $500, $1,000* $5,000, $10,000 and $100,000# P rovision w ill be made f o r the in te r change of bonds of d iffe re n t denominations and of coupon and re g iste red bonds, and fo r the tra n sfe r of re g iste re d bonds, under ru le s and regulations pre scribed by the Secretary of the Treasury. 5# The bonds w ill be subject to the general regulations of the Treasuiy Department, now or h ereafter p rescribed, governing United States bonds* III. SUBSCRIPTION AND ALLOTMENT 1, Subscriptions w ill be received at the Federal Reserve Banks and Branches and at the Treasuiy Department, Washington. Subscribers must agree not to s e ll or otherwise dispose of t h e ir su b scrip tio n s, or of the s e c u ritie s which may be a llo tt e d thereon, p r io r to the c lo sin g of the sub scrip tion books. Banking in s titu tio n s g enerally may submit subscriptions f o r account of customers, but only the Federal Reserve Banks and the Treasuiy Department are authorized to act as o f f i c i a l agencies. Others than banking in s titu tio n s w ill not be permitted to enter subscriptions except f o r t h e ir own account. Subscriptions from banks and tru s t companies f o r t h e ir own account w ill be received without deposit. Sub s c rip tio n s from a l l others must be accompanied by payment of 10 percent of the amount of bonds applied f o r . 2. The Secretary of the Treasury reserves the rig h t to re ject any sub s c rip tio n , in whole or in p a rt, to a llo t le ss than the amount of bonds applied fo r , and to close the books as to any or a l l subscriptions at any time without n otice; and any action he may take in these respects s h a ll be f in a l . Subject to these reservation s, subscriptions f o r amounts up to and inclu d in g $25,000 w ill be a llo tt e d in f u l l . The basis of the allotment on a l l other subscriptions w ill be p u b lic ly announced, and allotment notices w ill be sent out promptly upon allotm ent. IV. PAYMENT 1# Payment at par and accrued in te re s t, i f any, f o r bonds a llo tt e d hereunder must be made or completed on or before Ju ly 15, 1942, or on la t e r allotm ent. In every case where payment is not so completed, the payment with a p p lica tip n up to 10 percent of the amount of bonds applied fo r s h a ll, upon d e clara tio n made by the Secretary of the Treasury in h is d is c re tio n , be f o r fe it e d to the United States. Any q u a lifie d depositary w ill be permitted to make payment by c re d it fo r bonds a llo tte d to i t f o r i t s e l f and i t s customers up to any amount fo r which i t s h a ll be q u a lifie d in excess of e x istin g deposits, when so n o tifie d by the Federal Reserve Bank of i t s d i s t r i c t . - 3 - V. GENERAL PROVISIONS 1* As f i s c a l agents of the United States, Pederal Reserve Banks are author is e d and requested to receive su b scrip tio n s, to make allotm ents on the b asis and up to the amounts ind icated by the Secretary of the Treasury to the Pederal Re serve Banks of the respective d is t r ic t s , to issue allotment n o tice s, to receive payment f o r bonds a llo tt e d , to make d e liv e ry of bonds on f u ll- p a id subscriptions a llo tte d , and they may issue interim re ce ip ts pending d e liv e ry of the d e fin it iv e bonds. 2. The Secretary of the Treasury may at any time, or from time to time, pre scribe supplemental or amendatory ru le s and regulations governing the o ffe rin g , which w ill be communicated promptly to the Pederal Reserve Banks* HENRY MORGENTHAU, JR*, Secretary of the Treasury* oOo- TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday. July 8. 1942. Press Service No. 32-38 The Bureau of Customs announced today preliminary figures showing the cruantities of wheat and wheat flour entered, or withdrawn from warehouse, for consumption under the import quotas established in the President’s Proclamation of May 28, 1941, as modified by the President’s proclamation of April 13, 1942, for the twelve months commencing May 29, 1942, as follows: Country of O rig in Canada China Hungary Pong Kong Japan United Kingdom A u stra lia Germany S y ria New Zealand C h ile Netherlands Argentina Ita ly Cuba France Greece Mexico Panama Uruguay Poland and Danzig Sweden Yugoslavia Norway Canary Islands Rumania Guatemala B r a z il Union of Soviet S o c ia lis t Republics Belgium : '/heat f lo u r , semolina, : crushed or cracked wheat, : and s im ila r wheat products Wheat; Imports Imports Established: May 29, 1942, to :Esta blishe d : May 29, 1942 to : Quota : June 27. 1942 Quota : June 27. 1942 (Bushels) (Pounds) (Pounds) (Bushels) 795,O^O 100 10 100 100 7,000 100 1,000 100 1,000 100 100 795,000 - 100 100 800,000 -1' 795,000 — oOor 3,815,000 24,000 13,000 13,000 8,000 75,000 1,000 5,000 5,000 1,000 1,000 1,000 14,000 2,000 12,000 1,000 1,000 1,000 1,000 1,000 1*000 1,000 1,000 1,000 1,000 — — 3,352,059 44 — — — — — 4,-000,000 3,352,103 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday« Ju ly 8, 194?» Press Service No. 32-39 The Bureau of Customs announced today prelim inary fig u re s showing the a u a n titie s of coffee authorized f o r entry fo r consumption under the ouotas fo r the twelve months commencing October 1, 1941, provided f o r in the Inter-American Coffee Agreement, proclaim ed by the President on A p r il 15, 1941, as follow s: Country of Production Signatory Countries: B r a z il ' ‘ -- * Colombia Costa Rica Cuba Dominican Republic Ecuador E l Salvador Guatemala H a iti Honduras Mexico Nicaragua Peru Venezuela . Q,uota Quantity (Pounds) 1/ 1,401,426,521 475,086,450 30,144,642 12,109,603 18,098,664 22,634,408 96,657,909 80,715,477 41,436,647 3,297,588 74,966,100 32,078,385 3,767,088 38,094,430 Non-signatory Countries: B r it is h Empire, except 17,674,322 Aden and Canada Kingdom of the Netherlands 19,669,574 and i t s possessions Aden, Yemen, ?nd Saudi 3,872,909 Arabia Other co untries not sig n a to rie s of the Inter-American Coffee Agreement 12,276,800 1/ 2] Authorized f o r Entry f o r consumption As of (Date) : (Pounds) June 27, 1942 it ( Import auota June 27, 1942 (Import quota J u ly 4, 1942 June 27, 1942 ( Import ouota Ju ly 4, 1942 it June 27, 1942 n Ju ly 4, 1942 ( Import quota (Import quota f i l l e d ) June 27, 1942 13,107,191 h ( Import quota f i l l e d ) Qpotas revised e ffe c tiv e Februaiy 26, 1942. Per telegraphic rep orts. -oOo- 837,280,732 372,549,298 fille d ) 5,642,283 f ille d ) 2/ 18,412,238 75,493,420 fille d ) 2J 39,357,942 2/ 2,513,687 34,598,080 21,0^2,030 2/ 3,110,901 f ille d ) 875,809 TREASURY" DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, Ju ly 8, 1943. press Service No. 33-40 The Bureau of Customs announced today that p relim inary reports from the c o lle c to r s of customs show imports of cotton and cotton waste chargeable to the imuort ouotas estab lish e d by the P r e s id e n t s proclamations of September 5, 1939, and December 19, 1940, as fo llo w s, during the u eriod September 20, 1941, to June 27, 1942, in clu sive ? COTTON HAVING A STAPLE OF LESS THAN 1-11/16 INCHES (OTHER THAN HARSH OR ROUGH COTTON OF LESS THAN 3/4 INCH IN STAPLE LENGTH AND CHIEFLY USED IN THE MANUFAC TURE OF BLANKETS AND BLANKETING, AND OTHER THAN LINTERS). Annual ouotas commencing September 20, by Countries of Origin? Country of O rig in Egypt and the AngloEgyptian Sudan ........ P e r u ................................ B r it is h India . . . . . . . . China Mexico ............................ B r a z il ............................ Union of Soviet S o c ia lis t Republics A r g e n tin a ...................... H a iti .............................. Ecuador .......................... Honduras ........................ Paraguay ........................ Colombia ........................ * I r a q ........................ B r it is h East A fr ic a .. Netherlands East Indies ....................... Barbados ...................... . Other B r it is h West Indies ]J .................. N ig e ria .......................... Other B r it is h West A fr ic a 2/.................... A lg e ria and T u n isia . . Other French A fr ic a 3/ (In Pounds) Staple length le ss _______ than 1-1/8» ? Imports Sept. Established : 20, 1941, to ?June 27. 1942 Quota 783,816 247,952 2,003,483 1,370,791 8,883,259 618,723 475,124 5,203 237 9,333 752 871 124 195 2,240 71,388 - 247,952 69,452 8,883,259 618,723 ?Staple length 1-1/8” or imore but le s s than 1-11/16 Imports Sept. ?Established 20, 1941, to : Quota June 27. 1942 43,451,566 2,056,299 64,942 2,626 3,808 33,493,073 2,056,299 - 6 . 203 2 9,333 435 506 - - 2 6 — — 29,909 — 170 - 12,554 — . - * - 21,321 5,377 30 30,139 - - 16,004 689 - 2,002 1,634 - - 14,516,882 9 ,828,954 45,656,420 35,549,556 1/ Other than Barbados, Bermuda, Jsmaica, Trinid ad, and Tobago. 2/ Other than Gold Coast and N ig eria, 3/ Other than A lg e ria , T u n isia , and Madagascar. - 2 - COTTON CARD STRIPS 2/, COMBER WASTE, LAP TASTE, SLIVER WASTE, AND ROVING WASTE WHETHER OR NOT MANUFACTURED OR OTHERWISE ADVANCED IN VALUE. Annual quotas commencing September 20, by Countries of O rig in : T o ta l cuota, nrovided, however, that not more than 33-1/3 percent of the quotas s h a ll be f i l l e d by cotton wastes other than card s t r ip s 2/ and comber wastes made from cottons of 1-3/16 inches or more in staple length in the case of the fo llo w in g coun tries: United Kingdom, Prance, Netherlands, Sw itzerland, Belgium, Germany and Ita ly : Country of Origin United Kingdom .. Canada ......... Prance ......... British India ... Netherlands .... Switzerland .... Belgium ........ Japan .......... China .......... Egyut .......... C u b a ........... Germany ........ Italy .......... Total ( In Pounds) : Established TOTAL IMPORTS : Established Imnorts Sent. *• TOTAL QUOTA Sept. 20, 1941 : 33-1/3^ of 20, 1941, to to June 27. 1942: Total Quota June 27.1942 1/ 4,323,457 239,690 227,420 69,627 58,240 44,388 38,559 341,535 17,322 8,135 6,544 76,329 21,263 434 231,615 5,482,509 1,441,152 — 75,807 — 22,747 14,796 12,853 434 * •M» — _ — _ 25,443 7,088 - 301,676 1,599,886 434 - 59,627 « — — — - ,t 1J Included in t o t a l imports, column 2. 2/ The President *s proclam ation, signed March 31, 1942, exempts from import quota r e s t r ic t io n s card s tr ip s made from cottons having a staple 1-3/16 inches or more in length. —o0o~ TREASURY DEPARTMENT Washington EGR IMMEDIATE RELEASE, Wednesday. July 8. 1942. Press Service No. 32-41 The Bureau of Customs announced today preliminary figures for imports of commodities within the quota limitations provided for under the Philippine Independence Act, as amended by the Act of August 7, 1939, from Januaiy 1 to June 27, 1942, inclusive, as follows? Products of Philippine Islands * J Established Quota Period i Quantity : Unit of ¡Imports as of ? Quantity ¡June 27. 1942 Coconut oil Calendar year 448,000,000 Pound 31,149,515 Refined sugars Calendar year 112,000,000) Pound 2,346,712 Sugars other than refined Calendar year ) ) ) 1,792,000,000) Pound 43,232,544 Cordage Calendar year 6,000,000 Pound 323,826 Buttons of Pearl or shell Calendar year 850,000 Cross 72,057 Cigars Calendar year 200,000,000 Scrap tobacco and stemmed and unstemmed filler tobacco Calendar year 2 J Number 521,366 1 4,500,000 Pound 209^,465 The duty-free quota on Philippine Sugars applies to 850,000 long tons, of which not more than 50,000 long tons may be refined sugars. —oOo— TREASURY DEPARTMENT Washington for immediate r e l e a s e , "Wednesday, July 8, 1942». Press Service No. 32-42 The following statement was made "today by Secretary Morgenthau* In his Message to Congress on April 27, 1942. the President said: "To keep the cost of living from spiraling upward, we must discourage credit and instalment buying, and * encourage the paying off of debts, mortgages, and other obligations; for this promotes savings, retards excess ive buying and adds to the amount available to the creditors for the purchase of War Bonds." I want to reemphasize this seventh point in the President1s recent Message to Congress so that there may be no misunderstanding about it. Specifically, I want to clear up a misconception that may have arisen from a memorandum recently pre sented by Mr. Randolph Paul, Tax Adviser to the Sec retary of the Treasury, to the Ways and Means Com mittee of the House of Representatives on the sub ject of repayment of debts under high tax rates. This memorandum stated explicitly: "It should be emphasized that this memorandum does not contain any recommendations of the Treasury but was submitted merely for the information of the Committee in response to questions relating to various subjects, particularly the debt problem.. It is merely a staff study and does not incorporate any policy decisions." 1Committee questions called for a discussion of all remedies and the subject of a debt moratorium was, therefore, referred to in the memorandum.. As some misunderstanding seems to have arisen, I should like to make it clear that the Treasury did not recommend such a moratorium.. Mor did the Committee 'take any action with respect to the memorandum. -oOo- ?ft£*SUftY DKPAifflMT Washington FOR KEUSA3E, KfflHIHO RSW3PAPKHS, Press Service Q ~2 ^ Uk \ Secretary of the Treasury llorgenthau announced last night that the subscription books for the current offering of 2 percent Treasury Bond* of 1949*51 will eloee at the eloee of business today, July 9 Ascriptions addressed to a Federal Reserve Bank, or Branch, or to the Treasury Department, and placed in the mail be* fore 12 o’clock midnight Thursday, July 9, *111 bo eonsidered as having been entered before the eloee of the subscription books* Announcement of the amount of eubaoriptlone and the basis of allotment will probably be made around noon on Saturday, July U. TREASURY DEPARTMENT Washington Press Service No. 32-43 Secretary of the Treasury I.Torgenthau announced last night that the subscription books for the current offering of 2 percent Treasury Bonds of 1949-51 will close at the close of business today, July 9. Subscriptions addressed to a Federal Reserve Bank, or Branch, or to the Treasury Department, and placed in the mail before 12 o ’clock midnight Thursday, July 9, will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the basis of allotment will probably be made around noon on Saturday, July 11 TREASURY DEPARTMENT Washington (The following address by Assistant Secretary of the Treasury John L. Sullivan before a War Savings campaign luncheon in Boston, Massachusetts, is scheduled for delivery at 1 p.m., Eastern War Time, Thursday, July 9»' 1942, and is for release at that time. ) • I do not think that I need t o tell you how delighted I am to have this opportunity to meet with you today. At a time when the world appears to be up-side down, at a time when desperate forces are seeking to crush civilization itself, one derives a certain sense of reassurance in returning to Mew England and to Boston -- the section of this new world and the very town in which many of the foundations of our American way of life were laid. And it is inspiring during days such as these to meet with men like yourselves who are living proof that a democracy can wage war democratically. When the master military minds of the aggressor nations laid their plans for total war it was their vain hope that this type of warfare could be resisted only by other dictator nations. Their faith in this type of warfare indicated a complete lack of understanding of the American mind, of American courage, and of the American concept of the value of freedom. Now we are just beginning to demonstrate what we will soon prove to them: That in a land wherein ail men are created free and equal, where there are no discriminations because of race, creed, and color, and where to 130 million people liberty is truly dearer than life, there exists a nation with such unity of purpose and devotion to freedom that we can outstrip any other nation in the world in the totality of our war effort. Neither you nor I nor anyone in this world today knows when or how this war will end. We know it will be a hard war. We know it may be a long war. We know that before it is finished the s u p r e m e ■sacrifice will have been paid by thousands of our fine young men. We know that for years to come the misery and the agony of this conflict will linger with us. We know that this war will create a greater drain upon the wealth and substance of this country than any war we or any other nation has ever fought. But we also know this: Almost no matter how many deaths and casualties result, certainly no matter how much it costs us in terms of money and goods, it is far, far cheaper to fight and be free than to bend to the conqueror. Yes -- it is ten thousand times cheaper to win than to lose. 32-44 Ask the people of Poland and Czechoslovakia, of Belgium and Holland. Ask the people of Prance and Austria and Yugoslavia*. Yes -- ask those people whether it is better for our sons to die on the battlefield or to fall before the murder squads of despot powers seeking to make all races forever servile to their own. Ask the business men of conquered Europe whose factories and storey, whose banks and businesses have been taken over lock, stock and barrel by the invader. Ask any member of the millions of broken families of Europe whether any price can be too great to win this fight and their answer will be just what you expect: Whatever the cost, it is cheaper to win than to lose. There is one thing more we know about this war, and that is that somewhere, somehow, sometime, we will win. Ho matter how long it takes - - n o matter how many ittakes -- no matter how much it takes.-- we will win. And, we will win this war so thor oughly and so completely, that when it has been concluded, we, in company with our allies can establish a just and enduring peace so that future generations of Americans will not have to go through those things which we ai:e now experiencing. Hot the least important aspect of total war is finances, and I think it might be helpful to you if I briefly review our finan cial situation: On July 1, 1941, there was a national debt of about fortynine billion dollars. On July 1 of this year that debt was seventytwo billion dollars. In mid-summer of 1941, we were spending for rearmament about eight hundred million dollars a month. In mid-summer of this year, we are spending on the war effort about four billion dollars a month. During the fiscal year 1942, about 25 % of our entire national income was spent for rearmament. During the fiscal year 1945» about 55% of our national income will be spent for the war effort* Military and naval appropriations already voted by the Con gress total about two hundred billion dollars. Under the present tax laws, we anticipate in the fiscal year 1943 collections of about seventeen billion dollars, and expendi tures (including Government corporations)of about seventy-seven billion dollars, leaving a deficit of about sixty billion dollars. This deficit indicates that the tax bill now pending before the Congress may be considered as the start, rather than the con clusion, of the nation’s wartime revenue program. It also em phasizes the tremendous sums of money we must procure from other sources. Roughly speaking, this nation is today obtaining money through three main sources; Taxes; the sale of regular Treasury securities to banks, insurance companies, trusts and individuals: and War Savings Bonds. The borrowing of true investment funds is now being acceler ated with the cooperation of a nation-wide Victory Fund Committee of bankers, businessmen, and security dealers. They are giving generously and freely of their time and doing a splendid «job. I bespeak for the committee here in.the Boston district the coopera tion of everyone in New England. The third source of funds for waging this war is the sale of War Savings Bonds to the people of the United States. It is the hope of the Treasury that from this source we may borrow at least twelve billion dollars in the next twelve months. W e believe that it is vitally important not only to the Treasury, but.to each and every one of us individually that this minimum ob jective be achieved and that at least a billion dollars a month is borrowed from the current earnings of the people of Americ a. In addition to the fact that we urgently need this money are the further reasons that borrowing from this particular source contributes substantially to restrain inflation and the altern atives to the success of our drive to raise this amount out of current earnings are far from pleasant* , Lending to Uncle Sam a part of each salary check or wage en velope is surely far better than having the specter of inflation as^a guest at our dinner table. When the people of America set aside a definite percentage of their earnings to lend to the Gov ernment, they can plan their budgets with a reasonable degree of certainty, but they are defenseless before the creeping paralysis of inflation. Bo one can know how to budget his resources ’ when he doesn’t know what the necessitites of life may cost next week or next month. Everything we do to check inflation serves to hold down the cost of living, thus promoting better public morale* At the same time, it keeps down the cost of war and the pyramiding of the national debt. ' Moreover, in addition to keeping us in a better economic con dition during the war this type of borrowing furnishes the people with an ever increasing fund of savings to fall back upon when they need it and with which they can plan a secure future for their families. The money which is invested in War Bonds is not money spent but money saved. The bonds they buy are the finest, strongest securities in the world. They are backed with the entire re sources and strength of the United States Government. And for every $3.00 invested in them the lender receives $4.00. 4 I would be less than frank with you if I did not remind you of the consequences of the failure of this campaign to borrow twelve billion dollars annually from current earnings. The amount of money we are required to raise is so great that taxes and the ordinary type of Treasury financing cannot satisfy our requirements. If, through a voluntary savings plan we cannot borrow the amount we need, we shall be forced to resort to compulsory savings -- a prospect not pleasant to contemplate. The keystone of this War Savings Bond campaign, as you well realize, is the 10/o payroll allotment plan. You gentlemen are businessmen. You know that in order to finance your business you need a steady source of income. You c a n ’t meet your payrolls on a trickle, of sales this month and a torrent next month. You want steady production and steady sales, so that you can chart an even course for your business. You also realize that we cannot count on individual month by month effort to bring us our billion dollar a month quota. You know we c a n ’t gamble on the weather or the war news to be favorable for bond selling. We have to plan and organize so that the money will come in and the bonds go out month after month. Only in that way can we meet our quotas. The Treasury and the nation at large are grateful to you and to thousands of your fellow workers, all over the country for the unselfish service you have rendered to help promote this campaign* A splendid job has been done. A more thorough job must be done. Ninety-nine percent of those industrial plants employing 5,000 people have installed a payroll savings plan. Many of these firms are over the 10% mark. If we can get an over-all savings from 34 million workers in the country with plant payrolls, our objec tive of a billion dollars a month will be more than reached. In those cases where payroll savings have been successfully installed and where over 90% of the people in the plants are par ticipating f o r a substantial part of their wages, the results have been obtained through well organized drives within the plant itself. Most of these drives have been conducted in the manner of a.Community Chest campaign. All of these drives have been joint employer and employee enterprises. Management has taken the in itiative. The planning has been done in the front office. The individual solicitation has been done in the plant itself by the workers. I doubt if in the nation today there exists any more striking proof of the cooperation between management and labor than has been demonstrated in their working shoulder to shoulder in making the 10% payroll allotment plan a success. Throughout the nation labor has given to this campaign its unqualified support. There is no segment of organized labor or grouio of unorganized labor that has not done its part, and I am sure that you gentlemen will find that every effort you make to increase the number participating or the degree of participation will be met at least half way by your employees. Apropos of la b o r ’s attitude toward this question, I might tell you that last week in a small plant in an Eastern city, the employees walked out on strike because two of their fellow employees were not par ticipating in this, campaign. The Treasury very earnestly hopes that long before snow falls everyone working in an industrial plant in New England will be lending voluntarily at least 10% of his current earnings. For many of these enterprises this will require a new drive to in crease the degree of participation. I do hope that no one will be reluctant to make a renewed effort to achieve this. We^have recently had a striking example of the result of such a drive in the Treasury Department. About two months ago, the employees of the Treasury Department were setting aside about 3% of their current earnings in War Bonds. The first two weeks in June we put on in the Treasury a drive such as I have just described, and as a result of that drive, the employees of the Treasury are today setting aside out of their earnings 11%. Thus, by a two-week effort, we were able to more than double our own participation. I am sure that with the type of effort of which I know., you gentle men are capable, you can experience a similar increase. I am not going to try to tell any of you gentlemen how you should try to organize your plants. Most of you have already largely completed that organization. I am merely pointing out to you how vital it is that every plant and every office be or ganized as completely as possible for regular payroll purchase^ of War Savings Bonds. The War Savings Bonds Committee and office here in Boston, under the able direction of State Administrator Daniel J. Doherty, stands ready and willing to help you in every possible way. They will supply you with forms, folders, printed matter, and speakers. They will be delighted to give you every kind of help that experience has proved valuable. May I appeal to you gentlemen today as employers and as^ leaders. Now is the time for organizers to organize. Now is the time for leaders to lead. I urge you to set aside any fears you may have of seeming to take a paternalistic attitude toward your employees. Everybody is ready for this plan. Almost every body wants it. •William Green of the A. E. of L. endorses it. He says; "A steady investment of 10% of the earnings of working men and women in War Savings Stamps and Bonds would be reasonable and in no way burdening.” 6 •Philip Murray of the C. I. 0. endorses it. He states; ,fWe of the C. I. 0, will increase our purchases to the maximum of our ability. Those who can will put at least 10$ into War Bonds. Some will go much higher.” The Gallup Poll finds that 98% of the American people 'are in favor of Yfar Savings Bonds, and that over 2/3rds of the people think that 19 % is a fair amount to buy, rather than ±0%>. You gentlemen are leaders. You who are good executives can organize this vital job of payroll allotment and of War Savings Bond sales in your plants as nobody else can possibly do. In behalf of the Treasury, in the name of the United States of America, I call upon you all to perform this patriotic service. -oOo TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS Friday, July 10, 1942, 779742 — — ^— ------ ----------- The Secretary of the Treasury, by this public notice, invites tenders for £>300,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under compet itive bidding. The bills of this series will be dated July 15, Y 1942, and will mature October 14, 1942, when the face amount will be payable without interest. They will h e issued in bearer form only, and in denominations of ¿1,000, ¿5,000, ¿10,000, ¿100,000, ¿500,000, and ¿1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o ’clock p.m., Eastern War time, Monday, July 13, 1942. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of i1,000, and the price offered must be ex pressed on the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor* Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which pub lic announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately avail able funds on July 15, 1942, provided, however, any qualified 32-45 over , ; 2 a ■. i depositary will be' permitted to make payment by credit for Treasury bills allotted to it for itself and its customers up to any amount for which it shall be qualified in excess *of existing deposits when so notified by the Federal Reserve Bank of its i District, The income derived from Treasury bills, whether interest or gain from the sal© or .other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treat ment, as such, under Federal tax Acts now.or hereafter enacted, The bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation no-w or hereafter imposed pn the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority, For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be considered to be interest. Under Sections 42 and 117 (a) (1) of the Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall, not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills |i are excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance companies)’ I issued hereunder need Include In his income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and govern the ; conditions of their Issue. Copies of the circular may be ob tained from any' Federal Reserve Bank or Branch. -oOo- TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Thursday, July 9, 1942. Press Service No. 32-46 The Bureau of Customs announced today that due to the authorization for acceptance of an entry covering a large shipment of Venezuelan coffee which was inadvertently pre sented for entry under the current quota, and was subse quently placed in storage pending the opening of the next quota period on October 1, 1942, the current Venezuelan coffee import quota remains unfilled to an appreciable extent. Therefore, Treasury Department Press Service 32-39, dated July 8, 1942, is hereby amended and the total quantity of Venezuelan coffee covered by entries for con sumption authorized for acceptance during the period October 1, 1941, to July 4, 1942, pounds. should read 36,919,928 TREAbUnX DEPARTMii.I'JT Washington (The following aauress by Eawara H. Foley, Jr., General Counsel of the Treasury Department ana chairman of the Inter-American Conference on bystems of Economic ana Financial Control is^ scheaulea for aelivery before the Conference at 3 ,.iIM ±, m m ~ , Jui.y xu, i ana is for release upon delivery,. Members of the Inter-ainerican Financial and economic Advisory Committee, fellow Delegates, Aavisors, ana Friends: X think I speak for ail those present when I say that this_ ( ^ r m c e ^ has been a real success. It is in an atmosphere of great accomplishment that this Conference araws to a close. he came here to discuss our mutual problems, to leariv of each other's experiences; ^ > ;tf ^ h C^ntroiiing the ^XiSciai^ana economic transactions S S gt1 t e r e h f o ? Cthr^is°nftimfsnIna tnli'r allies_and of those rnaer the domination or influence of the axis. These objectives have Deen accomplished. The eieht Resolutions, which have been unanimously aaoptea oy tne aelegates IrJifiohf=r:onstltute and effective hemispheric program of economic ana financial controls. •Great tnough the accomplishment of this conference may oe when measured in terms of aaoptea Resolutions, these are not its greatest accomplishments. ^ i • 4 i HHtnLutiorib lltxVv D00H ciQOpfc0 (i i£ &pilit Ein unison H S for. their mutual interest ana well-being. Moreover.unanimityupon This is the unanimous ana militant answer to the twenty-one American ttepublics to the Axis aggressor. But Resolutions standing alone are not enough, fes^utiona no matter hn. strone will not aestroy tne forces of aggression. Our program n requires'^executio^with tijsame forthright action ana singiene^ofpurpose as that which accomplished of the progr. . ^ mise without planning -paif Row we must stana shoulder to shouioer in its execution. Each f this conference has a duty to see that the program aaoptea heie .b carried o . -3il7 The task will not be easy. The Resolutions will not be effective automatically to destroy the enemy. At many points in the road the job will be tnankless. Vie cannot discharge our duty without hurting some people for ours is the task of hurting the enemy. An aostract resolution to destroy the aggressor abroad ana the aggressor within each of our countries is comparatively simple in its adoption. In its execution we will not be dealing with abstractions — we will be called upon ruthlessly to uproot the financial and economic roots of persons and enterprises m each of our countries. These persons and enterprises will have power and influence. They will not take the force of our blows meekly. Rather, they will fight back with all the viciousness of a cornered rat ana with all of the intrigue ana pressure tactics symbolized by totalitarian aggression and cunning. It will take real courage for us to discharge our duties in the spirit ana with the determination evidenced at this conference. Against these difficulties, however, there will be many compensations. Freedom ana sovereignty are worth any price which must be paid for their defense. Vnhat does it matter that you ana I make personal sacrifices ana enaure hatred if our actions are executed with the conviction that we are doing our part both in our homes and abroad to beat the Axis to its knees. Others are daily making the supreme sacrifice with their lives. The spirit of these twenty-one Republics knows no compromise with those who have attached our institutions and our* way of life. Finally, it must always be remembered that we are not alone in the execution of this grave mission. Each of us cun take courage and be heartened by the fact that tne rest of us are fighting the same battles and that the rest of us are ready ana anxious to come to the assistance of our sister Republics, lid must keep each other informed, both on the problems arising ana upon the progress we are making. This is a hemispheric project, not the separate and unrelated efforts of tv/enty-one countries, he dedicate our action to mutual assistance and a singleness of objective — tne destruction of the Axis. In closing, I should like again .to thank the delegates and advisers for their whole-heartea cooperation ana assistance. The ability and training of the delegates and aavisers of each of the American Republics attending this Conference testify to the sincerity of ail of the Republics in trying to solve our mutual problems in the fine traditions of Pun-Americanism. It is this spirit and this traaitiun that is foreign to tne philosophy uf the Axis machine of aggression ana against which the aggressor must inevitably succumb. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Friday,,July 10, 1942. Press Service No. 32-48 The Bureau of Customs announced today preliminaiy figures for imports of commodities within quota limitations provided for under trade agreements, from the beginning of the quota periods to June 27, 1942, inclusive, as follows; L Commodity 1____ Established Quota -_____________________ :Period & Country ¿Quantity Cattle less than 200 pounds each Calendar year : Unit of ;Imports as of : Quantity ;June 27. 1942 100,000 Head 48,408 51,720 8,280 Head Head 49.930 (Tariff rate quota filled) ¡Cattle, 700 nounds or more each (other than dairy cows) Quarter year from April 1, 1942 Canada Other countries ¡Whole milk, fresh or sour Calendar year 3,000,000 Gallon 2,336 Cream, fresh or sour Calendar year 1,500,000 Gallon 491 Pish, fresh or frozen filleted, etc., cod, haddock, hake, pollock, cusk and rosefish Calendar year 15,000,000 Pound 5,728,845 90,000,000 Pound 33,030,494 60,000,000 Pound 1,237,846 Pound (Unstemmed equivalent) ¡White or Irish potatoes 1,Certified seed Other 12 months from Sept.15» 1941 12 months from Sept. 15, 1941 Cuban filler tobacco, unstemmed or stemmed (other than cigarette leaf tobacco), and scrap tobacco Calendar year 22,000,000 Red Cedar Shingles Calendar year 2,617,111 Square 1,678,981 41,774 Number 15,452 Silver or black foxes, furs, and articles? Foxes valued under $250 ea. and whole furs and skins Pails Period - May Nov. 1942. All countries 12 months from December 1, 1941 5,000 Piece 11,118,111 (Import quota filled) 2 "** Commodity : Established Quota : Unit of : Imports as of :Period & Country i Quantity • Quantity * June 27. 1942 Silver or "black foxes, furs, and articles: Paws, heads, or other separated parts 1 2 months from December 1, 1941 500 Pound Piece plates it 550 Pound Articles, other than piece plates ii 500 Unit Crude petroleum, topped crude petroleum, and fuel oil Calendar year Venezuela 2, 082,574,771 Netherlands Colombia Other countries ¡Molasses and sugar sirups containing soluble nonsugar solids equal to more than 6$ of total soluble solids Calendar year -oOo- (Import quota filled) None 24 Gallon 214,535,429 620,097,196 ti 226,413,482 94,662,490 it 92,469,506 150,868,242 it 1,500,000 Gallon (Imnort ouota filled) 665,646 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Saturday, July 11, 1942. Press Service No. 32-49 Secretary of the Treasury Morgenthau today announced the subscription figures and the basis of allotment for the cash offering of 2 percent Treasury Bonds of 1949-51. Reports received from the Federal Reserve Banks show that subscriptions aggregate $3,843,000,000. in amounts up to and including $25,000, $196,000,000, were allotted in full. Subscriptions totaling about Subscriptions in amounts over $25,000 were allotted 52 percent, on a straight percentage basis, but not less than $25,000 on any one sub scription, with adjustments, where necessary, to the $100 denomination. Details as to subscriptions and allotments will be announced when final reports are received from the Federal Reserve Banks. -oOo- % TREA SURY DEPA RTMENT Comptroller of the Currency Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, July 14, 1942.__________ 7-13-42 During the month of June, 1942, Press Service No. 32-50 the liquidation of eight insolvent national hanks was completed and the affairs of such receiverships finally closed. Total disbursements, including of f s e t s .allowed, to depositors and other creditors of these eight receiver ships, amounted to $44,376,235, while dividends paid to unsecured creditors amounted to an average of 81.67 per cent of their claims. Total costs of liquidation of these receiverships averaged 6.98 percent of total col lections from all sources, including offsets allowed. Dividend distributions to all creditors of all active receiverships during the month of June, amounted to $1,357,531. Data as to results of liquidation of the receiverships finally closed during the month are as follows: INSOLVENT NATIONAL BANKS LIQUIDATED AND FINALLY CLOSED ____________ DURING THE MONTH OF JUNE, 19^2__________ _ Name & Location of Bank Date of Failure Total Dishur semen ts to Creditors Including Offsets Allowed Percent Dividends Declared to All Claimants 1 2 ,lU2 ,UlO 8 2 .5 7 1 ,000,000 8U .9 2-22-33 Federal American Nat11 Bk & Tr Co. Washington, D. C. IO-3 I-3 3 12,918,155 Citizens Nat*l Bk Kokomo, Indiana IO-23 -3 I 3 ,0 2 9 ,8 7 1 Peoples-Ticonic NB Waterville, Maine 1 1 -6-33 Cash, Assets Uncollected Stock Assessment s, etc., Returned to Shareholders - 0 - 2 ,000,000 - 0 - 90.197 350,000 - 0 - 5 .608,269 8 9 .32 00 00 Commercial Nat*l Bk Washington, D. C. Capital St&bk at Date of Failure - 0 - 9-2 2 - 3 1 2 ,6o U ,090 76 .L9 200,000 - 0 - 10 -10 -3 U 1 ,558,862 93.2 150,00 0 - 0 - Union Nat’l Bk Scranton, Penna. 2 -2 1 -3 U U, 1 1 2 ,1*91 76.07 500,000 - 0 - Merchants NB Brownsville, Texas 3 -28-32 2,396,087 U6 .75 250,000 - 0 - Commercial NB & Tr Co. St. Joseph, Michigan First Nat11 Bk East Rochester, N.Y. $ $ TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, July 14, 1942. _______ 7-13-42 Press Service No. 32-51 The Secretary of the Treasury announced last evening that the tenders for $300,000,000, or thereabouts, of 91-day Treasury bills to be dated July 15 and to mature October 14, 1942, which were offered on July 10, were opened at the Federal Reserve Banks on July 13. The details of this issue are as follows: Total applied for - $650,704,000 Total accepted - 301,186,000 Range of accepted bids: (Excepting two tenders totaling $45,000) High - 99.920 Low - 99.906 Average Price - 99.908 Equivalent rate approximately 0.316 percent ” ” M 0.372 " rf " ,f 0.365 n (6 percent of the amount bid for at the low price was accepted) -oOo- TREASURY DEPARTMENT Washington EOR IMMEDIATE RELEASE, Wednesday, July 15, 1942. Press Service No. 32-52 Market transactions in Government securities for Treasury investment and other accounts in June, 1942, resulted in net sales of ('>250,000, Secretary Morgenthau announced today. -oOo- TBEASUHT DEPARTMEHT Wsshiagfc« « 8 IMMEDIATE RELEASE, prass Sarrie« Wadnaaday. tuly 15. 1942. 3> -?to, ^ Secretary of the Treasury Mergenthau today announced the final eubseription and allotment figure« with respect to the current offering of 2 percent treasury Bonds of 1949-51. Subscriptions and allotaent« «ere divided among the several Federal Reserve Districts and the Treasury as follows s Federal Reserve district Total Subscrip- Total Subscript tlowi R90«lT«d tlona Allqttftri Boston Hew York Philadelphia Cleveland Richmond Atlanta Chicago St, Louis Minneapolis Kansas City Dallas San Francisco Treasury Total I • 2X8,046,000 1 ,5 8 7 ,2 5 8 ,7 0 0 1 9 8 ,8 5 4 ,9 0 0 231 .7 5 1 .2 0 0 199 ,0 9 2 ,1 0 0 227 ,408,000 511 216.200 1 0 2 ,4 1 8 ,5 0 0 6 4 .4 0 3 ,3 0 0 9 7 ,3 5 7 ,2 0 0 115 ,066,800 2 8 7 ,2 7 7 ,6 0 0 9 .3 4 5 .0 0 0 » 3 ,8 4 9 ,4 9 5 ,5 0 0 . 117 ,6 9 9 ,3 0 0 834.234.500 1 0 8 ,4 5 4 .8 0 0 128 .0 1 5.4 0 0 109,087,300 135.643.400 280,593,000 62 ,378,200 3 9,320,700 58,817,500 6 5 ,5 8 7 ,8 0 0 152.566.500 , ____ ¿ .8 8 1 .0 0 0 1 2 ,0 9 7 ,2 7 9 ,4 0 0 TREASURY DEPARTMENT Washington Press Service No. 32-53 FOR IMMEDIATE RELEASE, Wednesday, July 15, 1942. Wife Secretary of the Treasury Morgenthau today announced the final subscription and allotment figures with respect to the ti»mit current offering of 2 percent Treasury Bonds of 1949-51. Subscriptions and allotments were divided among the Wlk several Federal Reserve Districts and the Treasury as fol lows i j« i m 18,1 10)1 ttfll m federal Reserve District Total Subscriptions Received Total Subscriptions Allotted Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury $ $ 218,046,000 1,587,258,700 198,854,900 231,751,200 199,092,100 227,408,000 511,216,200 102,418,500 64,403,300 97,357,200 115,066,800 287,277,600 . 9.3^5.000 $3,849,495,500 -oOo- 1 117,699,300 834,234,500 108,454,800 128,015,400 109,087,300 135,643,400 280,593,000 62,378,200 39,320,700 58,817,500 65,587,800 152,566,500 4.881.n00 $2,097,279,400 FOR RELEASE, MORNING NEWSPAPERS, Friday, July 17, 19^2. TREASURY DEPARTMENT Washington 7/16 /U2 ' : ' The'Secretary of the Treasury, by this public notice, invites'tenders for $350,000,000, or thereabouts, of 91-day Treasury bills, to'be issued on a discount basis'under competitive bidding. The bills of this series will be dated July 22, 19^2“, and will mature October 21, 19^2, when the face amount will be payable without interest. They will be issued in bearer form only, and in. denominations of $1 ,0 0 0 , $5 ,0 0 0 , $1 0 ,0 0 0 , $1 0 0 ,0 0 0 , $5 0 0 ,0 0 0 , and $1 ,0 0 0 ,0 0 0 (maturity value), ' Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o ’clock p. m., Eastern wan time, Monday, July 20, 19^2. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1 ,0 0 0 , and the price offered must be expressed oh the basis of 1 0 0 , with not more than three decimals, e. g., 9f,925, Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Braches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for* unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in pant, and his action m any such respect shall be final, Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on July 22, 19^-2, provided, however, any qualified depositary will be permitted to make payment by credit for Treasury bills allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits when so notified by the Federal Reserve Bank of its District. (Over) 32-5U ( ~ 2 - The income derived from ’Treasury hills, whether interest or gain from the sale or other disposition of the hills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury hills shall not have any special treatment, as such, under Federal tax Agts now or hereafter-enacted. The hills shall he subject- to es'ta,te, inheritance, gift, or other excise taxes, whether Federal or State, hut shall he exempt from all taxation now or hereafter imposed on. the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority.' For purposes of taxation the amount of discount at which Treasury hills are originally sold by the United States shall he considered to he interest. Under Sections k2 and 117 (a) (l) of the Internal Revenue Code, as amended by Section II5 of the Revenue Act of I9U1 , the amount of discount at which hills issued here under are sold shall not he considered to accrue until such hills shall be sold, redeemed or otherwise disposed of, end such hills are excluded from consideration as capital assets. Accordipgtly, the owner of Treasury hills (other than life insurance companies) issued hereunder need include in his income tax .return only the difference between the price paid for such hills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary gain or loss, < Treasury Department Circular No.. Ulg, as amended, and this notice, prescribe the terms of the Treasury hills and govern the conditions- of their issue. Copies of the circular may he obtained from any Federal Reserve Bank or Branch. -0O0- TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, July 21, 1942. 7/20/42 Press Service No. 32-55 The Secretary of the Treasury announced last evening that the tenders for $350,000,000, or thereabouts, of 91-day Treasury bills to be dated July 22 and to mature October 21, 1942, which were offered on July 17, were opened at the Federal Reserve Banks on July 20. The details of this issue are as follows: Total applied for - $679,266,000 Total accepted - 351,861,000 Range of accepted bids: High - 99.924 Equivalent rate approximately 0.301 percent Low - 99.906 n ff ” 0.372 u Average Price - 99.907 ,f ” " 0.368 m (40 percent of the amount bid for at the low price was accepted) TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS Tuesday, July 28, Press Service No. 32-56 19^2 Secretary of the Treasury Morgsnthau today made public pre liminary statistics from corporation income» declared value excessprofits, and defense tax returns for 1940» filed through December 31» 1941» prepared under the direction of the Commissioner of Internal Revenue Guy T* Helvering* The preliminary report, Statistics of In come for 1940, Part 2, will be released at an early date* NUMBER OF RETURNS, NET INCOME, DEFICIT, TAX, AND DIVIDENDS PAID The number of corporation income, declared value excess- profits, and defense tax returns for 1940 filed through December 31» 1941, is 511,741, of ■which 220,980 show net income of 111,203,244,134» while 247,020 show a deficit of #2,269,240,519, and 43,741 have no income data (inactive corporations)* The income tax is #2,143,913,713, the declared value excess-profits tax is #30,761,851, and the total tax #2,174,675,564* The total amount of dividends paid in cash and assets other than corporation's own stock is $6,088,346,325, of which #5,888,150,235 is reported on returns with net income and #200,196,090 on returns with no net income* The increase or decrease, 1940 over 1939, for the number of returns, net income, deficit, and tax follows« - 2 - Preliminary data for corporation returnst Increase or decrease, 1940 over 1939 for number of returns, net income, deficit, and tax (Money figures in thousands of dollars) Item 1940 Number of returns 511,741 Returns with net incomes Number of returns 220,980 Net income l/ 11,203,244 Total tax liability Income tax 2/ 2,143,914 Declared value excess-profits tax 3/ 30,762 Returns with n o net income: Number of returns 247,020 Deficit 1 / 2,269,241 Number of returns of inactive i corporations 43,741 1939 Increase or decrease (-) 1940 over 1939 Number or Percent amount 515,960 - 4,219 - 1 199,479 8,826,713 21,501 2,376,531 11 27 1,216,450 927,463 76 15,806 14,956 95 270,138 , 2,092,148 - 23,118 177,093 - 9 8 - - 6 46,343 2,602 1 / "Net income? or "Defioit," for 1940, is the amount reported for declared value excess-profits tax computation adjusted by excluding net operating loss deduction; for 1939, is the amount reported for declared value excess« profits tax computation and is the difference between "Total income" and "Total deductions•" l/ Includes income defense tax • \/ Includes declared value excess-profits defense tax • - 3 - RETURNS INCLUDED The data presented in this release are, in general, from re turns for the calendar year ending December 31, 1940* However, data from a considerable number of returns for a fiscal year end ing within the period July 1940 through June 1941 are tabulated with the calendar year returns* There are also Included part yeai returns with the greater part of the accounting period in 1940« Data are tabulated from returns, Form 1120, filed by domestic corporations and resident foreign corporations not exempt from tax under section 101, Internal Revenue Code as amended; also from Form 1120L filed by domestic life insurance companies and by for eign life insurance companies carrying on insurance business within the United States or holding reserve funds upon business transacted within the Uhited States* The data are tabulated from the returns as filed by the taxpayer, and prior to revisions that may be made as a result of audit by the Bureau of Internal Revenue* No data from amended returns or tentative returns are included in the tabu lations* CHANGES IN LAN AFFECTING CORPORATION RETURNS The Internal Revenue Code, as amended by the Revenue Act of 1939 and the two Revenue Acts of 1940, introduces certain changes which affect the computation of the taxable net income anl the - 4 - income tax of corporations haring taxable years beginning after December 31, 1939« (1) The most significant changes are: Increase in the rates of income tax (including income defense tax) for domestic corporations (other than mutual inrest«» ment companies)« The rates are as follows: Normal-tax net income of $25,000 or less 14.85 percent of the first $5,000 16«5 percent of the next 15,000 18.7 percent of the next 5,000 Normal-tax net Income orer $25,000 and not orer $31,964*30 38«3 percent of amount orer $25,000, plus $4,152.50 Normal-tax net income orer $31,964*30 and not orer $38,565.89 36.9 percent of amount orer $25,000, plus $4,250 Normal-tax net income orer $38,565.89 24 percent of the entire amount of normal-tax net Income Resident foreign corporations regardless of amount of normaltax net income, and mutual investment companies regardless of amount of adjusted net inoome less the basic surtax credit are taxed at the 24 percent rate. (2) "Net operating loss deduction," is available (except to mutual investment companies) for taxable years beginning after December 31, 1939, and for the first such year represents the ex cess of statutory deductions over statutory gross income of the preceding taxable year, subject to certain exceptions and limitations. - 5 - (3) Gains and losses from sales or exchanges of capital assets are classified as •short-term* or "long-term** A short term capital gain or loss results from the sale or exchange of a capital asset held for 18 months or less; a long-term capital gain or loss, from the sale or exchange of a capital asset held for more than 18 months* A net short-term capital gain and a net long-term capital gain or loss are included in computing net income for the current year; but a net short-term capital loss is not deductible in com puting net income for the current year* Such loss may be carried over and treated as a short-term capital loss in the succeeding taxable year, in an amount not in excess of the net income for the year in which the loss was sustained* For the previous taxable year a net capital gain was included in net income, and the deduction for capital loss in excess of gain was limited to $2,000* (4) Amortization of the cost of emergency facilities necessary for national defense may be deducted* In general, the cost of such facilities completed or acquired after June 10, 1940, may, at the election of the corporation, be written off over a five-year period instead of through the ordinary allowance for depreciation based on estimated useful life* DEFINITIONS ’’Net income" or "Deficit" for 1940, is the amount reported for declared value excess-profits tax computation (item 30, page 1, Form 1120) adjusted by excluding net operating loss deduction (item 26, page 1, Form 1120)* "Income tax" for 1940 includes the income defense tax, and does not take into allowance any credit claimed for income tax paid to a foreign country or United States possession. The "Declared value excess-profits tax" for 1940 is the amount re ported as tax liability and includes the declared value excess-profits defense tax. This amount is taken as a deduction in the computation of net income for income tax purposes, unless the return is rendered on a cash basis. If the cash basife of accounting is used, the deduction is the amount of declared value excess-profits tax actually paid within the taxable year covered by the return. "Total compiled receipts" as tabulated, consists of gross sales (less returns and allowances), gross receipts from operations (where inventories are not an income-determining factor), taxable interest, rents and royalties, net short-term capital gain, net long-term capital gain, net gain from sale or exchange of property other than capital assets, dividends, other receipts required to be included in gross in come, and tax-exempt interest received on Government obligations. "Total compiled receipts" excludes nontaxable income other than tax-exempt in terest received on certain Government obligations. - 7 - INDUSTRIAL CLASSIFICATION Corporations are classified industrially on the one business activity which accounts for the largest percentage of receipts. Therefore, the industrial groups contain corporations not engaged exclusively in the industries in which they are classified. Changes in the composition of certain major industrial groups for 1940 have been made. A chart showing the industrial groups in which changes occur between 1940 and 1939 is shown on the last page of this release. DATA AND CLASSIFICATIONS Tables 1 and 2 - All returns are classified by major industrial groups for returns with net income and with no net income. In Table 1, totals for the following items are shown for each classification to which the items are applicable: Number of returns, total compiled receipts, net income, deficit, income tax, declared value excess* profits tax, and dividends paid in cash and assets other than corpora tion’s own stock. shown: In Table 2, totals for the following items are Dividends received on stock of domestic corporations; and interest received on Government obligations, amount subject to declared value exoess-profits tax and amount wholly tax-exempt. Table 3 presents in historical sequence the number of returns, total compiled receipts, net income, deficit, tax, and dividends paid - 8 “ for the years 1931 - 1940, In comparing the data for these years, the various changes in law must be taken into consideration, especially the discontinuance, under the Revenue Act of 1934, of the privilege of filing consolidated returns except by railroad corporations; and the provision of the Revenue Act of 1936 requiring the dividends received from domestic corporations subject to tax, to be included in net income for excess profits tax computation. In analyzing the data consideration should be given the special provisions of the Internal Revenue Code affecting the computation of gross income, deductions, and net income of insurance companies. Of particular importance are the provisions permitting life insurance companies to include only interest, dividends, and rents in gross income and allowing deductions for earnings needed to maintain reserve funds required by law and reserve for dividends. For 1940, the deductions for these reserves are $29,804,967 for returns with net income and $933,215,101 for returns with no net income. Table 1. - Corporation return», 1940, filed through Deccaber 81, 1941, by major industrial groups, for returns with net income and with no net incomet Number of returns, total compiled receipts, net income, deficit, Income tax, declared value excess-profits tax, and dividends paid in cash and assets other than corporation's own stock (Money figures in thousands of dollars) Returns with net income 8/ Major industrial groups 1 2 5 4 5 6 7 8 9 10 11 12 IS 14 15 16 17 18 19 20 21 22 28 24 25 26 27 28 29 30 31 32 35 34 35 \/ Total number Number Total of returns 2/ of compiled returns receipts All industrial groups 511,741 Mining and quarrying 13,145 Metal mining 2,615 Anthracite mining 145 Bituminous coal, lignite, peat, etc. 1,955 Crude petroleum and natural gas production 5,569 Nonmetallic mining and quarrying 1,796 Mining and quarrying not allocable 1,065 Manufacturing 87,949 10,546 Food and kindred products Beverages 5,104 289 Tobacco manufactures Textile-mill products 4,877 8,461 Apparel and products made from fabrics Leather and products 2,155 Rubber products 595 Lumber and timber basic products 2,735 Furniture and finished lumber products 4,552 Paper and allied products 2,211 Printing and publishing industries 11,691 Chemicals and allied products 7,075 Petroleum and coal products 709 Stone, clay, and glass products 5,579 Iron, steel, and products 6,741 Nonferrous metals and their products 2,574 Electrical machinery and equipment 1,850 Machinery, except transportation equipment and electrical 6,001 Automobiles and equipment, except 846 electrical Transportation equipment, except automobiles 841 4,174 Other manufacturing 2,567 Manufacturing not allocable 25,458 Public utilities 15,475 Transportation 3,886 Conmunication Other public utilities 4,097 For footnotes, see pages 16-18. Net incoas 5/ Income tax 5/ t/ 220,980 125,181,114 11,203,244 2,143,914 3,956 2,416,569 63,692 314,948 922,946 580 55,269 175,575 59 4,962 122,793 790 676 658,961 50,015 5,965 Returns with no net Income 5/ Dividends Declared paid in value Number Total oash and compiled excess- assets of profits other than returns receipts tax 6/ corporation's own stock 50,762 456 115 4 89 5,888,150 267,964 140,111 2,755 16,500 247,020 6,257 999 77 1,070 75 151 4 21,565 597 142 29 988 241 209 280 565 88,550 20,269 198 2,576,799 245,654 66,699 89,296 77,485 19,756 22,566 27,021 56,529 5,022 859 250 57,717 4,855 1,282 155 2,081 4,160 969 240 1,017 Dividends paid in cash and Deficit 5/ assets other than corporation's own stock 22,844,460 2,269,241 844,955 108,580 94,271 19,881 108,679 5,492 295,425 15,552 200,196 14,589 1,048 me 2,296 1 2 8 4 292,545 47,849 6,565 6,285,539 1,108,045 284,816 25,052 759,760 545,547 249,911 51,859 161,965 61,169 5,458 867 521,022 55,817 19,559 5,215 57,028 15,454 10,285 1,958 16,979 11,029 214 1 22,809 2,064 544 862 1,458 595 234 155 1,658 6 7 8 9 10 11 5 1,992 818 51 47,169 5,515 1,641 124 2,690 4,198 1,159 559 1,608 475,856 229,215 6,620 60,680,295 9,495,808 1,545,825 1,594,545 3,486,115 1,953,655 1,059,205 1,115,391 928,822 2,898 1,469 5,612 8,484 554 1,941 4,552 1,596 1,059 1,175,782 1,811,922 1,940,992 4,640,910 5,045,667 1,577,710 7,125,564 1,928,199 2,580,418 75,272 190,145 178,515 688,168 267,700 215,460 616,552 219,064 525,740 15,657 42,549 86,995 145,076 44,751 47,295 157,171 48,749 74,159 426 500 226 754 119 952 4,798 651 1,245 27,697 64,758 88,542 535,405 175,246 102,557 191,278 68,567 147,142 2,064 704 5,717 5,287 515 1,527 2,028 919 715 220,608 255,091 466,567 226,050 658,605 155,528 452,676 82,462 110,218 12,282 8,858 50,085 16,858 19,827 12,165 21,145 4,724 7,226 891 528 1,097 594 10,588 277 486 59 79 18 19 8,885 4,458,849 651,485 143,896 5,299 217,668 1,965 184,147 15,758 468 27 498 4,678,608 576,796 127,709 745 249,282 305 117,906 9,154 57 28 426 2,050 883 11,478 7,516 1,784 2,378 1,545,560 1,028,994 568,008 10,441,885 5,195,349 1,508,654 3,737,881 256,451 122,433 28,407 1,592,066 585,503 286,242 722,521 57,402 26,740 6,011 547,575 124,082 65,055 158,258 1,856 740 266 1,195 865 100 251 71,181 45,547 10,002 1,055,670 520,025 200,957 532,690 552 2,009 1,071 10,565 7,177 1,870 1,516 49,090 158,054 59,604 5,260,749 2,986,514 54,725 219,510 7,670 9,415 6,785 278,681 252,899 7,075 18,709 55 402 78 21,857 11,670 805 9,562 29 80 81 82 14,649 71,140 52,612 6,885 646 157 5,681,955 1,215,118 444,517 95,794 58,188 151,995 145,279 53,667 229,746 49,109 59,092 11,520 48,074 9,110 72,712 14,785 75,772 15,805 12 18 14 IS 16 17 20 21 22 28 24 25 26 88 84 85 Table 1. - Corporation returns, 1940, filed through December 51, 1941, by major Industrial groups, for returns with net income and with no net income: Number of returns, total compiled receipts, net income, deficit, income tax, declared value excess-profits tax, and dividends paid in cash and assets other than corporation's oen stock - Continued (Money figures in thousands of dollars) Major industrial groups 1/ Continued 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 55 54 55 56 57 58 59 60 61 62 65 64 65 66 67 68 69 Trade Wholesale Commission merchants Other wholesalers Retail General merchandise Food stores, including market milk dealers Package liquor stores Drug stores Apparel and accessories Furniture and house furnishings Eating and drinking places Automotive dealers Filling stations Hardware B u i l d i n g materials, fuel and ice Other retail trade Retail trade not allocable Trade not allocable Service * Hotels and other lodging places Personal service Business service Automotive repair services and garages Miscellaneous repair services, hand trades Motion pictures Amusement, except motion pictures Other service, including schools Service not allocable Finance, insurance, real estate, and lessors of real property Finance Banks and trust companies Long-term credit agencies, mortgage companies, except banks Short-term credit agencies, except banks Fór footnotes, see pages 16-18, Returns with net income 5/ Total Declared number Income Net value Number Total of compiled income 5/ excesstax 5/ returns 2/ of profits returns receipts 4/ tax 6/ Returns with no net income 5/ Dividends Dividends paid in paid in cash and Number Total cash and Deficit 1/ assets compiled of assets other than returns receipts 4/ other than corporation's corporation's own stock own stock 141,619 58,016 4,724 35,292 86,661 6,529 71,766 22,296 2,406 19,890 40,619 3,574 40,021,748 19,088,463 516,858 18,571,605 17,964,204 5,596,055 1,270,130 496,601 39,026 457,575 639,643 520,841 262,825 100,122 7,046 95,076 134,854 73,328 4,915 2,557 185 2,172 1,451 282 504,758 170,054 17,562 152,692 275,096 153,539 66,680 14,899 2,179 12,720 44,256 2,854 7,079,817 2,766,201 117,290 2,648,911 5,547,020 288,093 184,960 59,579 5,158 54,221 105,215 11,026 7,581 2,955 619 2,315 3,226 524 56 57 58 59 40 41 6,992 1,705 5,471 11,459 5,708 9,755 10,881 2,721 2,851 8,911 8,522 5,176 16,942 44,851 4,964 9,476 8,087 2,492 733 1,960 5,174 2,992 2,678 6,266 1,079 1,566 5,091 4,358 2,876 8,851 16,091 1,718 3,765 5,247 5,545,027 56,289 459,543 1,670,535 728,091 438,876 5,092,268 255,006 157,531 976,127 680,595 450,665 2,969,082 2,617,707 505,263 429,789 631,415 68,802 957 17,067 56,448 28,513 16,619 45,201 9,246 4,357 54,069 25,444 12,079 135,887 205,565 17,762 22,053 45,872 15,218 135 3,049 11,201 5,540 3,045 8,158 1,901 726 5,851 4,652 2,071 27,849 56,558 3,155 5,871 9,382 75 8 68 155 85 59 225 22 37 184 171 85 1,106 408 42 74 72 57,838 46 7,593 18,709 7,205 7,452 13,054 4,897 1,082 12,097 6,219 5,566 61,588 89,989 5,916 7,725 25,215 4,296 952 5,576 6,070 2,656 6,841 4,354 1,566 1,459 5,663 5,992 2,197 7,545 24,777 5,075 5,582 4,222 587,281 40,259 168,214 572,457 164,997 546,864 781,546 81,286 50,984 291,427 255,759 137,892 766,596 1,210,987 354,890 225,510 161,565 12,245 875 3,941 14,305 7,210 12,925 10,912 2,101 2,100 10,054 10,842 4,681 22,566 94,525 51,566 9,667 16,617 241 7 27 579 128 70 553 14 23 527 640 516 1,420 1,589 224 290 205 42 45 44 45 46 47 48 49 50 51 52 55 54 55 56 57 58 5,888 1,275 88,666 3,994 696 17 1,248 2,496 77,840 5,750 40 59 1,432 4,636 5,421 6,722 225 591 2,353 1,528 1,550 68 44,471 810,375 157,155 146,947 3,627 2,246 78,985 19,467 12,755 252 416 12,525 4,025 2,445 45 18 74 50 52 10 902 57,356 6,955 4,642 75 814 2,072 5,259 3,551 108 16,558 194,392 84,678 113,876 1,880 730 10,397 11,821 9,562 213 4 529 204 86 6 60 61 62 65 64 152,962 40,754 17,348 58,990 22,401 11,422 6,559,200 3,812,812 1,622,276 2,050,914 1,630,221 319,297 188,879 120,398 21,724 1,184 564 510 1,535,779 1,283,141 216,462 82,084 14,793 4,425 3,344,674 1,158,957 577,096 457,410 315,165 80,264 119,044 75,881 20,556 65 5,243 1,1X)9 26,992 5,495 975 7 5,536 1,838 30,116 22,809 1,059 68 95 68,406 1,866 28,662 5,893 1,508 69 5,802 5,558 579,604 118,996 24,718 66 67 Table 1. - Corporation returns, 1940, filed through Deceaber SI, 1941, by major industrial groups, for returns with net income and with no net income: Number of returns, total compiled receipts, net income, deficit, income tax, declared value excess-profits tax, and dividends paid in cash and assets other than corporation's own stock - Continued (Money figures in thousands of dollars) Returns with no net income 5/ Dividends paid in oash and Deficit 5/ assets other then corporation's own stock Returns with net income 5/ Major industrial groups Continued TO 71 72 78 74 75 76 77 78 79 80 81 82 85 84 85 \f - Finance, insurance, real estate, and lessors of real property Continued Finance - Continued Investment trusts and investment companies 7/, Other investment companies, Including holding companies 8/ Security and commodity-exchange brokers and dealers Other finance companies Finance not allocable Insurance carriers, agents, etc. Insurance carriers Insurance agents, brokers, etc. Real estate, including lessors of buildings Lessors of real property, except buildings Construction Agriculture, forestry, and fishery Agriculture and services Forestry Fishery Nature of businrsss not allocable, except trade For footnotes, see pages 16-18. Total number Number Total of compiled returns 2/ of returns receipts Net income 5/ Income tax jj/ Dividends Declared paid in Number Total value cash and excess- assets compiled of profits other than returns receipts £/ corporation's tax §/ own stock 4,168 2,412 240,250 166,621 6,512 27 157,212 1,625 46,455 116,056 17,079 TO 2,517 1,441 1,562,857 975,624 58,775 46 800,955 799 95,689 171,522 26,714 71 2,105 2,242 5,529 8,452 2,055 6,599 887 619 955 4,007 780 5,227 99,565 55,758 27,569 1,669,416 1,504,997 184,418 16,900 22,054 7,255 165,659 154,555 29,064 2,764 4,157 975 22,958 17,485 5,475 59 28 15 190 5 186 11,209 19,060 6,525 100,280 85,175 17,107 1,101 1,185 1,960 4,047 1,096 2,951 57,544 15,425 12,242 1,725,274 1,685,787 59,487 12,148 25,218 25,720 595,850 595,082 2,768 6,845 588 1,754 28,429 28,296 155 72 75 74 75 76 77 95,604 29,825 890,225 142,018 24,148 577 75,214 58,895 1,002,478 285,855 12,454 78 8,152 16,685 8,741 7,825 560 556 2,757 6,716 5,215 2,965 118 152 186,749 1,905,651 484,176 450,072 10,519 25,785 95,056 101,702 49,269 45,887 1,456 1,947 21,575 18,858 9,190 8,542 276 572 55 954 282 200 17 66 77,144 29,850 24,421 25,090 952 599 4,549 8,888 4,985 4,597 887 201 41,826 615,450 156,695 145,804 6,721 6,171 21,841 55,554 51,642 22,574 7,912 1,156 2,281 1,051 1,422 580 852 10 79 80 81 82 85 84 22,551 1,601 76,105 8,897 1,425 45 4,941 5,289 47,815 57,765 10,474 85 Table 2. - Corporation returns, 1940, filed through December SI, 1941, by major industrial groups, for returns with net income and with no net incomet Dividends received on stock of domestic corporations and interest received on Government obligations (Money figures in thousands of dollars) Major industrial groups 3J 1 All industrial groups 2 Mining and quarrying Metal mining 5 4 Anthracite mining Bituminous coal, lignite, peat, etc. 5 6 Crude petroleum and natural gas production 7 Nonmetallic wining and quarrying 8 Mining and quarrying not allocable 9 Manufacturing Food and kindred products 10 11 Beverages 12 Tobacco manufactures 15 Textile-mill products 14 Apparel and products made from fabrics 15 Leather and products 16 Rubber products 17 Lumber and timber basic products 18 Furniture and finished lumber products Paper and allied products 19 Printing and publishing industries 20 21 Chemicals and allied products 22 Petroleum and coal products 25 Stone, clay, and glass products Iron, steel, and products 24 25 Nonferrous metals and their products 26 Electrical machinery and equipment 27 Machinery, except transportation equipment and electrical 28 Automobiles and equipment, except electrical 29 Transportation equipment, except automobiles 50 Other manufacturing 51 Manufacturing not allocable 52 Public utilities 33 Transportation 34 Communication 35 Other public utilities For footnotes, see pages 16-18. Dividends received on stock of domestic corporations 9/ Returns with net income 5/ interest received on Government obligations Subject to Wholly taxdeclared Total exempt 11/ value excessprofits tax IQ/ Returns with no net income 5/ Interest received on Government Dividends received on _____________ obligations Subject to stock of Wholly taxdeclared domestic exempt ll/ value excesscorporations 9/ Total profits tax 10/ 1,852,227 40,069 50,559 51 5,290 485,641 2,441 1,155 145 580 281,769 1,551 665 159 290 203,875 910 468 6 89 168,448 5,055 104 50 556 299,700 290 59 64 122 72,829 170 2 60 79 226,871 120 57 4 45 4,928 1,461 1 560,740 28,712 2,282 5,008 4,750 1,296 1,585 5,888 2,825 1,584 5,658 14,955 69,806 95,598 9,454 17,259 12,865 15,480 642 158 4 21,697 1,596 422 522 958 295 125 78 254 557 828 2,061 5,155 1,102 961 1,770 475 1,515 543 90 5 11,655 810 186 529 512 171 88 65 178 542 594 1,061 1,506 519 620 1,127 506 570 299 48 (12) 10,043 786 256 193 446 124 37 15 75 195 234 1,000 1,649 585 541 645 169 945 2,276 49 27 2 2 559 92 42 7 42 7 1 4 19 55 22 84 45 7 10 62 5 (12) 52 4 12,210 569 281 20 576 45 125 62 112 193 505 268 564 8,551 80 205 25 31 59 6 2 961 256 50 12 68 14 15 52 21 50 56 118 76 14 25 76 4 2 422 164 8 5 26 7 12 28 2 14 15 55 51 7 14 14 2 1 26 30,615 5,425 1,852 1,571 148 66 54 52 27 46,178 814 564 450 4 1 1 (12) 28 6,979 5,870 757 114,159 55,948 14,591 43,599 558 252 195 5,706 5,582 277 1,848 178 150 146 5,859 2,730 47 1,081 180 122 49 1,848 852 229 767 4 207 41 16,555 16,205 29 101 4 21 5 798 754 6 57 2 18 5 279 254 1 25 2 5 (12) 519 501 5 15 SI S2 55 - - 29 SO 54 55 Table 2. - Corporation returns, 1940, filed through December SI, 1941, by major industrial groups, for returns with net income and with no net income* Dividends received on stock of domestic corporations and interest received on Government obligations - Continued « Major industrial groups X/ Continued 56 57 38 59 40 41 42 45 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 Trade Wholesale Commission merchants Other wholesalers Retail General merchandise Food stores, including market milk dealers Package liquor stores Drug stores Apparel and accessories Furniture and bouse furnishings Eating and drinking places Automotive dealers Filling stations Hardware Building materials, fuel and ice Other retail trade Retail trade not allocable Trade not allocable Service Hotels and other lodging places Personal service Business service Automotive repair services and garages Miscellaneous repair services, hand trades Motion pictures Aanscstent, except motion pictures Other service, including schools Service not allocable Finance, Insurance, real estate, and lessors of real property Finance Banks and trust companies Long-term credit agencies, mortgage companies, except banks Short-term credit agencies, except banks FOr footnotes, see pages 16-18. Dividends received on stock of domestic corporations 9/ (Money figures in thousands of dollars) Returns with net income 3/ Interest received on Government obligations Subject to Wholly taxdeclared exempt ll/ value excessTotal profits tax 10/ Returns with no net income 3/ Interest received on Government Dividends received on _____________ __ obligations____________ Subject to stock of declared Wholly taxdomestic exempt n / value excesscorporations 9/ Total profits tax IQ/ 46,859 26,718 6,462 20,256 18,186 8,788 4,201 1,760 205 1,556 2,127 645 2,574 1,025 75 950 1,577 565 1,627 754 128 606 750 280 2,056 850 186 664 849 115 460 182 9 175 188 21 245 90 5 85 101 15 217 92 4 88 87 6 86 1,511 1 1,488 2,185 451 1,129 614 205 29 1,119 455 258 1,956 21,757 895 521 2,698 556 9 191 54 59 125 185 59 120 115 50 514 659 80 104 159 468 5 142 55 24 108 92 2 68 58 20 171 244 20 57 82 88 4 49 21 15 22 95 57 52 67 50 145 416 11 67 56 244 9 42 48 4 20 9 5 185 119 52 557 1,275 557 51 124 58 5 8 25 17 2 (16) 8 28 15 4 91 274 19 19 92 21 5 5 10 15 2 (16) 4 18 10 5 55 109 9 68 57 2 5 15 4 1 4 10 5 1 57 165 10 7 24 42 45 44 45 46 47 48 49 50 51 52 55 54 55 56 57 58 117 7 5 4 11 5 1 5 59 5 16,672 429 «18 5 5 177 84 108 8 2 54 10 56 • 1 145 74 52 8 (16) 110 555 87 1 7 6 128 • (16) 5 17 - 7 5 in 60 61 62 65 64 1,254,556 1,176,061 22,605 449,295 414,198 405,591 260,792 246,157 241,847 188,505 168,061 161,544 150,797 87,481 4,565 296,560 64,802 61,687 71,555 21,770 20,969 225,224 45,055 40,718 65 255 196 75 121 223 1,259 25« 986 68 9,159 186 70 116 457 1« 7 7 69 , n — 57 58 59 40 41 66 67 Table 2. - Corporation return«, 1940, filed through December si, 1941, by major industrial groups, for return« with net lnooa« and with no net Income: Dividends received on stock of domestic corporation« and Interest received on Government obligations - Continued (Money figures in thousands of dollars) 72 73 74 75 76 77 78 79 80 81 82 83 84 85 - Finance, insurance, real estate, and lessors of real property - Continued Finance - Continued Investment truste and Investment companies 7/ Other investment companies, including holding companies 0/ Security and commodity-exchange brokers and dealers Other finance companies Finance not allocable Insurance carriers, agents, etc. Insurance carriers Insurance agents, brokers, etc. Real estate, including lessors of buildings Lessors of real property, except building« Construction Agriculture, forestry, and fishery Agriculture and services Forestry Fishery Nature of business not allocable, except trade Por footnotes, see pages 16dB, Returns with no net income j/ Dividends Interest received on Government received on ______________ obligations______________ stock of Subject to domestic declared Tetad Wholly tax' corporations 9/ value sxcessexempt ll/ profite tax 10/ 187,188 2,595 1,189 1,404 30,246 596 152 244 945,849 3,350 1,482 1,869 49,741 599 157 242 5,820 4,753 2,434 66,184 62,558 3,626 2,757 68 1,677 32,708 52,632 76 1,051 51 392 13,574 15,533 41 1,685 38 1,285 19,534 19,299 85 1,029 588 855 55,854 55,800 55 S95 58 415 251,115 251,100 15 156 15 60 49,517 49,512 5 457 45 555 181,796 181,788 8 10,401 1,888 975 915 6,065 595 227 567 3 333333 70 71 \J Returns with net income 3/ Interest received on Government __________ obligations Subject to Wholly taxTotal declared value excessexempt n / profits tax IQ/ 1,690 7,148 5,491 5,549 15 127 500 608 787 777 8 2 307 270 722 713 7 1 193 557 65 64 1 (1«) 1,596 601 1,206 1,118 84 4 50 165 64 50 9 5 21 76 21 14 4 5 29 87 45 55 5 2 388383 Major industrial groups Continued Dividends received on stock of domestic corporations 9/ 1,687 248 125 124 954 ISO 57 74 Table 8* - Corporation returns, 1951-40, in aggregate and for returns with net inooae and with no net income: Number of returns, total eoqpiled receipts, net inecuw, deficit, incone tax, declared value excess-profits tax, and dividends paid in cash and assets other than corporation's own stock) also number of returns of inactive corporations (Money figures in thousands of dollars) * 1940 13/ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1958 1957 1956 1955 1954 1955 1952 1931 All corporation returns: Number of returns 469,617 477,858 478,857 469,804 446,842 468,000 471,032 451,884 459,704 477,115 142,445,579 Total coapiled receipts 148,025,574 152,878,224 120,455,946 101,489,954 84,254,006 81,657,988 108,056,952 152,722,602 114,649,717 8,954,004 Net Inooae less deficit jj 6,754,565 3,672,882 7,555,991 7,326,218 1,695,950 94,170 19/ 2,547,367 39/ 5,645,574 19/ 5,287,545 Inc o m tax 1/ 2,143,914 1,216,450 14/ 855,578 15/ 1,252,857 16/ 1,169,765 710,156 588,575 598,994 416,095 18/ 285,576 Declared value excessJj 6/ 30,762 15,806 5,988 20/ 6,976 profits tax 45,555 21,615 17/ 24,969 12/ 7,673 Dividends paid in cash and assets other than corpora 6,0*6,546 5,746,739 7,514,017 tion's own stock 5,015,433 7,579,555 5,940,620 18/ 4,859,579 5,127,4S9 5,885,601 6,151,085 Returns with net incoM 5/t 109,786 Number of returns 205,161 82,646 220,980 199,479 169,884 192,028 164,251 175,898 145,101 Total compiled receipts <J 125,181,114 105,658,538 80,267,477 105,011,695 77,658,952 65,118,556 109,202,759 46,906,664 51,855,451 52,267,015 Net income 5/ 11,205,244 8,826,713 9,654,857 4,275,197 2,985,972 6,525,979 9,478,241 5,164,725 2,155,115 5,683,568 §/ 2,143,914 710,156 Income tax 1,216,450 14/ 853,578 1y 1,252,837 16/ 1,169,765 588,575 18/ 285,576 598,994 416,095 Declared value excess15,806 profit» tax 6/ 30,762 5,988 21,615 17/ 24.969 45,555 17/ 7,675 20/ 6.976 Dividends paid in cash and assets other than corpora 5,562,275 2,520,586 tion's own stock 5,888,150 4,780,202 7,508,774 7,179,220 4,651,002 18/ 5,822,599 2,585,889 3,871,880 Returns with no net incoM 5/: 557,056 275,696 270,158 569,258 285,806 512,882 Number of returns 247,020 501,148 524,705 285,810 49,782,556 Total coapiled receipts 4/ 22,844,460 27,219,886 40,186,469 55,240,640 27,710,909 57,010,765 58,571,418 57,527,542 55,789,959 2,280,846 2,152,024 7,796,687 2,092,148 5,468,774 4,181,027 Deficit y 2,269,241 2,855,098 5,555,559 6,970,915 Dividends paid in cash and assets other than corpora 200,196 184,466 tion's can stock 205,245 255,251 200,112 1,289,618 1,056,781 2,279,205 741,570 1,565,215 Number of returns of 45,741 46,345 inactive corporations 49,469 51,259 51,922 56,518 59,094 57,258 56,752 56,700 ¥m t 1959 footnotes, see pages 16-18, 1 2 5 4 5 6 7 8 9 10 11 12 13 14 IS 16 17 16 - Footnotes for Tables l/ Corporations are classified indus trially on the one business activ ity which accounts for the largest percentage of receipts. Therefore, the industrial groups contain cor- ; porations not engaged exclusively in the industries in which they are classified. A chart showing the industrial groups in which changes occur between 1940 and 1939 is shown on the last page of this release. 2 / Includes number of returns of in active corporations. Z j "Net Income" or "Deficit" for 1G40 is the amount reported for de clared value excess-profits tax computation (item 30, page 1, Form 1120) adjusted to exclude net operating loss deduction (item 26, page 1, Form 1120); for 1936-39 is the amount reported for (declared value) excess-prof its tax computation and is the difference between "Total income" and "Total deductions"; for 193335 is the amount reported for in come tax computation; and for 1931-32 is the current year net income before deduction of prior year loss. Net income or deficit as here defined is the basis for classification of the returns by those with net and those with no net income for all years except 1936 when the classification was based on the net income for in come tax computation which is less than the net income for (declared value) excess-profits tax com putation by the amount of the ex cess profits tax. 1§ j\ J 2 , and 5 "Total compiled receipts" as tab ulated, consists of gross sales (less returns and allowances), gross receipts from operations (where inventories are not an income-determining factor), taxable interest, rents and royalties, net short-term capi tal gain, net long-term capital gain, net gain from sale or ex change of property other than capital assets, dividends, other receipts required to be included in gross income, and tax-exempt interest received on Government obligations. "Total compiled receipts" excludes nontaxable income other than tax-exempt interest received on certain Government obligations. Includes income defense tax. 6/ 1 Includes declared value excessprofits defense tax. / Consists of corporations which de rived 90 percent or more of re ceipts from investments and which at no time during the taxable year had investments in corpora tions in which they owned 50 per cent or more of the voting stock. 2 / Consists of (1) corporations which derived 90 percent or more of receipts from investments and which at some time during the taxable year had investments in corporations in which they owned 50 percent or more of the voting stock, and (2) corporations which derived less than 90 percent but more than 50 percent of receipts from investments. - 17 - Footnotes for Tables 1, 2, and 3 » Continued year beginning in 1937 and ending in 1938, the greater part of the accounting period falling in 1938), and $804,230,054 income tax reported on returns for the calendar year 1938 and on returns with a fiscal year ending in period January through June 1939 (and on returns for a part year beginning and ending in 1938 and for a part year beginning in 1938 and ending in IT*39, the greater part of the accounting period falling in 1938)* Dividends from domestic corpora tions subject to income taxation under chapter 1 of the Internal Revenue Code (column 2, schedule E, page 3, Form 1120), which is the amount used for the computa tion of the dividends received credit* Excludes dividends from corporations organized under the China Trade Act, 1922, and cor porations entitled to the bene fits of section 251 of the Internal Revenue Code, (corpora tions receiving a large portion of their gross income from sources within a possession of the United States)* 10/ a / Consists of interest on United States savings bonds and Treasury bonds owned in princi pal amount of over $5,000, re ported as item 8, page 1, Form 1120. Consists of interest on obliga tions of States, Territories, or political subdivisions thereof, or the District of Columbia, or United States possessions; obli gations of the United States issued on or before September 1, 1917, Treasury notes, Treasury bills, and Treasury certificates of indebtedness; United States savings bonds and Treasury bonds owned in principal amount of $5,000 or less; and obligations of instrumentalities of the United States* ;12/ Less than $500. W Preliminary figures* jl4/ Consists of $41,569,498 normal tax and $7,778,561 surtax on undis tributed profits reported on re turns for a fiscal year ending in period July through November 1938 (and on returns for a part I j 15/ Consists of $1,056,939,166 normal tax and $175,897,696 surtax on undistributed profits* 16/ Consists of $59,289,827 income tax reported on returns with fiscal year ending in period July through November 1936 (and on returns for a part year beginning in 1935 and ending in 1936, the greater part of the accounting period falling in 1936), and $965,503,111 normal tax and $144,972,284 sur tax on undistributed profits re ported on returns for the calendar year 1936 and returns with fiscal year ending in period January through June 1937, (and on returns for a part year beginning and ending in 1936, and for a part year beginning in 1936 and ending in 1937, the greater part of the accounting period falling in 1936.) 17/ Includes a small amount of excessprofits tax which appears on re turns with no net income for in come tax purposes because the credit for interest received on certain obligations of the United States and its instrumentalities, which is allowed against net income in the computation of the income tax, is not allowed against net income in the computation of the excess-profits tax. (See 18 Footnotes for Tables 1, 2, and 3 - Continued article 1, (d), Treasury Decision 4469, "Regulations relating to excess-profits tax imposed by section 702 of the Revenue Act of 1934.") 18/ Revised. 19341 See Statistics for 1935, Part 9, footnote 2. 1932t See Statistics for 1933, page of Income 2, Page of Income 37. 19/ Deficit in excess of net income. 20/ The excess-profits tax for 1933 became effective June 30, 1933, under section 216 of the National Industrial Recovery Aot. - 19 Industrial group« In whioh ohanges ooour between 1940 and 1989 The following chart shows the Industrial groups in which changes ooeur between the two years. Included are those for whioh the only change consists of rewording the title to express more clearly the oontents of the groups. Major industrial groups 1959 1940 Mining and quarrying Petroleum Manufacturing Food and kindred products (excludes "lee, natural and manufactured") Other manufacturing (includes "Ioe, natural and manufactured") Trade Wholesale Mining and quarrying Crude petroleum and natural gas production Manufaoturing Pood and kindred products (includes "Ioe, natural and manufactured" ) Other manufacturing (excludes "Ioe. natural and manufactured1*) Trade Wholesale - Commission merchants Other wholesalers Retail Retail Department, general merchandise, dry goods Limited-price variety stores Mail-order houses Food stores Apparel Dealers in automobiles, accessories, tires, batteries Lumber and ooal yards (exoludes "Fuel and ioe dealers") Other retail trade (inoludes "Fuel and ioe dealers") Servioe General merchandise Pood stores, including market milk dealers Apparel and accessories Automotive dealers Building materials, fuel and ioe (inoludes "Fuel and ioe dealers") Other retail trade (exoludes "Fuel and ioe dealers") Servioe Hotels and other lodging places Personal service Automotive repair services and garages Motion pictures Amusement, except motion pictures Miscellaneous repair servioes, hand trades Other servioe, including sohools Finance, insurance, real estate, and lessors of real property Finance Personal servioe Automobile repair servioes Amusement Other servioe, including sohools Finance, insurance, real estate, and lessors of real property Finance - not designated but available by summarising Mortgage and title companies Long-term oredit agencies, SK>rtgage companies, except banks Commercial oredit and finanoe companies Industrial and personal loan companies Investment trusts and investment companies Holding companies 4/ Other corporations holding securities 6/ Short-term oredit agencies, except banks Investment trusts and investment companies Other investment companies, including holding eampanies V Finance not allooabie 6/ Insurance carriers, agents, etc. Insurance oarriers Insurance agents, brokers, eto. Zf Insurance carriers, agents, etc. Finanoe, insurance, real estate, and lessors of real property, not allooabie Nature of business not allooabie, except trade 6/ Nature of business not allooabie, except trade Z/ s/ Zj[ 7/ Excludes corporations that are combinations of "Finance," "Insurance," "Real estate," and "Lessors of real property" which are tabulated in "Nature of business not allocable, except trade." 4/ Consists of corporations whioh at any time dur ing the taxable year owned 50 percent or more of the voting stock of another oorporation and whose income from such stock was 50 peroent or more of the amount of dividends received. For 1940, consists of companies whioh derived 90 peroent or more of receipts from investments and which at no time during the taxable year had investments' in companies in whioh they owned 50 percent or more of the voting stook; for 1959, oonsists of investment trusts and investment companies whioh (a) at no time during the taxable year owned 50 peroent or more of the voting stook of another corporation or (b) at any time during the taxable year owned 50 peroent or more of the voting stock of another oorporation but whose income from such stock was less than 50 peroent of the amount of dividends reoeived. &/ Consists of companies (other than investment trusts and investment companies) whioh (a) at no time during the taxable year owned 50 per oent or more of the voting stook of another oorporation or (b) at any time during the tax able-year owned 50 percent or more of the vot ing stook of another corporation but whose in come from suoh stock was less than 50 percent of the amount of dividends reoeived. 6/ "Finance not allocable" was included in "Finanoe, insurance, real estate, and lessors of real property, not allocable" for 1939. Tj Partly tabulated in "Finanoe not allooabie," and partly in "Nature of business not allocable, except trade" for 1940. Consists of (a) companies whioh derived 90 peroent or more of receipts from investments and which at some time during the taxable year had investments in companies in which they owned 50 percent or more of the voting stook, and (b) companies which derived less than 90 peroent but more than 50 per oent of reoelpts from investments. Jy For 1940, includes corporations that are combina tions of "Finance," "Insurance," "Real estate,” and "Lessors of real property" whioh for 1959 were tabulated in "Finance, insurance, real estate, and lessors of real property, not allooabie." Statement of Secretary Morgenthau before the Committee on Finance of the United States Senate July 23, 1942 You will recall that in his Budget Message of January 5th, President Roosevelt asked for additional taxes for the fiscal year 1943, exclusive of Social Security taxes, of $7 billion. On March 3rd, I appeared before the Committee on Ways and Means of the House and presented recommendations for a tax program to produce $7,600 million in additional annual revenue from taxes. On May 6th I wrote a letter to the Chairman of the Committee on Ways and Means recommending a re duction in personal income tax exemptions to produce approximately $1,100 million more revenue. These two recommendations together involved a tax program of $8,700 million of additional revenue. These amounts represented what I believed, and still believe, was the very least that the American people could afford to pro vide. It is only against the background of our war expend itures that we can tell whether the Revenue Bill before you will fulfill its purpose. We are now spending $150 million a day, or almost $5 billion a month. In the fiscal year that is beginning we expect to spend the almost inconceivable sum of $77 billion to win this war for human freedom. There can be no compromise with these war expend itures. We would not reduce them if we could. Our whole effort must be to translate our spending as fast and as effectively as possible in the actual production and use of our war materials. If our expenditures this year reach $77 billion, our receipts in revenue from the people must bear some reasonable relationship to that colossal figure. If the House Bill were to become law it would be necessary to borrow from the public 32-57 * 2 - during this fiscal year about $53 billion. To the extent that we enlist our current income in taxes to cut down this borrowing, we shall be protecting the future economic soundness of our country and our free institutions. To the extent that we fail, we shall be endangering the survival of all that we are fighting to preserve. It is interesting to remember that only two years ago, in the fiscal year 1941, we were devoting only about 7 percent of our national income to defense . expenditures. In the present fiscal year we shall be spending about half of our national income on the war. Thanks to the foresight of President Roosevelt and the splendid cooperation of Congress, we expect to devote to the war effort in our first complete fiscal year of war a proportion of our national income roughly comparable to the proportion being spent by Canada and approaching that being spent in Great Britain. We get a different picture, however, if we look at the percent of expenditures financed through, taxes in the three countries. In the fiscal year 1941 Canada financed about 70 percent of all its expenditures by taxation, and in the fiscal year 1943 it expects to raise about 55 percent from taxes. The United Kingdom, in the fiscal year 1941, financed 44 percent of all its expenditures by taxation, and in the fiscal year 1943 it expects to raise 53 percent from taxes. In the United States, however, including Federal, State, and local governments, only 37 percent of all fiscal 1943 Government expenditures would be financed by taxation on the basis of the Revenue Bill now before you. It is clear that we are substantially behind Great Britain and Canada in the proportion of our expenditures which we are raising from taxes. Quite frankly, I do not see why we should not do at least as well as Great Britain and Canada. - 3 Taxation and the Cost of Living Taxation does more than supply money to finance the war. It does more than apportion the war burden now, once and for all, instead of leaving it for further dis tribution through taxes after the war. Wartime taxation also plays an important part in preventing rapid and con tinued increases in the cost of living. The President has announced a seven-point program for holding down the cost of living. Ceilings have been placed on prices. This fact may have caused many people to be unduly opti mistic about the future of the cost of living. It cannot be too strongly emphasized that if the price ceilings are to be maintained and rapid and continuous price rises avoided, the pressure of the large and expanding volume of consumer purchasing power on the diminishing supply of goods must be reduced. To reach a much larger volume of consumer purchasing power, the Bill now before you includes such a broad reduction of personal exemptions that it will affect almost seven million individuals who have never paid direct taxes to the Federal Government before. If this section of the Bill is passed as it stands, some thirtyone million income tax returns will be filed in 1943 as against only 7,700,000 in 1940. For the first time in our histoiy the income tax is becoming a people’s tax. Taxes cannot, by themselves, win the battle against inflation. The battle must be fought with determined and coordinated effort on many fronts. Taxation can be fully effective in this battle only if it is accompanied by restraint and self-denial in other fields. Nevertheles taxation by itself can make the price situation more con trollable and less dangerous than it otherwise would be, and it is an essential anti-inflationary weapon that must be used to the utmost. Inflation has been well described as "the ruthless process whereby sacrifice is imposed in equitably upon a people who have lacked the unity, the courage and intelligence to impose that sacrifice equitably upon themselves." It is for us to show that we have the unity, the courage, and the intelligence to check infla tion now. Treasury Program a Minimum Program The Administration’s revenue program was presented last Spring as a minimum. On March 3rd, when I first came before the Ways and Means Committee,, our total con templated expenditures for the fiscal year 1943 were $63 billion. Since then they have risen by $14 billion, and the total war appropriations, authorizations and re quests for this and succeeding fiscal years have risen by $75 billion. It is true that the Bill before you would produce by far the greatest revenues in our history, and I would not wish for one moment to minimize the task performed by the Ways and Means Committee. Yet this Bill would provide only $6.3 billion additional revenue in place of the $8.7 billion we recommended in the Spring. It would fail by about $2.4 billion to reach that minimum of last Spring, which is even more emphatically the very least we can afford to provide today. In presenting its revenue program to the Committee on Ways and Means, the Treasury outlined methods of taxa tion which it considered most desirable and appropriate to raise the required amounts. I still believe that these proposals are sound and present the best sources for a revenue program of this size. They are based upon the principle of ability to pay, and they avoid such de vices as a general sales tax, which would fall with the greatest impact upon those least able to bear the burden.' The various provisions of the Administration program are well known and it is not necessary to repeat them here. .1 should like, however, to emphasize certain points which I hope will be most carefully considered by the Committee. - 5 1. Special Privileges The Revenue Bill as it stands violates the basic principle of equity which is so important to an all-out war finance program. It does this by leaving certain highly privileged groups free from tax on large portions of their income. The first of these especially favored groups are the recipients of tax-free interest from State and municipal securities. Exemption of interest on State and local securi ties is a serious breach in our system of taxing according to ability to pay. For example, in the case of one indi vidual, out of a total reported income of approximately $975,000, over $668,000 came from State and local securi ties. If the Bill as it passed the House should become law, this individual would pay only $243,000; if, on the other hand, your Committee would adopt my suggestion and remove this pre-Pearl Harbor exemption, he would pay $832,000. Let me put the illustration another way. If this exemption is retained he would have $732,000 left after taxes; if it is abolished, he would have $143,000 left. The glaring unfairness of this exemption may be seen in another way. Under the tax rates in the House Bill, a person with a surtax income of $100,000 from other sources who holds a 3 percent tax exempt security receives as much net return after taxes as from a taxable security yielding 20 percent. The existence of this special privi lege for all holders of tax-free securities costs the Government and the people of the United States, under the House rates of tax, about $200 million a year; and it will cost still more as our wartime taxes tempt more and more wealthy individuals to shift their investments into the hide-out of tax exempt securities. - 6 - How can we expect to obtain an all-out war effort from all our people if we go on permitting a group of in dividuals and corporations owning $14 billion of State and local securities to go tax free on the income from these securities? We are asking our young men to give their lives for their country, and at the same time we are allowing many wealthy persons, safe behind the lines, to escape their fair share of the war’s financial burden. At a time when we are straining our energies to the utmost to defeat a powerful and ruthless foe, common decency requires that we abolish these special tax shelters, and do it now. Another highly privileged group having large amounts of income exempt from income tax are the owners of oil wells and mines, I refer to those provisions of the law dealing with percentage depletion. Percentage depletion is a serious breach in our system of taxation according to ability to pay. I cannot believe that the taxpayers of America would knowingly sanction a provision of the law which allows owners of oil and gas^wells to deduct from-their income 27-1/2 percent of their gross receipts from such wells— not for one year, two years, or the period necessary to return investment, but for an unlimited period. For example, a leading oil company#owned a number of oil properties which had cost it $3 million. At the time the case was examined percentage depletion of $3.6 million had already been al lowed and the properties still had three-fourths of the oil left. Certainly we cannot justify this exemption on the ground that it encourages exploration and drilling for oil. There is grave doubt that it has a substantial effect on oil discovery.j It would have cost the Federal Govern ment about one-third as much to have paid all the cost of every wild-cat well that was drilled in 1941 as to have allowed percentage depletion and the associated intangible drilling expenses. The annual cost of these allowances under the proposed rates would be about $200 million. - 7 The privilege of filing separate income tax returns furnishes another example of special tax advantage to many married couples having larger than ordinary incomes* In families in which the income is earned partly by the husband and partly by the wife and in families in which income earning property can be divided between husband and wife, the tax on the family income is less than where the husband or wife receives the whole income. The family is the true economic unit, and it is unfair for the amount of tax on the family to vary depending upon who earns the income or upon who in the family has in come producing property. Ability to pay taxes must be judged in terms of family incomes and not the incomes of members of the family. The failure to require joint income tax returns constitutes a violation of the funda mental principle upon which our tax system has been based. The adoption of mandatory joint returns would also eliminate another discrimination prevailing under exist ing law. Married couples living in the eight so-called community property States receive tax advantages which are in no way commensurate with any special relationship that may exist between husbands and wives in those States. For example, take a family in which the husband^has a salary of $10,000 after deductions. If the family has its residence in, say, California, and filed community property returns, the family tax would be $1,788, while if the family lives in, say, Iowa, the tax would be $2,152, or over 20 percent more. The discrimination is even more pronounced with larger incomes. In this national emergency, how can we complacently permit the citizens of these community property States a more favorable tax status than those of the rest of the country? These examples of special privileges are intolerable at a time like this, when we are imposing heavy taxes on^ persons with small incomes and there is pressure for limiting wages and farm prices. The country is in greater danger today than ever before in its history. The war is now in its most critical phase, and only by pulling together as - 8 - a united people can we make the effort that will turn the tide toward victory* At such a time any special privilege for any group not only deprives the Treasury of revenue that is badly needed ior^the war effort, but it hinders the war effort by undermining the morale without which the war cannot be won. 2. Excess Profits Tax „ Another similar hindrance to the prosecution of this people's war is the existence of excessive profits in wartime. There is no easier way to stir the righteous anger of the American people than to let them hear constantly of excessive wartime profits that are not being recovered by adequate taxation. I have said repeatedly that we are determined to take the profit out of war, and the Treasury's recommendations have been framed with this determination m mind. i ®fffctive excess profits tax does much more than produce badly needed revenue in time of war. It also reassures the masses of our farmers and factory workers that industry is not being rewarded unduly for its part in the winning of the war. „? «eM eve ^kat any patriotic American needs the incentive of profits to produce for war at this time. Millions of our people are willing to pay new and genuinely burdensome taxes, to buy War Bonds without stint, and to do without many of the accustomed luxuries and even conveniences of daily life. Their only incentive is their firm resolve to win this war and build a better future. ^Experience has shown, however, that when excess profits taxes are too high they may result in extrava gance and waste in the conduct of business. It is vitally important that we stimulate business to produce - 9 for war purposes as economically and efficiently as possible, if for no other reason than to avoid a waste of war materials and labor and to hold down the cost of the war to the Government, Moreover, a post-war credit to industry will help toward the rebuilding of our economic life. For these reasons we have recommended a 90 percent excess profits tax coupled with a 10 percent credit for return to the corporation after the war. The credit should, of course, be restricted in such a manner that it would used for the direct employment of labor, the conversion of plant to peacetime business or for other uses promoting economic adjustment and growth. 3. Tax on Freight and Express One tax that would be imposed by the Bill before you directly threatens the stability of prices. This is the tax on freight and express which would add to the cost of producing and supplying practically every commodity and service. In great numbers of cases the added cost would make it impossible for businesses to continue to operate under the price ceilings which have been imposed and the breaches in the price ceilings which would thereby be caused would threaten the whole price structure. Conclusion I shall not attempt today to discuss the more tech nical aspects of the long and complex Bill before you, nor to enlarge further upon the subjects I have mentioned already. The Treasury staff stands ready, as always, to assist you in every way possible in carrying out your difficult and responsible task. I should like, however, to make just one more appeal. Every day consumed in your Committee’s work will lose us substantial amounts of revenue under the excise tax portions of the Bill. V - 10 - Every day that can be saved in enacting this Bill will enable it to produce just so much more in needed revenue. Every day saved will give our citizens additional time to adjust themselves to the impact of the most severe tax bill in all our history. I am discussing our tax problem with you today on broader grounds than that of revenue alone. It is my conviction that the people of this country want a courageous tax bill, and want it with the least possible delay. They are ready for greater sacrifices than some of us imagine. The overwhelming majority of them, I am convinced, want us in Washington to shew a determination that is worthy of their own. They will be critical of us only if we seem to palter or haggle, or if we pay too much attention to the demands of selfish groups, or if we seem half-hearted in asking self-denial of the people as a whole. Our acceptance of sacrifice on the home front is a yardstick of our determination to win the war. For this reason it is unthinkable to me that we should be straining every effort on the fighting fronts abroad and on the production line at home, and at the same time be anything less than all-out in the financing of the war effort. This war, above all others, can be won only by hard fighting, by the acceptance of risks and deprivations, and by the united effort of civilians and fighting men alike. In this kind of war a tax bill can be a decisive battle. It could be lost by narrow vision and faulty leadership. It can be won by boldness and courage. I am confident that this Committee will live up to its high responsibilities and keep faith with a united people. Individual Income Tax COMPARISON OF ADDITIONAL REVENUE FROM HOUSE REVENUE BILL OF 1942 AND FROM TREASURY PROPOSALS From Principal S ources (Amounts in Millions of Dollars) Estate and Gift Taxes REVENUE BILL TREASURY PROPOSAL 7/ 309.0 E x c is e s REVENUE BILL TREASURY PROPOSAL Special Privileges* REVENUE BILL TREASURY PROPOSAL 6 0 1 .5 TO TAL REVENUE BILL TREASURY PROPOSAL *Joint returns; interest on State and local obligations; and percentage depletion Office of the Secretary of the Treasury A. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Thursday, July 23, 194-2, Press Service No. 32-58 The Bureau of Customs announced today that provision •will be made at customs ports of entry to enable importers to file entries and withdrawals for consumption covering cotton having a staple length 1-1/8 inches or more but less than 1—11/16 inches subject to the quota provisions of the President's proclamation of June 29, 194-2, modifying the proclamations of December 19, 194.0, and September 5, 1939, at the same instant of time on July 29, 1942, at 12 noon EWT, 11 a.m. CWT, 10 a.m. MWT, and 9 a.m. PWT. The unentered portion of the quota of 45,646,520 pounds shall become a "global" quota on July 29, 1942, open to the entry and withdrawal from ware house for consumption of such cotton from any foreign country of origin. The unfilled balance of the quota as of July 18, 1942, was approximately 9,000,000 pounds. All outstanding authorizations for entries and withdrawals for consumption of cotton having a staple length 1-1/8 inches or more but less than 1-11/16 inches on which duties have not been paid and for which a permit of delivery has not been issued shall be cancelled as of the close of customs business July 28, 1942. No entries for consumption or warehouse withdrawals for con sumption shall be accepted for such cotton after July 25 without telegraphic authorization from the Bureau. The acceptance of entries and withdrawals for consumption covering such cotton will be authorized within the quota limitation in the order of the time of their presentation in proper form at the customhouse in the port w/here the merchandise has arrived. No quota status will attach by reason of prior presentation of an entry or wdthdrawal in this or any other quota period. If entries and withdrawals for consumption presented at the hour specified above on July 29, 1942, cover a total quantity of such cotton in excess of the unfilled balance of the current quota, the quantity which may be admitted to entry within the quota will be prorated on the basis of the quantity presented for entry. • 0 O 0 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEViSPAPERS Friday, July 24, 1942 7/23/42' The Secretary of the Treasury, by this public notice., invites tenders for §350,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under compet itive bidding. The bills of this series will be dated July 29, 1942, and will mature October 28, 1942, when the face amount will be payable without interest. They will be issued in bearer form only, and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o ’clock p.m., Eastern War time, Monday, July 27, 1942.. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of §1,000, and the price offered must be ex pressed on the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be made on. the. printed forms and forwarded in the spe cial envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour,, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders.will be advised of the acceptance or rejec tion thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on July 29, 1942. 32-59 over 2 The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treat ment, as such, under Federal tax Acts'now or hereafter enacted. The bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the prin cipal or interest thereof by any State, or any of the posses sions of the United States, or by any local taxing authority. For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be considered to be interest.■ Under Sections 42 and 117 (a) (1) of the Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which-bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from consideration as capital assets. Accord ingly,^ the owner of Treasury bills (other than life insurance companies) issued hereunder need include in his income tax return only the difference between the price paid for such bills., whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at matu rity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this prescribe the terms oi the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. -oOo- TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Sunday, July 26, 1942. 7-25-42 Press Service No. 3 2 -6 0 The Treasury Department announced today that space has been made available in the Shubert-Belasco Theater Building on Lafayette Square, which the Department is now using to house thousands of Government files, for an American Theater Wing Stage Door Canteen in Washington. Negotiations were conducted with the Treasury by Milton Shubert of the American Theater Wing War Service, Inc., who Is organizing the Washington branch. It is expected that the canteen will be open for free entertainment, food and smokes for service men in uniform soon after Labor Day. Treasury officials said they were pleased to aid in developing additional recreational facilities for members of the armed forces of the United Nations who are stationed or passing through Washington. ’’Moreover, ” they declared, fithe Treasury Department is delighted to be able to cooperate with the folks of the enter tainment world who have given so generously of their time and talent to stimulate the sale of War Savings Bonds and Stamps." At the same time the Theater Wing announced a buffet supper on the stage of the National Theater for Thursday evening, August 6, at which plans for operating the canteen in Washington will be laid before civic, professional, social and Governmental leaders of the National Capital. Helen Hayes, a native of ’Washington, will be hostess for the supper and will be assisted by a group of theatrical stars from Washington and New York. Miss Antoinette Perry, chairman of the Wing, and Brock Pemberton, co-chairman of its branches committee, will be present. The Washington Stage Door Canteen will be patterned on Its New York progenitor, where more than 3,500 service men are entertained nightly by the best theatrical talent in the coun try, supplied with cigarettes, coffee, tea, milk, sandwiches 2 cind are invited to dance by pretty girls all of whom are members of the theatrical profession or connected with the theater. No charge of any kind is made to service men in uniform apd no civilians will be admitted. The Shubert-Belasco Theater, formerly known as the Lafayette Square Opera House, is one of the historic playhouses of the city, located on the site of the home where Secretary of State Seward was assaulted and critically wounded on the night Lincoln was assassinated. The Treasury has made available for the Washington Stage Door Canteen a lobby, 28 by 18 feet, a recreation hall, 64 by 39 feet, and a mezzanine, 57 by 14 feet. The National Press Club already has pledged to participate in the venture, offering both talent and financial support. -oOo- TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, July 28, 1942. Press Service N0, 32~61 Commissioner of Internal Revenue Guy T. Helvering reminded American motorists today that the opportunity to purchase use tax stamps at local post offices will expire on Friday, July 31. Thereafter, the Commissioner said, owners will be required to purchase their stamps from the office of the Collector of Internal Revenue for their District. Commissioner Helvering issued his reminder for the benefit of a few delinquent motorists who, through negligence or other wise, have not purchased their $5 use tax stamps for the current fiscal year. Stamps are sold by the Collectors only upon presentation of cash,* money order or certified check. To avoid inconvenience and trouble, motorists who have not as yet complied with the law should call at their local post offices immediately and purchase their stamps, he said. Mr. Helvering called attention to the fact that under the. law which imposes this tax any person operating a motor vehicle prior to payment of the tax is subject to a penalty of $>25 and/or thirty days imprisonment, and to a penalty of $25 for operating the vehicle without the use tax stamp affixed thereto. Mr. Helvering stated emphatically that it is the intention of the Internal Revenue Service to pursue vigorously to a con clusion any violation of the law. He cited the action already taken by the Collector of Internal Revenue at St. Louis, Missouri, where cases involving 680 violators have been presented to the United States Attorney for prosecution. The violators in these cases were discovered in one hour by deputies operating from that office. ooOoo TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, July 28, 1942. _ _ _ _ Press Service 32-62 _ The Secretary of the Treasury announced last evening that the tenders for $350,000,000, or thereabouts, of 91-day Treasury bills to be dated July 29 and to mature October 28, 1942, which were offered on July 24, were opened at the Federal Reserve Banks on July 27. The details of this issue are as follows: Total applied for - $645,242,000 Total accepted - 350,308,000 Range of accepted bids: High Low Average Price - (Excepting one tender of $>500,000) 99.925 Equivalent rate approximately 0.297 percent 99.905 n ‘ » " 0.376 M 99.907 " " " 0.369 ” (19 percent of the amount bid for at the low price was accepted.) £ S p ecial agents of the In te llig e n ce U nit of the Bureau o f In tern al Revenue obtained indictment o f 113 in d ivid u als, including prominent business and p rofessional men as w ell as ra ck e te e rs, f o r evasion o f income and other taxes. The y ear also saw 113 prosecutions in th is category, of which 111 convictions were obtained, and fin es to ta llin g $135,000 were assessed in addition to prison senten ces. Nearly $ 3 8 ,0 0 0 ,0 0 0 in ad d ition al ta x e s and penalties were recommended in cases in v e stig a te d . Miscellaneous charges involved 49 other in d iv id u als. One in te re stin g case involved Dr. C u rtis H. Muncie, an osteopath of Great Neck, Long Islan d , who has maintained o f f ic e s in New York C ity fo r many y e a rs . Dr. Muncie claims a cure of deafness by recon stru ction of the eustachian tu bes. He had liv e d on a la v is h s c a le , but f a ile d to account f o r his t o t a l income in h is ta x re tu rn s. As the y e a r ended, Dr. Muncie pleaded g u ilty to ta x evasion, and was sentenced to a year and a day in the p en iten tiary . Sp ecial Agents of the In te llig e n ce Unit a lso were successfu l in bringing to ju s tic e Herbert Glassman o f Washington, D. C ., who was in te re ste d in sev eral corporations operating ta x ica b s, a casu alty insurance business, and automobile sale and finance company. Through diversion o f corporate funds, Glassman, with h is accountant, Joseph I . Zucker, was able to understate income f o r ta x e s over a long period. Both Glassman and th e accountant were convicted in May, 1942, and given su b stan tial prison sentences and f in e s . O & ‘© 15 - More than 2,000 investigations were made in cases involving sus pected violation of the "freezing” control; to determination of the true ownership of American business enterprises suspected of being under Axis control; of foreign trade transactions suspected of being for the benefit of persons or firms in foreign lands with Axis ties; and to the locating and policing of large deposits of currency and securities in the United States that might benefit Axis countries and nationals. One outstanding case was the discovery of $10,000,000 in assets belonging to the fugitive Henry Blackmer of Teapot Dome fame. In addition to bringing hidden alien-owned fortunes under Treasury control, the Foreign Funds Control provided information for the vesting of enemy alien properties by the Alien Property Custodian. Included in this category are such firms as I. C. Farbenindustn)^, the Schering Cor poration, Luscombe Airplane Corporation, Adlanco X-Ray Corporation and others. An outstanding contribution to national defense was made by the Foreign Funds investigators, along with officers from all other Treasury enforcement agencies in policing enemy nationals and businesses follow ing the Japanese attack on Pearl Harbor^ and the subsequent declaration of war upon the United States by Germany and Italy. The Foreign Funds Control took an active part in assisting in the mass migration of Japanese from Pacific coast military zones. 14 Inability of violators to obtain the necessary raw materials because of the war contributed to a decrease in illicit distilling operations during the 1942 fiscal year, Stewart Berkshire, deputy commissioner of Internal Revenue in charge of the Alcohol Tax Unit, reported. rted moonshiners in some southern states, unable to get sugar, ] to sorghum molasses as a source for their product, with the potency apparently not challenged, but palatability being a matter of debate. Some witnesses testified the potion made them ill before it made them convivial. The number of stills seized was 11,369, a decrease of about 4 per cent from the previous year. However, operations were on a much smaller scale per still, and mash seizures dropped more than 20 percent, and arrests more than 22 percent. In the fourteen southern states, the 'shiners were more persistent in the face of priorities and rationing, and still seizures actually increased slightly. More than 20,000 prosecutions were recommended to United States attorneys in alcohol tax cases during the 1942 fiscal year, involving 17,489 defendants, of which 15,279 were convicted. The field investigative staff of Foreign Funds Control completed its first year of operations, with its personnel, under direction of Erwin (r. May, increased to 100 investigators to meet the wartime activi ties of this phase of Treasury enforcement. /V4 O fficers of the Alcohol ta x u n it dug deep in to the wooded h ills of Shelby County, Alabama, f o r one o f th e ir most in te re stin g cases* In an in v estig atio n smacking o f s to rie d ,,revenoorsM and mountain clan s, they cleared up & widespread conspiracy in a se ctio n bounded by the Coosa R iver and Waxahatchee Creek. Here resided a number of fa m ilies by t l » names o f E tre s s , Garden, Hope and Jones, which, as f a r back as the era of nation al prohibition have been p e rsiste n t v io la to rs o f liq u o r laws. These people are mostly re la te d by blood or by m arriage, and liv e within a radius o f four square m iles. Their clannishness gave in v e stig a to rs a hard nut to crack . The case culminated with 36 con victions, and a c tu a l sentences to ta llin g 38 years and ad d ition al probationary sentences aggregating 85 y e a rs . In assembling evidence, the fe d e ra l o f f ic e r s destroyed d is tille rie s with a t o t a l cap acity o f 20,300 gallons a day. 13 - obtained against a number of persons, and the Treasury officers pains takingly followed out the leads, bringing others into the net. Nicolo Impastato of Kansas City is alleged by officers to have been the man behind the scenes in the operation of this and several previous rings in that area which have been riddled by the Bureau of Narcotics again and again over a period of years. The source of supply of the latest effort was charged by the investigators to have been one Paul Antinore of Tampa, Florida, who is believed to have smuggled the drugs into this country from Cuba and other Caribbean points. Indictments were obtained against Impastato and Antinore and a number of others. Total seizures of illicit narcotics by Customs and Narcotics officers in the fiscal year were 2,065 ounces, a sharp drop from the 5,863 ounces of the previous period. There also was a decline in seizures of bulk marihuana from 19,767 ounces in 1941 to 14,720 ounces in 194$. but an increase in the number of marihuana cigarettes from 18,405 to 33,660. The Bureau of Narcotics continued its marihuana eradication pro gram in cooperation with state and local authorities and land owners, with an estimated 9,742 acres of the growing plant being destroyed in the fiscal year, compared with more than 33,000 acres eradicated in the fiscal year 1941. There was a slight increase in marihuana arrests, and a slight decrease in narcotics arrests, with the total of 2,867 about the same as in 1941. 12 - "cafe color" heroin in Mexico, and smuggling it into the United States for delivery at New York City, with the aid of "border traffickers. A somewhat similar case developed in California, where Customs and Narcotics officers obtained indictments against ten persons, residents of New York and California, alleged to have smuggled narcotics from Mexico across the California line. The drugs were distributed even tually in New York, Detroit, and other points. Some of the principals were arrested in 1941, but subsequent investigation implicated others, and new indictments were returned. Defendants in the Los Angeles case are Samuel Walkoff, alias Sammy Walker, Max Gauchman, Thomas Cougler, Michael Walkoff, Milton Abramson, John Angel, Thomas McEvoy, Herbert Gordon, John Phelps, Anthony Busterno, and a man named Ruiz. One of the largest seizures made was that of 95 ounces of pure heroin, at San Francisco, coincident with the arrest of Alexander Stanger and Robert Ridgill, old offenders in the smuggling line. had been working as seamen on ships plying the Pacific. They Both drew prison terms, Stanger, 12 years, and Ridgill, two. Harry J. Anslinger, Commissioner of Narcotics, also reported the destruction of still another highly organized, far-reaching narcotics conspiracy, one Centering in the Middlewest. Large stores of narcotics were seized in Kansas City when officers solved an ingeniously devised secret wall panel. Indictments were 11 - these items were larger than in the previous year* Narcotics seizures dropped to 600, from 789 in 1941 fiscal period. There was a decided decrease in large-scale attempts to smuggle into seaports narcotic drugs, due to wartime shipping restrictions, and this, coupled with effective enforcement measures, drove prices in the underworld traffic to new highs, indicating an increasing scarcity of illicit supplies* However, there were indications that traffickers were turning to Mexico for supplies, and several large seizures were made at border points in recent months. There was a continued trickle of marihuana also, but these seizures were small in most cases. One of the most interesting narcotics cases, developed jointly by Customs and the Bureau of Narcotics, appeared to be an attempt of New York hoodlums to develop illicit sources in Mexico. Eight persons were prosecuted in Arizona, and later in New York, on a conspiracy count. The eight, Dominick Petrelli, Salvatore Santoro, Joseph Gagliano, Joseph Spitaleri, Philip Lombardo, Prank Livorsi, Charles Alberto, and John Schillaci were said by officers to be members of the so-called "107th Street Mob," an organization of New York racketeers recruited from the remnants of the old "Dutch" Schult/f and "Lucky" Luciano gangs. They and others in New York City, Texas, Arizona and Mexico have been the object of a two-year investigation. The Treasury officers travel thousands of miles into Mexico and Canada, and from coast to coast gathering evidence. This evidence indicated that the New York organization was purchasing opium and - 10 The coinsj made of silver and very deceptive, circulated mostly in the East, and Zerzow's capture resulted from intensive investiga tion involving tracing of thousands of coins and elimination of numerous suspect8. Major activities of the Bureau of Customs during the year shifted from the peacetime traffic in spices and silks, and other exotic prod ucts of foreign lands, into a grim "battle along the front of economic warfare, William R. Johnson, Commissioner of Customs, reported the Bureau’s outstanding “case work" was in the administration of export control laws designed to keep strategic commodities out of the hands of our enemies. The Bureau worked closely with the Office of Exports of the Board of Economic Warfare, and with the Treasury's Foreign Funds Control. Industrial diamonds, platinum, machine tools, and war-necessary metals are among the hundreds of items appearing in the Customs lists of attempted illegal exports, many of which appeared Axis promoted. The Customs men enforced censorship regulations on communications moving outside the mails, to prevent passage through the ports and borders of information valuable to the enemy. The strict control of merchant shipping necessitated by the war greatly increased the enforcement responsibilities of the Customs relating to movement of vessels in United States ports. Seizures of all kinds of smuggled commodities totalled 9,200 during the fiscal year. There were 3,100 seizures of smuggled liquor. Both - 9 - In imposing sentence, Judge Goddard said: "The crime involved here is not only one of counterfeiting, "but it is a despicable attempt at fraud upon our soldiers, sailors and people of small means who buy these stamps." With the Secret Service campaign of education making the passing of Mfunny money1' increasingly hazardous, the loss to victims of counter feit bills during 1942 fiscal year dropped to a new low of $47,882, compared with $91,000 the previous year* The low figure is 93 percent less than the 1933-36 average prior to the inauguration of the PRow Yeur Money11 campaign* " 'K a m v » * m iiI n . The Secret Serv- _ ice^f’ H nf an thfLagubysQt was shown^some 7,500,000 persons during the year, and its study material was incorporated in numerous school text books and other publications. The Secret Service made 3,886 arrests during the latest fiscal year, of which 118 were for making or passing counterfeit bills, 200 for mak ing or passing counterfeit coins, 1,171 for forging Government checks, and 397 for other offenses. The previous year saw 2,949 arrests* Nearly 98 percent of cases tried during the year resulted in convictions. The outstanding coin counterfeiting case during the period culmi nated in arrest at Buffalo, New York, on March 14 of William G. Zerzow, in whose homes agents seized a 200—ton.pressure hydraulic press and dies for making fake 50-cent pieces. Zerzow confessed to passing thousands of these coins during the past four years. - 8 l* U of high-graders "by Canadian authorities in 1939 caused the Toronto refineries to refuse to accept any more har or hutton gold, "but the convictions did not stop the trickle of the yellow metal from the mines into hootleg channels. It appeared that the flow had been diverted to the United States, and so it was that American officers were called into the case. The "break" came when agents of the United States Secret Service, the Bureau of Customs, and the Canadian Mounted arrested Charles S. Abrahams and Harry Julius at the Peace Bridge, in Buffalo, Hew York, seizing $10,000 in gold concealed on Julius, Canadian officers took into custody Sidney Faibish of Toronto, termed the "brains" of the conspiracy, and a number of lesser lights, including one woman. On the American side, Treasury agents rounded up as other principals, Kushner, Jack Rubin, and David Roth. The abortive venture in War Stamp counterfeiting resulted in arrest, in New York City, on May 12 of six men, comprising the engrav ers, printers, financial backers and distributors, and confiscation of $52,500 in fake stamps^and the plate from which they were printed. The seizure was made before a single stamp was placed in circulation. Abraham Perkes, Joseph Perkes, Harry Horowitz, Louis Samouski, and Morris Rubin were sentenced to 10 years in prison, and Abraham Glickstein to 8 years, when they appeared before Federal Judge Henry W. God dard on June 11. - 7 - richest nuggets and slipped them past the guards, concealed on their persons, through canny "fences" and refiners, through clever smugglers, and finally to the New York metals firm of Kushner and Pines. This firm, records of the case revealed, took care of the matter of conceal ment of origin, and sale of the pilfered metal to the United States Government• Bernard Kushner, president of the metals company was sentenced to four years in prison, and fined $3,000. There has always "been "high-grading" in the mining regions, as this thievery of ore, hit hy hit, is called. But even the veteran officers of the Canadian services were astounded at the magnitude of the operations revealed hy this investigation.-$3,000,000 worth in three years. It was found that in each gold mining camp of any size, several large operators were located; that each operator had a staff of "buyers" who obtained the ore from the individual miners and mill employees, maintaining a steady supply of the contraband; that the ore was pul verized and melted into bar or button form, and the re stilting bars, of considerable fineness.were sold to "distributors." The latter persons sold the gold to refineries and were paid for it after assays had been made. In the early stages of the conspiracy Toronto was the ultimate f ti disposal point for the high-graded gold. Prosecution of three groups - 6 - Chatard, or Chadwick, w ill have a Washington s ta te sentence of up to 15 years awaiting when he completes h is 1 2 -year sentence in the F o rt Worth case* His wife i s serving two years* S ecret Service agents helped smash s t i l l another in te rn a tio n a l cou n terfeitin g attempt during the y e a r. A r a id on an apartment house > in T iju a n a , Mexico, by Mexican and American o f f ic e r s yield ed a complete plan t and $ ^ ^ ¡0 0 fa ce value of co u n terfeit $10 and $20 Fed eral Reserve n o tes. Harry H. Edwards, a lia s Deane Reynolds, an old-tim er with two prison terms f o r making bogus money to h is c re d it and one f o r narcotics v io la tio n , was captured. A fte r h is case i s disposed of in the Mexican co u rts, an e f f o r t w ill be made to retu rn him to the United S ta te s fo r v io la tio n o f parole in the n a rc o tics case* In breaking up a gang o f in te rn a tio n a l 11h igh -grad ers,M o ffic e rs of Canada and the United S ta te s wrote a new and co lo rfu l chapter in the h isto ry o f gold mining. They smashed a modern, mechanized, organized version o f th e fev erish scramble f o r nuggets so often punctuated with f i s t i c u f f s and blazing gun f i r e in the roaring Gold Rush days of the l a s t century* Convictions in the United S ta te s court a t Buffalo of fiv e members of the conspiracy, and conviction in Toronto of fiv e others now make i t possible to rev eal d e ta ils of the th ree y ear in v e stig a tio n by o ffice rs of the two n ation s. This in v e stig a tio n had to th read a maze of intrigue., reaching from workmen in the mines o f Ontario and Quebec w] - 5 - Thelma Etta. It -was in this same case that Louis Buchalter, murder ring principal, •was a co-defendant. Chadwick, or Chatard, as he also was known, appealed his conviction, and upon i t s his w ife. |TKwil in A p ril, 1941, became a fu g itiv e , as did N arcotics o f f ic e r s launched a nationwide search . Shortly th e re a fte r, came the f i r s t of the drug company holdups in the s ta te of Washington that were later attributed to Chadwick. The Tacoma Drug Co., w holesalers, was robbed by three men who used a gun to fo rce an employee to open an e l e c t r i c a l l y p rotected s a fe , a fte r f i r s t tying up the president of the firm and two others with rope and tap e. The robbers took 4-5 ounces o f morphine and su b sta n tia l quantities o f other n a r c o tic s . E a rly th is year a S e a ttle pharmacy was robbed. a retu rn engagement a t the Tacoma Drug Co. Then the gang played A desperado accompanied by a woman entered the home o f V irg il L. B erry, an employee, and a t p isto l point forced him to give up the keys and safe combination, and then bound B erry, h is wife and ch ild in bed. The woman maintained guard while her companion attempted to complete the robbery. He was fru s tra te d when an alarm in the drug company plant went o f f . N arcotics o f f ic e r s cooperating with s ta te a u th o ritie s f in a lly identified one of the p rin cip als as the fu g itiv e Chadwick. A search throughout the northwest was launched, and he and h is wife were captured a t Tacoma in March 1942. possession. A quantity of n a rc o tics and two p is to ls were found in his - 4 - the “Know Xour Money41 educational campaign of the Service i s in te n sifie d A as a fu rth e r safeguard by making Americans scru tin iz e more ca re fu lly the money th a t passes through th e ir hands. De Shelley’s deceptive $20 note appeared in Tacoma, Washington, in December, 1941, and alert Treasury officers had the hunch that its appear ance might be, in some manner, linked with a gang active in hijacking legitimate drug dispensaries of narcotics. With the subsequent arrest of Philip Chadwick, the Fort Worth gunman, by Narcotics officers, clues were developed which put the Secret Service on the trail of de Shelley. The trail led to Mexico City. Mexican officers assisted the United States Treasury agents, and a trap was set for the wil^counterfeiter, who apparently thought he could operate with impunity,- from below the Rio Grande. v __ _ __ _ 1 smuggling h is wares in to the United S ta te s by » runners.” The S ecret Service was no stran g er to de S h elley, who had j S s i f c ^ s trad e in Europe as w ell as in Mexico and the United S ta te s . When he was a rre ste d by the cooperating Mexican o f f ic e r s he meekly led the agents to a hollow tr e e in Chapultepec Paifc wixere he uncovered his cache o f counter f e i t p la te s . He had a complete plant f o r manufacturing fake $50 and $100 notes and Mexican currency. He faces prosecution under Mexican law. Ph ilip Chadwick, whose a r r e s t contributed in d ire c tly to the foiling o f the de Shelley cou n terfeitin g scheme, was convicted in F o rt Worth, Texas, with a number of others in Ju ly, 1940, in connection with an extensive conspiracy to d istrib u te n a rc o tic drugs. Convicted with him was his wife, I - 3 - Alcohol Tax and Intelligence units of the Bureau of Internal Revenue intensified efforts to plug evasion of taxes as War expenditures increased the Nation's need for revenue. Major frauds in revenue in the eastern and northern metropolitan districts received attention of the Alcohol agents, with seizure of several high capacity stills. income tax evasion An outstanding " * ted by the Intelligence unit was the conviction of Enoch L.^JohriSon of Atlantic City, New Jersey, who had been County Treasurer of Atlantic County for five years and through his influence ha< >read illicit activities from which he had derived /V large annual incomes, unreported for tax purposes. Johnsons power enabled him to hamper investigators for a long period, but after a five-year probe during which many of his cohorts were convicted of various charges, Johnson was sentenced to ten years'imprisonment and fined $20,000. While the de Shelley counterfeiting case appeared no more subversive than other such violations of the country's currency laws, Chief Frank Wilson of the United States Secret Service pointed to the technique used as an example of what might be done by enemy agents attempting to destroy confi dence in the Nation's moneys by introducing bogus currency from without. Chief Wilson pointed out that the histoiy of warfare contains numerous instances of the use of counterfeit currency as a military weapon. The Secret Service is maintaining a constant vigil to thwart any attempt of America's enemies to resort to this weapon. At the same time, - 2 - a former associate of Louis “Lepke“ Buchalter of the infamous “Murder, Inc” gang. The de Shelley-Chadwick case is one of the more spectacular instances of the Trsasurytwar against crime tolng the 1942 fiscal year, and testifies +_ *»._ -i__________ _ to the close cooperation between ths" r Western Hemispher ' ~ a w y agencies betten 3er the Good Neighbor policy. War Savings Stamps and cooperated with the Bureau of Customs, the Foreign Funds Control, and the Canadian Royal Mounted Police in breaking up a goldsmuggling ring that was draining a million dollars a year in possible wartime assets from our allied nation to the north. Customs and the Foreign Funds Control cooperated in the investigation in New Yoric that led to indictment of Werner von Clemm, naturalized citizen of German origin, and associates, in what the officers allege was a plot sponsored by the German government to “cash“ in the United States millions of dollars worth of diamonds which fell into the hands of the invaders of Belgium and Holland. The Bureau of Narcotics, in cooperation with Customs, broke up an attempt of New York racketeers to organize narcotics traffic across the Mexican border to replace the sources of supply dried up by wartime shipping restrictions. Treasury Law Enforcement agencies have been mobilized into a manysided offensive against the enemies of the United Nations, and at the same time have occupied the front lines of defense at home, Elmer L. Irey, coordinator of the investigative groups, today told Secretary Morgenthau in a 1942 fiscal year review. Energies of the highly trained Treasury officers have been directed into such lines as bringing hidden, Axis-owned fortunes under Treasury control to prevent their use for subversive purposes; closing of the borders to^passage of suspected enemy agents and of strategic materials and information that might fall into Axis hands; and the combatting of counterfeiting, smuggling, narcotics, alcohol and income tax violations directly or indirectly menacing the war effort. Functions of censorship, supervision of enemy aliens^ and property and protection of port facilities, public officials, and important visitors, have been carried out by Treasury officers in cooperation with other Government agencies. The report revealed how one far-flung investigation broke up an ambitious international counterfeiting conspiracy, sent to prison a notori ous fugitive gunman, and solved a series of spectacular narcotics armed robberies in the Pacific northwest. The counterfeiter is Iuis Eduardo de Shelley, alumnus of Alcatraz prison, Yfco has spent 20 years of his life in United States penitentiaries, for making bogus money. The gunman is Felix Chatard, alias Philip Chadwick, TREASURY DEPARTMENT Washington FOR RELEASE, MORNING- NEWSPAPERS, Sunday, August 2, 19^2. Press Service No. 3 2 -6 3 Treasury Law Enforcement agencies have been mobilized into a many-sided offensive against the enemies of the United Nations, and at the same time have occupied the front lines of defense at home, Elmer L. Irey, coordinator of the investigative groups, today told Secretary Morgenthau in a 19^2 fiscal year review. Energies of the highly trained Treasury officers have been directed into such lines as bringing hidden, Axis-owned fortunes under Treasury control to prevent their use for subversive purposes; closing of the borders to outward passage of suspected enemy agents and of strategic materials and information that might fall into Axis hands; and the combatting of counterfeiting, smuggling, narcotics, alcohol and income tax violations directly or indirectly menacing the war effort. Functions of censorship, supervision of enemy aliens and property, and protection of port facilities, public officials, and important visitors, have been carried out by Treasury officers in cooperation with other Government agencies. The report revealed how one far-flung investigation broke up an ambitious international counterfeiting conspiracy, sent to prison a notorious fugitive gunman, and solved a series of spectacular narcotics armed robberies in the Pacific northwest. The counterfeiter is Luis Eduardo de Shelley, alumnus of Alcatraz prison, who has spent 20 years of his life in United States penitentiaries, for making bogus money. The gunman is Felix Chatard, alias Philip Chadwick, a former associate of Louis ’’Lepke” Buchalter of the infamous ’’Murder, Inc. ’1 gang. The de Shelley-Chadwick case is one of the more spectacular instances of the Treasury’s war against crime during the 19*+2 fiscal year, and testifies to the close cooperation between its various agencies as well as between United States and other Western Hemisphere enforcement officers under the Good Neighbor policy. Secret Service agents working with Post Office inspectors, smashed a gigantic conspiracy to counterfeit War Savings Stamps and cooperated with the Bureau of Customs, the Foreign Funds Control, and the Canadian Royal Mounted Police in breaking up a gold-smuggling ring that was draining a million dollars a year in possible wartime assets from our allied nation to the north. - 2 - Customs and the Foreign Funds Control cooperated in the investigation in New York that led to indictment of Werner von Clemm, naturalized citizen of German origin, and associates, in what the officers allege was a plot sponsored hy the German government to "cash” in the United States millions of dollars worth of diamonds which fell into the hands of the invaders of Belgium and Holland. The Bureau of Narcotics, in cooperation with Customs, "broke up an attempt of New York racketeers to organize narcotics traffic across the Mexican border to replace the sources of supply dried up by wartime shipping restrictions. Alcohol Tax and Intelligence units of the Bureau of Internal Revenue intensified efforts to plug evasion of taxes as War expenditures increased the Nation’s need for revenue. Major frauds in revenue in the eastern and northern metropolitan districts received attention of the Alcohol agents, with seizure of several high capacity stills. An outstanding income tax evasion case culminated by the Intelligence unit was the conviction of Enoch L. (’’Nucky”) Johnson of Atlantic City, New Jersey, who had been County Treasurer of Atlantic County for five years and through his influence had controlled for many years widespread illicit activities from which he had derived large annual incomes, imreported for tax purposes. Johnson’s power enabled him to hamper investigators for a long period, but after a five-year probe during which kk of his cohorts were convicted of various charges, Johnson was sentenced to ten years’ imprisonment and fined $20,000. While the de Shelley counterfeiting case appeared no more subversive than other such violations of the country’s currency laws, Chief Frank Wilson of the United States Secret Service pointed to the technique used as an example of what might be done by enemy agents attempting to destroy confidence in the Nation’s moneys by introducing bogus currency from without. Chief Wilson pointed out that the history of warfare contains numerous instances of the use of counterfeit currency as a military weapon. The Secret Service is maintaining a constant vigil to thwart any attempt of America’s enemies to resort to this weapon. At the same time, the ’’Know Your Money” educational campaign of the Service is being intensified as a j further safeguard by making Americans scrutinize more carefully the money that ‘ passes through their hands. De Shelley’s deceptive $20 note appeared in Tacoma, Washington, in 1 December, I9 U1 , and alert Treasury officers had the hunch that its appearance might be, in some manner, linked with a gang active in hijacking legitimate drug dispensaries of narcotics. With the subsequent arrest of Philip Chadwick, the Fort Worth gunman, by Narcotics officers, clues were developed which put < the Secret Service on the trail of de Shelley, The trail led to Mexico City. Mexican officers assisted the United States Treasury agents, and a trap was set for the wily counterfeiter, who apparently thought he could operate with impunity ~ 3~ from "below the Rio Grands, smuggling his wares into the United States "by f,runners.u > The Secret Service was no stranger to de Shelley,, who had plied his trade in Europe as well as in Mexico and the United States. When he was arrested "by the cooperating Mexican officers he meekly led the agents to a hollow tree in I Ohapultepee Park where he uncovered his cache of counterfeit plates. He had a complete plant for manufacturing fake $50 and $100 notes and Mexican currency. He faces prosecution under Mexican law. Philip Chadwick, whose arrest contributed indirectly to the foiling of the de Shelley counterfeiting scheme, was convicted in Port Worth, Texas, with l a number of others in July, 1 9 ^0 , in connection with an extensive conspiracy to distribute narcotic drugs. Convicted with him was his wife, Thelma Etta. It was in this same case that Louis Buchalter, murder ring principal, was a co-defendant. Chadwick, or Chatard, as he also was known., appealed his conviction, and upon its confirmation in April, 1 9 ^1 , became a fugitive, as did his wife. Narcotics officers launched a nationwide search. Shortly thereafter, came the first of the drug company holdups in the state of Washington that were later , attributed to Chadwick. The Tacoma Drug Co., force an employee to open r the president of the firm 1 ^5 ounces of morphine and wholesalers, was robbed by three men who used a gun to an electrically protected safe, after first tying up and two others with rope and tape. The robbers took substantial quantities of other narcotics. Early this year a Seattle pharmacy was robbed. Then the gang played a 1 return engagement at the Tacoma Drug Co. A desperado accompanied by a woman ; entered the home of Virgil L. Berry, an employee, and at pistol point forced I him to give up the keys and safe combination, and then bound Berry, his wife | and child in bed. The woman maintained guard while her companion attempted to complete the robbery. He was frustrated when an alarm in the drug company plant went off. Narcotics officers cooperating with state authorities finally identified I one of the principals as the fugitive Chadwick. A search throughout the northwest was launched, and he and his wife were captured at Tacoma in March 19 U2 . | A quantity of narcotics and two pistols were found in his possession. Chatard, or Chadwick, will have a Washington state sentence of up to 15 j years awaiting when he completes his 12-year sentence in the Fort Worth case, j His wife is serving two years. /' ' . § / Secret Service agents helped smash still another international counterB p i n g attempt during the year. A raid on an apartment house in Tia Juana, j cxico, by Mexican and American officers yielded a complete plant and $11,200 I face value of counterfeit $10 and $20 Federal Reserve notes. Harry H. Edwards, I u alias Deane Reynolds, an old-timer with two prison terms for making "bogus money^to his credit and one for narcotics violation, was captured. After his ! case is disposed of in the Mexican courts, an effort will "be made to return him to the United States for violation of parole in the narcotics case. In breaking up a gang of international °high-graders, 0 officers of Canada and the United States wrote a new and colorful chapter in the history of gold mining. They smashed a modern, mechanized, organized version of the feverish scramble for nuggets so often punctuated with fisticuffs and blazing gun fire in the roaring Gold Rush days of the last century. Convictions in the United States court at Buffalo of five members of the conspiracy, and conviction in Toronto of five others now make it possible to reveal details of the three year investigation by officers of the two nations. This investigation had to thread a maze of intrigue, reaching from workmen in the mines of Ontario and Quebec who ’’high-graded” the richest nuggets and slipped them past the guards* concealed on their persons, through canny "fences0 and refiners, through clever smugglers, and finally to the Hew York metals firm of Kushner and Pines. This firm, records of the case revealed, took care of the matter of concealment of origin, and sale of the pilfered metal to the United States Government. \ t Bernard Kushner, president of the metals company was sentenced to four years in prison, and fined $3 *0 0 0 . i There has always been 0high-grading0 in the mining regions, as this \ thievery of ore, bit by bit, is called. But even the veteran officers of the Canadian services were astounded at the magnitude of the operations revealed by this investigation - $3 ,0 0 0 ,0 0 0 worth in three years. It was found that in each gold mining camp of any size, several large operators were located; that each operator had a staff of °buyers° who ob tained the ore from the individual miners and mill employees, maintaining a steady supply of the contraband; that the ore was pulverized and melted into bar or button form, and the resulting bars, of considerable fineness, were sold to ’’distributors. 0 The latter persons sold the gold to refineries and were paid for it after I assays had been made. In the early stages of the conspiracy Toronto was the ultimate disposal j point for the ’’high-graded” gold. Prosecution of three groups of ”high-graders” by Canadian authorities in 1939 caused the Toronto refineries to refuse to accept any more bar or button gold, but the confictions did not stop the I brickie of the yellow metal from the mines into bootleg channels. It appeared v- that the flow had been diverted to the United States, and so it v/as that l American officers were called into the case. [ The ’’break” came when agents of the United States Secret Service, the | Bureau of Customs, and the Canadian Mounted arrested CharLes S. Abrahams - 5 and. Harry Julius at the Peace Bridge, in Buffalo, Hew York, seizing $10,000 in gold concealed on Julius, Canadian officers took into custody Sidney Faibish of Toronto, termed the "trains” of^the conspiracy, and a number of lesser lights, including one woman. On the American side, Treasury agents founded up as other principals, Kushner, Jack Rubin, and David Roth. The abortive venture in War Stamp Counterfeiting resulted in arrest, in New York City, on May 12 of six men, comprising the engravers, printers, financial hackers and distributors, and confiscation of $5 2 ,5 0 0 in fake stamps, and the plate from which they w^re printed. The seizure was made "before a single stamp was placed in circulation. Abraham Perkes, Josenh Perkes, Harry Horowitz, Louis Sanouski, and Morris Rubin were sentenced to 10 years in prison, and Abraham Glickstein to 8 years, when they appeared before Federal Judge Henry W. Goddard on June 1 1 . In imposing sentence, Judge Goddard said: "The crime involved here is not only one of counterfeiting, but it is a despicable attempt at fraud upon our soldiers, sailors and people of small | means who buy these stamps.” With the Secret Service campaign of education making the passing of "funny money” increasingly hazardous, the'loss to victims of counterfeit bills [ ¿wing 19 *4-2 fiscal year dropped to a new low of $*47,882, compared with $91,0(30 \ the previous year. The low figure is 93 percent less than the 1933~36 average prior to the inauguration of the Crime Prevention campaign. The Secret Service "Know Your Money” film was shown to some 7*500*000 persons during the year, and its study material was incorporated in numerous school textbooks and other publications. The Secret Service made 1,886 arrests during the latest fiscal year, of which 118 were for making or passing counterfeit bills, 200 for making or passing counterfeit coins, 1,171 for forging Government checks, and 397 for [ other offenses, The previous year saw 2,9*4-9 arrests. Hearly 98 percent of ; cases tried during the year resulted in convictions. I The outstanding coin counterfeiting case during the period culminated in | arrest at Buffalo, Hew York, on March 1*4 of William G. Zerzow, in whose home agents seized a 2 0 0 -ton pressure hydraulic press and dies for making fake 50' cent pieces. Zerzow confessed to passing thousands of these coins during the ; past four years. I II The coins, made of silver and very deceptive, circulated mostly in the ■East, and Zerzow1 s capture resulted from intensive investigation involving tracing of thousands of coins and elimination of numerous subjects. - 6 « Major activities of the Bureau of Customs during the year shifted from the peacetime traffic in spices and silks, and other exotic products of foreign lands, into a grim battle along the front of economic warfare, william R. Johnson, Commissioner of Customs, reported the Bureau*s outstanding case work was in the administration of export control laws designed to keep strategic commodities out of the hands of our enemies. ; £ureau worked closely with the Office of Exports of the Board of I Economic Warfare, and with the Treasury*s Poreign Bunds Control. Industrial diamonds, pülâiinum, machine tools, and war—necessary metals I are among the hundreds of items appearing in the Customs lists of attempted I illegal exports, many of which appeared Axis promoted. ^The Customs men enforced censorship regulations on communications moving S outside the mails, to prevent passage through the ports and borders of in| formation valuable to the enemy. The strict control of merchant shipping necessitated by the war greatly increased the enforcement responsibilities of the Customs relating to movement of vessels in United States ports. 1 | Seizures of all kinds of smuggled commodities totalled 9,200 during the : fiscal year. There were 3.100 seizures of smuggled liquor. Both these items I were larger than in the previous year. Narcotics seizures dropped to 600 , j from 789 in the 19^-1 fiscal period. There was a decided decrease in large-scale attempts to smuggle into seaports narcotic drugs, due to wartime shipping restrictions, and this, coupled with effective enforcement measures, drove prices in the underworld traffic to | new highs, indicating an increasing scarcity of illicit supplies. However, I there were indications that traffickers were turning to Mexico for supplies, I and several large seizures were made at border points in recent months. There I was a continued trickle of marihuana also, but these seizures were small in | most cases. One of the most interesting narcotics cases, developed jointly by Customs V and the Bureau of Narcotics, appeared to be an attempt of New York hoodlums to I develop illicit sources in Mexico. Eight persons were prosecuted in Arizona, l and later in New York, on a conspiracy count. The eight, Dominick Petrelli, j1 Salvatore Santoro, Joseph G-agliano, Joseph Spitaleri, Philip Lombardo, I i'rank Livorsi, Charles Alberto, and John Schillaci were said by officers to be 1 members of the so-called "107th Street Mob," an organization of New York racketeers I recruited from the remnants of the old "Dutch11 Schultz and "Lucky11 Luciano j Sangs. They and others in New York City, Texas, Arizona and Mexico have been j; the object of a two-year investigation. The Treasury officers traveled thousands of miles into Mexico and Canada, and from coast to coast gathering evidence. This evidence indicated that the - 7New York organization was purchasing opium and "cafe color" heroin in Mexico, and smuggling it into the United States for delivery at New York City, with ! the aid of "border traffickers. I A somewhat similar case developed in California, where Customs and Narcotics officers obtained indictments against ten persons, residents of New York and California, alleged to have smuggled narcotics from Mexico across the California I line. The drugs were distributed eventually in New York, Detroit, and other points. Some of the principals were arrested in 19^1» but subsequent investigation implicated others, and new indictments were returned. Defendants in the Los Angeles case are Samuel Walkoff, alias Sammy Walker, Max Gauchman, Thomas Cougler, Michael Walkoff, Milton Abramson, John Angel, Thomas McEvoy, Herbert Gordon, John Phelps, Anthony Busterno, and a man named Ruiz. One of the largest seizures made was that of 95 ounces of pure heroin, at San Francisco, coincident with the arrest of Alexander Stanger and Robert Ridgill, old offenders in the smuggling line. They had been working as seamen on ships plying the Pacific. Both drew prison terms, Stanger, 12 years, and Ridgill, two. I Harry J. Anslinger, Commissioner of Narcotics, also reported the S destruction of still another highly organized, far-reaching narcotics conspiracy, one centering in the Middlewest. Large stores of narcotics were seized in Kansas City when officers solved |\ an ingeniously devised secret wall panel. Indictments were obtained against a number of persons, and the Treasury officers painstakingly followed out the leads, bringing others into the net. Nicolo Impastato of Kansas City is alleged by officers to have been the , the man behind the scenes in the operation of this and several previous rings in that area which have been riddled by the Bureau of Narcotics again and again : over a period of years. The source of supply of the latest effort was charged by the investigators to have been one Paul Antinore of Tampa, Florida, who is believed to have smuggled the drugs into this country from Cuba and other Caribbean points. I Indictments were obtained against Impastato and Antinore and a number of others. Total seizures of illicit narcotics by Customs and Narcotics officers in the fiscal year were 2,065 ounces, a sharp drop from the 5»£>63 0-1111068 the previous I period. There also was a decline in seizures of bulk marihuana from 19»767 * ounces in 19^-1 to 1 ^ ,7 2 0 ounces in 19^3 » but an increase in the number of | marihuana cigarettes from 18,lK)5 to 3 3 *6 6 0 . | The Bureau of Narcotics continued its marihuana eradication program in cooperation with state and local authorities and land owners, with an estimated i 9*7^2 acres of the growing plant being destroyed in the fiscal year, compared with more than 33*000 acres eradicated in the fiscal year 19 ^1 . j - g There was a slight increase in marihuana arrests, and a slight decrease in j narcotics arrests, with the total of 2 ,8 6 7 about the same as in 1 9 ^KL. | Officers of the Alcohol Tax Unit dug deep into the wooded hills of Shelby County, Alabama, for one of their most interesting cases# In an investigation smacking of storied ’’revenoors” and mountain clans, l they cleared up a widespread conspiracy in a section bounded by the Coosa River I and Waxahatehee Creek. Here resided a number of families by the names of Stress, | Garden, Hope and Jones, which, as far back as the era of national prohibition have been persistent violators of liquor laws. These people are mostly related by blood or by marriage, and live within a ; radius of four square miles. Their clannishness gave investigators a hard nut | to crack. The case culminated with 36 convictions, and actual sentences totalling 1 33 years and additional probationary sentences aggregating 85 years. In assembling evidence, the federal officers destroyed distilleries with a total capacity of 20,300 gallons a day. f Inability of violators to obtain the necessary raw materials because of I the war contributed to a decrease in illicit distilling operations during the 19^2 fiscal year, Stewart Berkshire, deputy commissioner of Internal Revenue I in charge of the Alcohol Tax Unit, reported. ; / Agents reported moonshiners in some Southern states, unable to get sugar, turned to sorghum molasses as a source for their product, with the potency I apparently not challenged, but palatability being a matter of debate. Some I witnesses testified the potion made them ill before it made them convivial. The number of stills seized was 1 1 ,3 6 9 » a decrease of about H percent from j the previous year. However, operations were on a much smaller scale per still, I and mash seizures dropped more than 20 percent, and arrests more than 22 percent. In the fourteen Southern states, the ’shiners were more persistent in the I face of priorities and rationing, and still seizures actually increased slightly. More than 2 0 ,0 0 0 prosecutions were recommended to United States attorneys | in alcohol tax cases during the 19^-2 fiscal year, involving 1 7 ,^ 8 9 defendants, I of which 15»279 were convicted. The field investigative staff of Foreign Funds Control completed its I first year of operations, with its personnel, under direction of Erwin G-. May, f increased to 100 investigators to meet the wartime activities of this phase of j j treasury enforcement. TREASURY DEPARTMENT Washington FOR RELEASE, ’MORNING NEWSPAPERS, Friday, July 31, 1942. 7750/42 --- --------- ' ------- The Secretary of the Treasury, by this public notice, invites tenders for $350,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under compétitive bidding.- The . bills of this series will be dated August 5, 1942, and will mature November 4, 1942, when the face amount will be payable without interest. They will be issued in bearer form only, and in denomi nations of $1,000, $5,000, $10,000, $100,000, $500,000, and ' '| $1,000,000 (maturity value). Tenders will be received at Federal Reserve- Banks arid Branches up to the closing hour, two o ’clock p.m., E a s t e r n ‘War time,:Monday, August 3, 1942, Tenders will not be received at^the Treasury Department, Washington. Each tender must be for*an even multiple of $1,000, and the price offered must be expressed'on the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. X t is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. (Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized deal ers in investment securities. Tenders from others must be accom panied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an ex press guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on. August 5, 1942. The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other dis- . position of Treasury bills shall not have any special treatment, 32-64 (Over) 2 as such., under Federal tax .Acts now or hereafter enacted. The bills shall be subject to estate, inheritance,- gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the. principal or inter est thereof by any State, or any of the possessions of the United t . tes ,■ or by any local .taxing authority,.. For purposes of taxa tion the amount oi: discount at which Treasury bills are origif s old.b^ bbe United States shall be considered to be interest .„nder Sections 42 and 117 (a) (1 ) of the Internal Revenue Code as' amended -by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall riot be considered'to- accrue until such bills shall be so ld , redeemed or otherwise disposed of, and such bills are excluded from consideraaS 4.iSp,1 i?i a ?sets- Accordingly, the owner of Treasury bills 1 other^ than lixe insurance companies) issued hereunder need in clude in hill income tax return only the difference between the price paid for such bills, whether on original issue or on sub sequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable.year Tor which the return-is made, as ordinary gain or loss. Treasury Department C.ircular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch. -oOo- 1 TREASURY Ä A R Ï M M J Washington For Immediate Release, Saturday, August 1, 19*+2. Press Service .No, 32-65 In connection with the resignation of Edward H, Foley, Jr., General Counsel of the Treasury Department, announced today by the White House, Secretary Morgenthau made public the following exchange of letters between Mr. Foley and himself: July 23, I9U2 Dear Mr. Secretary: Enclosed is a letter from me to the President dated today which tenders my resigna tion as General Counsel for the Department of the Treasury in order that I may accept a com mission as Lieutenant Colonel in the Army of the United States, As you know, the decision was a very difficult one to make. The years that I have been honored by serving you as. General Counsel for the Department represent to me the most interesting and happiest of my life. However, I have felt that I could best serve my country for the duration of the war by accepting the commission that has been offered me. It has been a great privilege to work under you. The magnitude of the tasks, the variety of the work, and above all, your fore sight in anticipating and taking steps to meet the problems which would face the Department in the event of war, have been a stimulation to me which I shall always remember. My work in the Department was made infinitely easier and pleasant by the excellent cooperation and fine personal attitude of the various officers of the Department, X do not think I am overstating the situation when I say that they make up the most efficient and most able executive establishment in the Government. I request that you express my appreciation to them. Finally, I must ask you to thank the members of my own staff for their efforts on behalf of the General Counsel’s Office. I have never known a group of men who gave more unstintingly of their time and abilities than did they. I doubt that a more competent and conscientious organization of lawyers has ever been assembled anywhere. The warm personal relationship which I enjoyed with the men at the Treasury Department will, I know, continue. I hope there will be many opportunities during the days ahead for me to see much of them. Cordially, (Signed - S. H. Foley, Jr.) The Honorable, The Secretary of the Treasury, July 2kr 19U2 Dear Sd: I have your letter of July 23 and the letter from you to the President of the same date which you enclosed and in which you tendered your resignation as General Counsel for the Department of the Treasury. Your services in this Department have, been so well performed, and you have handled with ability and efficiency so many difficult and im portant matters, that X deeply regret that you have decided to tender your resignation* The manner in which you executed your duties as General Counsel has been of inestimable value in the prosecution of the war, and X could not ask for a better or more competent General Counsel than you have been. I have enjoyed our personal relations and your coopera tion has always made our official relations very pleasant. While I regret your leaving, I can appreciate that you are anxious in time of war to aid your country as a member of the armed forces. J know that when you accept your commission as lieutenant colonel, the Army will secure a gentleman and an excellent officer. I shall most certainly comply with your request to me to express your thanks and appreciation to the officers of the Department and to the members of your staff. I sincerely hope that someday after the war has been prosecuted to a successful conclu sion we shall again be able to work together. Very sincerely yours, (Signed - Henry Morgenthau, Jr.) Secretary of the Treasury. Edward H. Eoley, Jr., E s q . , General Counsel for the Department of the Treasury, Washington, D. C. any amount for which lt «hall be qu&llfied in exo«*« of axisting deposita, when to notified by the Federal Reserve Baak ©f ite district« f* mmAL vmusiom 1* Ae fiscal agents of the United States, Federal Beeenre Banks are authorised and reqmested to reeeive eubscriptions, to aake allotments mp to the aaounts indlcated by the Seeretary of the Treasury to the Federal Heserve Banks of the reepeotlve districts, to leeme «llotaent notice*, to receive payment for bonds allotted, to nake delivery of bende oxi full-paid nubecriptione allotted, and they may iseme interi® receipt« peading delivery of the definitive bonds« 2« The Seereiary of the Treasuiy nay at any time, or fräs time to tias, pr®seribe supplemental or «uaondatory rules and regulations governing the offsrlng, which will bo eooeaxnloated proeptly to the Federal Reserve Banks« HEBET JiÖhßBHTHAD, Ä , Seeretary of the Treasury« ** 4 m and sworn to, and by a certificat# of the appointaient of the personal représenta tives, under seul or the court, datad sot atora than 6 aonths prior to the submission of tha bonds, «hloh shall »bear that at tha data tharaof tha appointaient m s stili la foras and affect. Upen passant of tha bonds appropriate memorandm racaipt wiH ba formrdad to tha representativas, which «111 bs followed lu dus coursa by forma reealpt fro a tha Collecter of Internai Hevenue. 7. Except as provided in tha prccedlng paragruphs, tha bonds «111 bs eubjeet te tha general régulations of tha Treasury Department, no« or haraaftar prescribe**, governine United State# bonds. m. siscgimoi asd aujotmekt 1« Subscriptions «111 bs received st tha Federal Reserve Banks and Brandis* and at ths Treasury Department, Washington. Banking Institutions and security dealers generally may subnit subscriptions for aecount of cuatomers, but only the Federal Reserve Banks and ths Treasury Department ara authorised to act as affieial agenda®. Subscriptions must bs accompanisd by payaient in full for ths ameni of bonds applied for» 2. Ths Secretar? of tha Treasury reservas ths right to reject any aubacrlption, in «boia or in part, to aUot lees than ths saount of bonds applied for, and to eloss the bocks as to any or ail subscriptions at any tins «ithout notice} and any action ha oay taka in thasa raspante shsll bs final. Subject to thsss reasrva- tiens, ail subscriptions «111 bs aHotted in full. Alletment notices «111 bs sent eut promptly upon allotœent. I?. PAYMEKT 1. Payaient at par and accrusd interest from May 5, 1942, for bonds allottsd harsunder oust ba nada on Àugust 3, 1942, or on lator allotment. fran Kay 5* 1942 to August 3, 1942 inclusive Acerned interest is 16.16293 par il,006« Bach day*» accruad interest theraaftar is $6.0683 per $1,006. Any qualified depositar? «ili ba pemitted to nako payaient by crédit for bonds allottsd to its eustomsrs up te | becauae of ih# fallura of such loans io b# pald ai aaturlty «dii b# required io dia* pota ©f ih#« in ih# sa«# marmar a# thay disposa of oihar assai# noi eligibl# to be oenad by banks* 6. Any benda Isauad hereunder, or under ih# provisiona of Baparteent Clroular Ha# 685, daiad My 4, 1942, which upon ih# daaih of ih# ownar conatitute pari of hla astate, «ili ba radaamad ai ih# option of thè duly constitutad rapresenUtives of ih* daeMMd oimar'a M U U , et par and aocrued interest to date of pay*wit. .(*) thot thè bornio mra eetuelXy oonod hy thè doeedont ot thè tima of hi# daathj and (b) ihai iho Sacratali of thè Treasury be authorizad to apply iho entire proooeds of reda&aptlon to thè paymant of Federai estate taxos* Eaglatarad bendo subaittad for radaaption hor«under «usi be duly aasignad to *Tha Secretary of thè Treaaury for redeaption, thè proaoods to be pald to thè Collector isiU of Internai Hevenue ai ............ ìiftité * firn astata of for erodli on Foderai ostate tane# dna .....j>" Owing to thè perlodie eloeing of thè trans* for hook# and iho isposalbility of stoppina payment of interest io thè resistermi ewner during iho oloood parlod, mgistered bonds received after thè eloslng of thè ■ tantali iH&éì£ bo^cs, for p&yment derln* such cloaed parlod, «ili bo pald ©aly ai par alth a da* a/ duetlon ©f intarest from iho dato of p&ymnt io iho noni intareet paynent datai bonds received durine *hs elossd parlod for paynant at a data aftar thè books ra* tUlL apan, adii ba pald at par plus accrued Interest ih# date of payaent. from ih# raopenlng of thè books ts In elthar case ehecks for iho full slx «onths interest due on tho lasi day ©f tho oloood porlod sili bo foruardad te iho otmer In due court#. All bonds subnltted noti be aooonpanlod by Fora PD 1782, properly coa^leted, slgned Ibil V half-year's Interest io cosputed for esoh full half~yaar porlod Irrespooilro of thè aeiual nuaber of days In iho bali year. For a fractional pari of any half yoarf computation is on iho basi© of iho aeiual nunher o f days In such «slx year. y brniitóor books aro olosod fresi May 16 te <htna 1$, and from Koveaber 16 to Daeenbar 15 (boih data# Inclusiva) in each year. y Copie# of Fora PD 1782 «ay be obtalned froa any Federai iiesenre Bank or fros tha Treasury Department, Washington, D. C. te Sun - a at the epUon «f the United State* oa and after t e 15, lfé% in whol« 01* in part, at per and aeerued intereet, en any interest day or days, oa 4 ¿uonths1 netlee ©f redssiption fleen 1« «ueh *a&na#r as ti» Seereiary of ti» freasury «hall prescribe* Ja ©ase ©f pertial rede^ption ti» bond* to be redseesed wiil be deteiw aiaed by sueh aethoá as m y be p rescrib e* by th e S e e ra to y ©f the Treasury* fa # th# date oí redepjption desígnate* in any aueh notice, interest oa th# bond* e&U«| Jí.j* ¿, .;,■' , ‘ ‘ *['■:' for redesjptlort shell o##*#« 3* The incóese d erired from th# bond# s h a ll be su b jeet to a l l Federal U*e@# noer o r h e re a fte r ksposed* th# borato « h a ll be «ab jeet to e s tá te , in herltan ce, gift o r o th er exoiee t o e s , whether Fed eral o r S ta te , bwt #fc»U be eanrqpt iros* #U to * a tlo a no* o r h e re a fte r Inposed ©n the p rin cip a l o r la te r e s t th ereo f by any a to e , o r any o f th e posseeslons o f th e United S ta te » , o r by aay lo c a l t o i n g authority, 4* The botó# eill aot be aoeeptabte to »acure deposite of public s m y s m~ foro May 5, 1952, they edil not bear the circul&tion prlvUsf», and they wiH net be entitled to any prtvllege of conversión* 5. Bond# regietered as to principal and interest edil be issnsd in denoto* tlons of *100, §500, 11,000, $5,000* $10,000 snd #100,000* The borat* wiU not be issued in ©cupo« í&m prior lo Hay 5, 1952, teut *111 be availabls in coupon fera after that date, in the sao» denoainations as, and freeiy Intsrstisnfubls wtth, ths registered bonds of this issue* Under rules and regelaUoxs» preseribsd by the Seeretary of the Treaeuxy, provisión wlU be nade for the transfer oí the bonds, other than to oomerei&l banks aftich aeoept desead deposite, and for exeh&nges of denonln&tions* They eill not be eligióle for transfer to e«es»reial banks ehioh aeoept domad deposite before May 5, 1952* However, the bonds may bs plsdged as eollateral for loans, including loan# by eoesesreial banks «hich as» ospi cenan* deposite, but any «ueh bank aequirlng sueh bonda before May 5, 1951# MUTE» STATUS CF 2-1 /z psicsmt v a m m x m m or 1962-67 D*t*d and boarlng Intanai Trota fiay 5, 1942 SmBHABtS AT THE OPTICK a«o Anse 15, 1947 IffilTSD STATES AT PAR Al© ACCRUSt) IBTS8SST OF THE OB Affi AFTS8 A ffili 1 J , 1962 In U ra a t p ejab la Ama 1$ and Seooafcar 15 01 AODITICHaL 1SSUS l%2 Dep&*t»ent Circul&r le* muglia èft Office of thè tecret&iy, ^aehiiigton, àuguet 3, 194 Fiscal Service Bureau of thè Public tebt 2. ommrn ©r som 1 * thè Seerotary of thè Treaeesy, pureu&nt io thè authertty of thè Secete Liberty Bond Aat, aa amendod, Invita» aubsoripUon», at p»r and aoerued Intanai, trom tha pacalo of thè United State» far banda of thè United States, 2-1/2 pereent Treaauty Honda of 1962-67. Theao banda dealgnated «ili not be availubl» f0r sub. A eeription, far their orni Account, hy temetela tenie whlch eteept d*®mte deposita. The aifiotuìt of thè offerir^ ie not ^eciflcally Uniteci* 22* 1 * The benda w nmesamon or bcmds offerte O U be an additi©® te end * 1 1 1 fom a part of ti» serlee ot 3-1/2 pereent Treeeury tanta of 1962-é? l*«ute pureuant te Bepartaetifc &t» miler te* étf, tette May 4, 1942, «ili be freely interchan^eable thereelth, ate & n M$ i àkltt identica in s U reepeet* therewith. aswi, 2* The tende «111 he tette tey 5, 1942, end Oli bear internet from that date *«*te at thè rate of 3-1/2 pereent per m m m , payable csn a eesdanmial beai« «m dura 15 and w te -tecenber 15 In «ad» year until thè principili aaount beeomes payuble, thè flret pay* m n t * * **& m é * tetesiter 25, 1942 . They wiU nature «hine 15 , 1947, hut s»y ba re- oaIli» -8- not be available f o r s u b s c r ip t io n by oomoerolal banka accepting demand dapoaita, nor eligible for tranafar to auoh banks for a period of tan ranra from May 8. The bonds nay be pledged as collateral for loana, In cluding loana by eoseierclal banks which accent demand dapoaita, but m y auoh banka acquiring the bonds because of the failure of such loana to ha paid at maturity will be required to dispose of than in the sane ««mar as they dispose of other assets not eligible to be owned by bmks. as the offering is not specifically Halted In count, it will remain open for a period longer than customary. Pursuant to the provisions of the Public Debt Aot of 1941, interest upon the bond« now offer«! .hell not have any « o p t i o n , as such, under Federal Tax Acta now o r hereafter enaotad. The full provisions relating to taxability are .at forth la th. official circular released today. Subscriptions will be reeelred at the Federal Reserve Banks end Branches, end at the Treasury Department. Washington. Banking Institution, and security daelera generally say «ubn.lt subscription« for account of eustoMrs, but only the federal Reserve Banka and tha Treasury Department •re author lead to act as official agenda«. S u b s c r ip tio n s mist ba accompanied by .payment in full. The right la reserved to c lo s e the books ss to any or a l l aubeerlotlona at any tine without notice, su b scrip t lone will ba allotted la f e ll as received, and payment .t per and accrued interest from »ay S, 1 9 « m e t ba nsde on August 3 , 1 9 « , or on later allotment. Accrued Interest to August 3, 1948, is $8.16893 psr $1,000, and each day’s accrued interest thereafter 1L * 0:0?83 p , t W.OOO* Delivery of bonds allotted hereunder will not be effected earlier than September 1» The text of the official circular follows: >7 '> ✓ TRKAKJHT BSPARTSFH? Washington k ® r h i a s k ,u'mmnQ nrnspAvrm, Monday. August 3. 1948._____ 7/31/42 ------- Pr«*« s « m « « no. deeretaryof the Treasury Morganthau today announced the offering throufh tha Federal Reserve Banks, of an additional anount of 2-1/2 p „ . oant iraaaury Honda of 1 9 6 8 -6 ? , for which oaah aubsorlptions are l a m e d at par and aoorued lntaraat, tha anount to be leaued not bain« epeelfleally Halted. At the aaae tine tha Searatary announced that additional rights not heretofore aeeorded m a i d he attaehad to the bonds, through p r o m t on for their optional redemption, at par and aoorued Interest, upon the death of the owner, for the purpoaa of satisfying Federal eetate taxes, full particulars in w o h respeet appearing la the official otreular. The bonds non offered will be an addition to and will fora a part of tha seriaa of 8-1/2 percent Treaaury Honda of 1962-67 laeued pursuant to Department Circular Ho. 68S, dated Hay 4, 1942, They ere Identical in all respeota with euoh bonds, «1th which they «ill be freely inter changeable. The bonds are dated May 5. 1942, and bear Interest from that data at tha rata of 8-1/2 eroent par annua payable semiannually, with the first payment due December 16, 1942. Tha bonds will nature Jhn# 15, 1967, but nay be redeemed, at tba option of the Daltad States, on and after June 15, 1962. Bonds registered both as to principal and Interest will be Issued In deaoalnatlona of *100, *600, *1,000, 18,000, 610,000 and *100,000; they will not be laeued In coupon fora prior to Hay 8, 1952, but coupon bonds In these denominations will be available and freely inter changeable wltb the registered bonds after that date. These bonds will TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, M o n d a ^ ^ A u g u s t 3, 1942. 7/31/42 ------- Press Service No. 32-6B Secretary of the Treasury Morgenthau today announced the offering, through the Federal Reserve Banks, of an additional amount of 2-1/2 percent Treasury Bonds of 1962-67, for which cash subscriptions are invited at par and accrued interest, the amount to be issued not being specifically limited. At the same time the Secretary announced that additional rights not heretofore accorded would be attached to the bonds, through provision for their optional redemption, at par and accrued interest, upon the death of the owner, for the purpose of satisfying Federal estate taxes, full particulars in such respect appearing in the official circular. The bonds now offered will be an addition to and will form a part of the series of 2-1/3 percent Treasury Bonds of 1962-67 issued pursuant to Department Circular No. 685, dated May 4, 1942. They are identical in all respects with such bonds, with which they will be freely interchangeable. The bonds are dated May 5, 1942, and bear interest from that date at the rate of 2-l/2 percent per annum payable semiannually, with the first payment due December 15, 194,2. The bonds will mature June 15, 1967, but may be redeemed, at the option of the United States, on and after June 15, 1962. Bonds regis tered both as to principal and interest will be issued in denominations of $100, $500, $1,000, $5,000, $10,000 and $100,000; they will not be issued in coupon form prior to May 5, 1952, but coupon bonds In these denominations will be available and freely interchangeable with the registered bonds after that date. These bonds will not be available for sub scription by commercial banks accepting demand deposits, nor eligible for transfer to such banks for a period of ten years from May 5. The bonds may be pledged as collateral for loans, including loans by commercial banks which accept demand de posits, but any such banks acquiring the bonds because of the 2 failure of such loans to be paid at maturity will be required to dispose of them in the same manner as they disposé of other assets not eligible to be owned by banks. As the offering is not specifically limited in amount, it will remain open for a period longer than customary. Pursuant to the provisions of the Public Debt Act of 1941, interest upon the bonds now offered shall not have any exemp tion, as such, under Federal Tax Acts now or hereafter enacted. The full provisions relating to taxability are set forth in the official circular released today. Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington, Bank ing institutions and security dealers generally may summit sub scriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as offi cial agencies. Subscriptions must be accompanied by payment in full. The right is reserved to close the books as to any or all subscriptions at any time without notice. Subscriptions will be allotted in full as received, and payment at par and accrued interest from May 5, 1942 must be made on August 3, 1942, or on later allotment. Accrued interest to August 3, 1942, is $6.16293 per $1,000, and each day’ s accrued interest thereafter is $0.0683 per $1,000. Delivery of bonds allotted hereunder will not be effected earlier than September 1. The text of the official circular follows: UNITED STATES OF AMEBICA 2-1/2 PERCENT TREASURY BONDS OF 1 9 6 2 -6 7 Dated and "bearing interest from May 5 , 19U2 Due June 15, 1967 REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND AFTER JUNE 1 5 , 1962 Interest payable June 15 and December 15 ADDITIONAL ISSUE 19^2 Department Circular No. 692 TREASURY DEPARTMENT, Office of the Secretary, Washington, August 3» 19^-2. Fiscal Service Bureau of the Public Debt I. OFFERING- OF BONDS 1 . The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, invites subscriptions, at par and accrued inter est from the people of the United States for bonds of the United States, designated 2-1/2 percent Treasury Bonds of 1962- 6 7 . These bonds will not be available for subscription, for their own account, by commercial banks which accept demand deposits. The amount of the offering is not specifically limited. II. DESCRIPTION OF BONDS 1. The bonds now offered will be an addition to and will form a part of the series of 2-1/2 percent Treasury Bonds of 1 9 6 2 -6 7 issued pursuant to Department Circular No. 685» dated May U, 19^2, will be freely interchangeable therewith, and are identical in all respects therewith. 2. The bonds will be dated May 5* 19^2, and will bear interest from that date at the rate of 2-1/2 percent per annum, payable on a semiannual basis on June 15 and December 15 in each year until the principal amount becomes pay able, the first payment being made December 15, I9 U2 . They will mature June 15, 1967* but may be redeemed at the option of the United States on and after June 1 5 , 1 9 6 2 , in whole or in part, at par and accrued interest, on any inter est day or days, on H months1 notice of redemption given in such manner as the Secretary of the Treasury shall prescribe. In cage of partial redemption the bonds to be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease, 3. The income derived from the bonds shall be subject to all Federal taxes, now or hereafter imposed. The bonds shall be subject to estate, inheri tance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest there of by any State, or any of the possessions of the United States, or by any local taxing authority. - 2 - H* The bonds will not he acceptable to secure deposits of public moneys be fore May 5» 1952, they will not bear the circulation privilege, and they will not be entitled to any privilege of conversion. 5. Bonds registered as to principal and interest will be issued in denomi nations of $100, $500, $1,000, $5,000, $10,000 and $100,000. The bonds will not be issued in coupon form prior to May 5» 1952, but will be available in coupon form after that date, in the same denominations as, and freely interchangeable with, the registered bonds of this issue. Under rules and regulations prescribed by the Secretary of the Treasury, provision will be made for the transfer of the bonds, other than to commercial banks which accept demand deposits, and for ex changes of denominations. They will not be eligible for.transfer to commercial banks which accept demand deposits before May 5, 1952. However, the bonds may be pledged as collateral for loans, including loans by commercial banks which accept demand deposits, but any such bank acquiring such bonds before May 5, 1952, because of the failure of such loans to be paid at maturity will be re quired to dispose of them in the same manner as they dispose of other assets not eligible to be owned by banks. 6. Any bonds issued hereunder, or cular No. 6S5 , dated May U, 19^2, which part of his estate, will be redeemed at representatives of the deceased owner1« date of p a y m e n t , Provided: under the provisions of Department Cir upon the death of the owner constitute the option of the duly constituted estate, at par and accrued interest to (a) that the bonds were actually owned by the decedent at the time of his death; and (b) that the Secretary of the Treasury be authorized to apply the entire proceeds of redemption to the payment of Federal estate taxes. Registered bonds submitted for redemption hereunder must be duly assigned to "The Secretary of the Treasury for redemption, the proceeds to be paid to the Collector of Internal Revenue at _____________ for credit on Federal estate taxes due from estate of ♦" Owing to the periodic closing of the transfer books and the impossibility of stopping payment of interest to th« registered owner during the closed period, registered bonds received after the closing of the books for payment during such closed period will be paid only at par with a deduction of interest from the date of payment to the next interest payment date;£/ bonds received during the closed period for payment at a date after the books reopen will be paid at par plus accrued interest from the re opening of the books to the date of payment. In either case checks for the 1/ An exact half-year’s interest is computed for each full half-year period irrespective of the actual number of days in the half year. For a fractional part of any half year, computation is on the basis of the actual number of days in such half year. 2/ The transfer books are closed from May 16 to June 1 5 , and from November l6 to December 15 (both dates inclusive) in each year. 3full six months interest due on the 'last day of the closed period will be for warded to the owner in due course. All bonds submitted must be accompanied by Form PD 1782,^/properly completed, signed and sworn to, and by a certificate of the appointment of the personal representatives, under seal of the court, dated not more than 6 months prior to the submission of the bonds, which shall show that at the date thereof the appointment was still in force and effect. Upon payment of the bonds appropriate memorandum receipt will be forwarded to the representatives, which will be followed in due course by formal receipt from the Collector of Internal Revenue. 7. Except as provided in the preceding paragraphs, the bonds will be sub ject to the general regulations of the Treasury Department, now or hereafter prescribed governing United States bonds. III. SUBS CRIPTI OH AHD ALLC M N T 1. Subscriptions will be received at the Fed3ral Reserve Banks and Branches and at the Treasury Department, Washingtoa. Banking institutions and security dealers generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasur r Department are authorized to act as official agencies. Subscriptions must be accompanied by payment in full for the amount of bonds applied for. i ^ | 2, The Secretary of the Treasury reserves the right to reject any sub scription, in whole or in part, to allot less than the amount of bonds applied for, and to close the books as to any or all subscriptions at any time without notice; and any action he may take in these respects *hall be final. Subject to these reservations, all subscriptions will be allotted in full. Allotment notices will be sent out promptly upon allotment. IV. PAYMENT 1. Payment at par and accrued interest from May 5, 19U2 , for bonds allot ted hereunder must be made on August 3, 19U2 , or on later allotment. Accrued interest from May 5, 19^2 to August 3, 19^2 inclusive is $6 .16293 per $1,000. Each day's accrued interest thereafter is $0.0663 per $1,000. Any qualified depositary will be permitted to make payment by credit for bonds allotted to its customers up to any amount for which it shall be qualified in excess of existing deposits, when so notified by the Federal Reserve 3ank of its district. V. y GENERAL PROVISIONS 1. As fiscal agents of the United States, Federal Reserve Banks are author ized and requested to receive subscriptions, to make allotments up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive payment for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive bonds. » 2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offer ing, which will be communicated promptly to the Federal Reserve Banks. I rr-TT— ___________ ___ .___._______________________ — |lA/ Copies of Form PD 1782 may be obtained from any IFederal Reserve Bank or from the Treasury Department, Washington, D. C, HENRY MORGENTHAU, JR., Secretary of the Treasury. TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, August 4, 1942.____ __ . Press Service No. 32-67 The Secretary of the Treasury announced last evening that the tenders for $350,000,000, or thereabouts, of 91-day Treasury bills to be dated August 5 and to mature November 4, 1942, which were offered on July 31, were opened at the Federal Reserve Banks on Augu s t 3. The details of this issue are as follows: Total applied for - $582,900,000 Total accepted - 352,511,000 Range of accepted bids: High - 99.925 Eauivalent rate approximately 0.297 percent Low - 99.905 ' M tf J " 0.376 " Average Price - 99.906 ” H " 0.372 " (57 percent of the amount bid for at the low price was accepted.) -oOo- August 5, 194S. STATUTORY DB3T LIMITATION AS OR JULY 31. 1943 Section 21 of the Second Liberty Bond Act, as amended, provides that the face amount of obligations issued under authority of that Act, ,rshall not exceed in the aggregate $125,000,000,000 outstanding at any one time.tt The following table shows the face amount of obligations outstanding and the face amount which can still be issued under this limitation: Total face amount that may be outstanding at any one time $125,000,000,000 Outstanding as of July 31, 1942: Interest-bearing: Bonds Treasury $40,182,050,350 Savings (Maturity value)* 13,546,763,725 Depositary 81,173,000 Adjusted Service 727.669.357 Treasury notes Certificates of indebtedness Treasury bills (Maturity value) Matured obligations, on which interest has cei $54,537,656,432 14,514,899,825 6.250.863.000 3.663.342.000 ed 24,429.104.825 78,966,761,257 76,740.350 face amount of obligations issuable under above authority ‘ / I 79,043.501.607 $ 45,956,498,303 Reconcilement with Daily Statement of the United States Treasury July 31, 1942 Total face amount of outstanding public debt obligations issued under authority of the Second Liberty Bond Act, as amended Deduct, unearned discount on Savings bonds (difference between current redemption value and maturity value) Add other public debt obligations outstanding but not subject to the statutory limitation: Interest-bearing (Pre-War, etc..) $ 195,969,620 Matured obligations on which interest has ceased 10,963,960 Bearing no interest 354.659.517 Total gross debt outstanding as of July 31, 1942 $ 79,043,501,607 2,468,923.459 76,574,578,148 _____561.593,097 $ 77,136,171,245 *Approximate maturity value. Principal amount (current redemption value) according to preliminary public debt statement $11,077,840,266. 32-68 -oOo- - 3 • IT* 1. PAYMENT Payment at par and accrued interest, if any, for certificates allotted hereunder «uet bo made or completed on or before August 15, allotment. 1942, or on l*t#r In ovary case where payment is not so completed, the payment with application up to $ percent of the amount of certificates applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the United States, Any qualified depositary will be permitted to sake payment by credit for certificates allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its District, v. o m m i provisions 1. AS fiscal agents of the United States, Federal Reserve Banks are author* ised and requested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal Re serve Banks of the respective districts, to issue allotment notices, to receive payment for certificates allotted, to make delivery of certificates on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive certificates, 2. The Secretary of tho Traaeury guy at any tiae, or froa tiaa to tiaa, pre- aeribo aupplaoantal or aaendatory ruloa and regulation g o w n i n g tho offering, nhlch will bo communicated promptly to tho Federal Reserve a nk#. HSKRT R0R02HTHAU, JR., Secretary of the Treasury, «*» 2 m A. Bearer certificates with two coupon« attached will be issued in denooiin&~ tions of $1,000, $5,000, $10,000 and $100,000. The certificates will not be issued in registered form. 5* The certificates will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States certifi cates* III. 1. SUBSCRIPTION AHD ALLOTMENT Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department, Washington* Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securities which may be allotted thereon, prior to the dosing of the subscription books. Banking insti tutions and security dealers generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorised to act as official agencies. Others than banking institutions and security dealers will not be permitted to enter subscriptions except for their own account. Subscriptions from banks and trust companies for their own account will be received without deposit. Subscriptions from all others must be accom panied by payment of 5 percent of the amount of certificates applied for* 2* The Secretary of the Treasury reserves the right to reject any subscrip tion, in whole or in part, to allot loss than the amount of certificates applied $ for, and to d o s e the books as to any or all subscriptions at any time without notice) and any action he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and including $25,000 will be allotted in full. The basis of the allotment on all other subscriptions will be publicly announced, and allotment noticee will be sent out ment* p r o m p tly upon allot UNITED STATES OP AMERICA 7/8 PERCKKT T8BA3URÏ C S O T m C A T S S OP IKOBBfHWSSS OF SSSÎSS 0-1943 Dat*d “nd ‘»•»rin* interest from August 15, 1942 1942 Department Circular No# 693 Dus August 1, 1943 TREASURY DiMKTMSN?, Office of the Secretary, Washington, August 6, 1942, Fiscal Servies Bureau of the Publie Debt I. 1. Q F F m im OP CERTIFICATES The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, lnvitss subscriptions, at par and accrued interest, from the people of the United States for certificates of indebtedness of the United States, designated ?/S percent Treasury Certificates of Indebtedness of Series B-1943. The amount of the offering is #1,500,000,OGO, or thereabouts. II. 1. DESCRIPTION OP CERTIFICATES The certificates will be dated August 15, 1942, and will bear interest from that date at the rate of 7/8 percent per annum, payable on a semiannual basil on February 1 and August 1, 1943« They will mature August 1, 19 4 3 , and will not be subject to call for redemption prior to maturity» 2. The income derived from the certificates shall be subject to all Federal taxes, now or hersafter imposed. The certificates shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority« 3. The eertificates will be acceptable to secure deposits of public moneys» They will not be acceptable in payment of taxes and will not bear the circulation privilege* Federal tasarve Banks and the Treasury Department are authorized to act as official agencies. Subscriptions for the certificates from banks and trust companies for their own account will be re ceived without deposit, but subscriptions from all other® must be accompanied by payment of 5 percent of the waount of certificates applied for. The basis of allotment of subscriptions over *85,000 will be publicly announced, and payment for any certificates allotted must be made or completed on or before August 15, 1948, or on later allotment* These certificates will be redeemed in cash at maturity and will carry no exchange privileges. The text of the official circular follows: ffpj&gOHT BRPA»f*d*T Washington for w b s m sxt u w n m uswspgpsits, 4£( Pret® August 6» 19^2» 3 ^ g/5/bp Secretary of tli« treasury Korgenthau today announced the offering, 0 kJ P through the Federal f*e«erwe Bank., for eaeh subscription at par end ac | Secret crued intere.t, of $1,500,000,000, or thereabout», of 7/« P«r©e»t Fr«a«ury prii|) t Certificates of Indebted»«., of Sorte. B-19^3• list car *R order to insure »ore ew- ten.iwe partieipation o» tbe pari of baak*, Corporation., and other« Inter- Its, Oi e.ted in a type of .oeurity earrjring »atnritio. langer than Freasnry kille, ijiiss3*13 th« «ubeoriptiou boofcs will renain open twe daya. and subseription» up to 5t iepent $25,000 will be allpUed in füll, fhere » U l be no re.triction« a. to tbe bati. for »ubscribing to thi» Um ». £0subscri the certificate, will b« dated Auguet 15* 1^^* eill be peyable on August 1, 19^3, and will bear intere.t at tbe rate of .ewen-ei^ith« of ono pereont por aamx», payablo on a seeiannual basi. on Fobmary 1 and Augttet 1 , 191*3* of sec they will ke issued in bearer for» only, with two intere.t coupon« attached, in deno»inatlon. of $1,000, $5,000, $10,000 and $100,000. isupto esirictiom !he ce: sjsble onj sf seven-ei; laislDfsii ¡led in bi Pursuant to the prowl.ion. of the Public Bebt ^ct of 19^1, Internet upon the certificate, now offered .hall not hero any exemption, a» such, undor Fedoral fa* dot. now or hereafter enacted. The full prowl*ion. relat ing to taxability are net forth in the official circular released today. Subscriptions will bo receiwed at the Federal Beserre Bank, and Branch** Subscri p inches and at the treasury Separteeat, *a»hington. Banking institutions and .«curl tenstitut Options f dealers generally »ay submit subscriptions for account of euatoaert, but onl 7 s and tt TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Thursday,.August 6, 1942. 8-5-42 - Press Service No. 32-69 Secretary of the Treasury Morgenthau today announced the offering, through the Federal Reserve Banks, for cash subscrip tion at par and accrued interest, of $1,500,000,000, or there abouts, of 7/8 percent Treasury Certificates of Indebtedness of Series B-1943. In order to insure more extensive participation on the papt of banks, corporations, and others interested in a type of security carrying maturities longer than Treasury bills, the subscription books will remain open two days, and subscrip tions up to $25,000 will be allotted in full. There will be no restrictions as to the basis for subscribing to this issue. The certificates will be dated August 15, 1942, will be payable on August 1, 1943, and will bear interest at the rate of seven-eighths of one percent per annum, payable on a semi annual basis on February l a n d August 1, 1943. They will be issued in bearer form only, v/ith two interest coupons attached, in denominations of $1,000, 85,000, $10,000 and $100,000. Pursuant to the provisions of the Public Debt Act of 1941, interest upon the certificates now offered shall not have any exemption, as such, under Federal Tax Acts now or hereafter enactod. The full provisions relating to taxability are set forth in the official circular released today. Subscriptions will be received at the Federal Reserve Banks and Branches’, and at the Treasury Department, Washington. Bank ing institutions and security dealers generally may submit sub scriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as offi cial agencies. Subscriptions for the certificates from banks and trust companies for their own account will be received without deposit, but subscriptions from all others must be accompanied by payment of 5 percent of the amount of certificates applied for. 2 The "basis of allotment of subscriptions over ¿25,000 will be publicly announced, and payment for any certificates allotted must be made or completed on or before August 15, 1942, or on later allotment. These certificates will be redeemed in cash at maturity and will carry no exchange privileges. The text of the official circular follows; UNITED STATES GE AMERICA 7/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES B-1943 Dated and "bearing interest from August 15, 1942 Dae August 1, 1943 TREASURE DEPARTMENT, Office of the Secretary, Washington, August 6, 1942 1942 Department Circular No. 693 Fiscal Service Bureau of the Public Debt I. OFFERING OF CERTIFICATES 1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as anended, invites subscriptions, at par and accrued interest, from the people of the United States for certificates of indebted ness of the United States, designated 7/8 percent Treasuiy Certificates of Indebtedness of Series B-1943. The amount of the offering is $1,500,000,000, or thereabouts. II. DESCRIPTION OF CERTIFICATES 1. The certificates will be dated August 15, 1942, and will bear inter est from that date at the rate of 7/8 percent per annum, payable on a semi annual basis on February 1 and August 1, 1943. They'‘will mature August 1, 1943, and will not be subject to call for redemption prior to maturity. 2. The income derived from the certificates shall be subject to all Federal taxes, now or hereafter imposed. The certificates shall be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the prin cipal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority, 3. The certificates will be acceptable to secure deposits of public moneys. They will not be acceptable in payment of taxes and will not bear the circulation privilege. 4. Bearer certificates with two coupons attached will be issued in denominations of $1,000, $5,000, $10,000 and $100,000. The certificates will not be issued in registered form. 5. The certificates will be subject to the general regulations of the Treasury Department,.now or hereafter prescribed, governing United States certificates. - III. 2 - SUBSCRIPTION AND ALLOTMENT 1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department, Washington. Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securities which may be allotted thereon, prior to the closing of the sub scription books. Banking institutions and security dealers generally may submit subscriptions for account of customers, but only the Federal Réserve Banks and the Treasury Department are authorized to act as official agen cies. Others than banking institutions and security dealers will not be permitted to enter subscriptions except for their own account. Subscrip tions from banks and trust companies for their own account will be received without deposit. Subscriptions from all others must be accompanied by pay ment of 5 percent of the amount of certificates applied for. 2. The Secretary of the Treasury reserves the right to reject* any subscription, in whole or in part, to allot less than the amount of certif icates applied for, and to close the books as to any or all subscriptions at any time without notice; and any action he may take in these respects shall be final. Subject to these reservations, subscriptions for amounts up to and including $25,000 will be allotted in full. The basis of the allotment on all other subscriptions will be publicly announced, and allot ment notices will be sent out promptly upon allotment. IV. payment 1. Payment at par and accrued interest, if any, for certificates allotted hereunder must be made or completed on or before August 15, 1942, or on later allotment. In every case where payment is not so completed, the payment with application up to 5 percent of the amount of certificates applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the United States. Any oualified deposi tary will be permitted to make payment by credit for certificates allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its District. V. GENERAL PROVISIONS 1. As fiscal agents of the United States, Federal Reserve Banks are authorized and reauested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allot ment notices, to receive payment for certificates allotted, to make delivery of certificates on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive certificates. 2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. :a C k .. % r «? Jut £ th e V icto ry Fuad Committees « i l l be used, S ecretary lorgentfeau announced la t e today* to s tim ia te widespread d istrib u tio n o f th e $1*500*000*000 issu e o f C e rtif ic a te s o f Indebtedness* which i s being offered tomorrow* follow ing sim ilar e f f o r ts on the 2 - 2 / 2 % reg istered i The v bonds offered e a r lie r in the week* pay : I t was pointed out th a t i t has been th e aim o f the treasu ry to - |fgsd dis p lace as la rg e a volume of s e c u ritie s a s p ossib le outside the banking system . lliflodebtec This i s co n siste n t with i t s p o licy o f u tilis in g th e la rg e reserv o ir o f spendable funds and accumulated savings in the war e f f o r t. llilar eff The V ictory kier in Fund organization* the S ecretary pointed out* was formed with th is program a va\\a\»^ in mind and its^ tra in e d personnel of n early 2 0 ,0 0 0 rep resen tativ es of the banking and s e c u ritie s in d u strie s, working on a voluntary b asis through Federal Reserve d i s t r i c t and regio n al com m ittees, i s w ell equipped to help ca rry out th is plan* From incomplete re p o rts cm th e s a le o f th e re g iste re d j It fas :| j» y to Elie the . liley of u IteciuL |!|IÌZ«01 .OTpgjjjIn| I t reprc 2~l/2a, it appears th a t the demand in many Fed eral Reserve d i s t r i c t s fo r the f i r s t few ■jto, work! ¡ l e t sne pj out th I, toa in days o f the o fferin g exceeds th a t of the corresponding period fo r the origin al p , it sp p e t s fo: issu e l a s t la y , in d icatin g th a t the V ictory Fund Committees are successful I I correi pcating t] in finding new in v esto rs in te re ste d in th is type of s e cu rity . N i n g at George B uffington, A ssistan t to the S e cre ta ry , i s in charge of the V icto ry Fund Committee program* 11 »sorgel % of the TRE/, SURY DEP/ RTMENT Washington POR IMMEDIATE RELEASE, Wednesday, August 5, 1942 Press Service No. 32-70 The Victory Fund'Committees will be used, Secretary Morgenthau announced late today, to stimulate w i d e spread distribution of the $1,500,000,000 issue of Certificates of Indebtedness, w h i c h is being offered tomorrow, following earlier in the week. It was pointed out thst it has been the aim of the Treasury to place as large a volume of securities as possible outside the banking system. This is consistent w i t h its policy of utilizing the large reservoir of spendable funds end accumulated savings in the wa r effort. The Victory Fund organization, the Secretary pointed out, was formed wi t h this program in m i n d and its available trained personnel of nearly 20,000 representatives of the banking and securities indus tries, working on a voluntary basis through Federal Reserve district and regional committees, is well equipped to help carry out this plan. i From incomplete reports on the sale of the registered it appeatrs that the demand in many Federal Reserve districts for the first few days of the offering exceeds that of the corresponding period for the original issue last May, indicating that the V ictory Fund Committees are successful in finding new investors interested in this type of security. 2 --5-S, George Buffington, Assistant to the Secretary, charge of the Victory Fund Committee program. -0 O 0 - is in TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday, August 7, 1942. 8/7/42 The Secretary of the Treasury, by this public notice, vites tenders for $>350,000,Q00, ■;i- Treasury bills, tive' bidding. 1942, or thereabouts, in of 92-day to be issued on a discount basis under competi The bills of this series will be dated August 12, and will mature November 12, 1942, when the'face amount will be payable without interest. form only, They will be issued in bearer and in denominations of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value). Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o ’clock p.m., Eastern war time, Monday, August 10, 1942. Tenders'will not be received at the Treasury Department, Y/ashington. E a c h tender must be for an oven multiple of $1,000, and the price offered must be e x pressed on the basis of 100, w i t h not more than three decimals, e. g., 99.925. Fractions m a y not be used. It is urged that tenders be made on the printed forms and forwarded in the spe cial envelopes w h i c h will be supplied b y Federal Reserve -Banks or Branches on application therefor. Tenders will be received without deposit, f r o m incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders, from others mu s t be accompanied, by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an.express guaranty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following w hich public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of a c cepted tenders at the prices offered must be made or completed at 32-71 - 2 - the Federal Reserve Bank in cash or other immediately available funds on August 12, 1942. The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other dis position of Treasury bills shall not have any special treatment, as such, u nder Federal tax Acts n o w or hereafter enacted. The bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or inter est thereof by any State, or any of the possessions of the United States, or by any local taxing authority. For purposes of taxa tion the amount of discount at w h i c h Treasury bills are originally sold^by the United States shall be considered to be interest.! Under Sections 42 and 117 (a) (1 ) of the Internal Revenue Code, as si amended by Section 115 of the Revenue Act of 1941, the amount of discount at w h i c h bills issued h e r e under are sold shall not be considered to ac.crue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are. excluded from considéra- : tion as capital assets. Accordingly, the owner of Treasury bills (other^than life insurance companies) issued hereunder need in clude in^his income tax return only the difference between the price paid i or such bills, whether on original issue or on sub sequent purchase, and the amount actually received either upon sale or redemption at m a turity during the taxable year for which the return is made, as ordinary gain or loss. Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular m a y be obtained : from any Federal Reserve Bank or Branch. TREASURY DEPARTMENT /Washington FOR RELEASE, MORNING m W A P E E S , yrlday. Auguat 7. 1942._____ 8/6/42 Press Service Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of ?/8 percent Treasury Certificates of Indebtedness of Series B-1943 will dose at the close of business today, August 7* Subscriptions addressed to a Federal Reserve Bank, or Branch, or to the Treasury Department, and placed in the mail before 12 o'clock midnight Friday, August 7, will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the basis of allotment will probably be made on Tuesday, August 11. TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday, August 7, 1942. _______ 8/6/42 * Press Service No. 32-72 Secretary of the T r easury Morgenthau announced last night that the subscription books for the current offering of 7/8 percent Treasury Certificates of Indebtedness of Series B-1943 will close at the close of business today, August 7. Subscriptions addressed to a Federal Reserve Bank, Branch, or to the Treasury Department, mail before 12 o ’clock midnight Friday, or and placed in the August 7, will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the basis of allotment will probably be made on Tuesday, August 11. -oOo- Statement of Randolph E. Paul Tax Adviser to the Secretary of the Treasury Before the Senate Finance Committee on percentage depletion and related allowances On March 3 and April l6, 19^2, the Treasury recommended to the House Committee on Ways and Means the elimination of two privileges now accorded to the oil and gas and mining industries. These are (1) the allowance of depletion on arbitrary percentage bases that are considerably higher than average cost depletion for the enterprises affected, and (2) the option to charge intangible development costs to current expense instead of to capital,!/ which in conjunction with percentage depletion results in effect in a double deduction for the intangible development costs. The Treasury believes that these proposals Constitute a vital improvement in the income tax. They would also yield about two hun dred million dollars in revenue under the rates of the House Bill. I. ELIMINATION OF PERCENTAGE DEPLETION The present law provides that the producers of oil, gas and certain minerals may take as a depletion deduction the following per centages of their gross income from such properties: 1. 2. 3. K Oil and gas Sulphur Metal mines Coal 27è£ 23$ 15$ 5$ The House Bill provides in addition to the allowances contained in the present law percentage depletion of 15 percent for fluorspar. In each case, the percentage depletion allowance for any property may not exceed 5U percent of the net income for the taxable year. For oil and gas wells taxpayers may exercise their option between cost depletion and percentage depletion every year. Under the House Bill, this privilege is extended to raining operations as well, 17 The provisions with respect to intangible development costs for oil and gas wells differ from those relating to mines (see foot note, page 17), 32-73 - 2 - It is estimated that at 19^42 business levels and the rates of tax fixed in the House Bill, the elimination of percentage depletion and the substitution of cost depletion will increase the revenue by $12^ million. Approximately 20 percent of this total is accounted for by oil and gas properties, the rest by sulphur, metal, and coal mines. The figure includes the increase on corporate tax revenue ^nly. Since individuals are large owners of oil royalty interests, against which'- depletion is allowed, there would also be some increase in tax receipts from' individuals. A* Background of the Percentage Depletion Deduction The basic purpose of allowing a deduction for depletion is to permit the taxpayer to maintain his capital investment. It is thus closely analogous to the deduction for depreciation, which provides an allowance for the restoration of capital consumed in the process of production. Unless an allowance for depletion were made, the producer of oil and minerals would be taxed on the entire value of the product extracted from the ground, and when the well was dry or the mineral exhausted, he would not have maintained his capital without impairment. Since our tax is a tax on income, it is clear that he should be allowed to recover his capital investment free of tax. But to exempt from the tax any amount greater than his capital investment is to allow a subsidy which is not shared by other taxpayers. Ordinarily a taxpayer would maintain his capital investment through an allowance based upon his cost, that is, the amount of capi tal which he had invested in the enterprise. When the Revenue Act of 191S was enacted, however, it was thought desirable to make a special provision for the producers of oil and minerals. This was done by providing for discovery depletion. This allowed a deduction for deple tion based not on the taxpayer’s cost, but (in the case of mines and wells discovered after March 1, 1913) on the value of the property at the time of discovery, or within thirty days thereafter. Thus, the discoverer of oil or minerals was in effect given the value of his discovery free from any income tax. This was an extraordinary pro vision. In no other line of endeavor, is a successful entrepreneur allowed to take the fruits of his success tax free. - 3 Discovery depletion continued in the law without material change until 1 9 2 6 . In that year percentage depletion was substituted in the case of oil and gas wells, and this was extended to coal and metal mines and to sulphur in the Revenue Act of 1932. Percentage deple tion is based wholly on income. It bears no relation to the actual capital investment in the property. Percentage depletion thus in effect conceals the subsidy of discovery depletion, and it adds a further serious evil. The total amount recoverable through discovery depletion was at least limited to the value of the property within a short period after the discovery. But there is no such limit to per centage depletion. It runs on year after year without any regard to the amount which has already been allowed to the taxpayer.l/Percentage depletion as it now exists is therefore wholly divorced from the fundamental purpose of a depletion allowance, Moreover, percentage depletion is not confined to the taxpayer making the discovery. It is extended to any taxpayer who has an interest in oil and gas or minerals regardless of whether his enter prise or risk has contributed to discovery or production. B. Percentage Depletion is Inequitable The percentage depletion allowance is greatly in excess of the depletion actually sustained by the taxpayers to which it is allowed. An examination of the returns filed by 78 oil companies shows that they deducted an aggregate of $3 0 .6 million as depletion for the year 19^1. Yet the same returns show that these taxpayers deducted on their books only $6.1 million in computing their income and sur plus which was reported to stockholders. 17 Cf. G.C.M. 1776o , 1937-1 Cum. Bull. 102, and G.C.M. 22239, 19^0-2 Cum, Bull. 105, both involving situations where the tax payer had received percentage depletion allowances in excess of its capital investment in the property. See also Mother Lode Coalition Mines Co. v. Commissioner 125 i * (2d) ¿57 (C.C.A. 2d,, 19^2 ), pending on certiorari before the Supreme Court, where the taxpayer seeks to obtain percentage depletion for the year 1935 although it conceded that “cost basis depletion had been fully recovered by 1 9 2 5 ,“ and that “no deduction on that basis was allowable.“ - k _ The present statutory allowance for percentage depletion on oil and gas wells is greatly in excess of the average cost depletion for the industry (Exhibit l). In 19^0, the average sales price or gross income per barrel of oil produced was $1 ,02 * Depletion at the rate of percent of gross income would have amounted to 28 .0 # per barrel. Reported depletion based upon cost amounted to only 5 .9 # per barrel. Actually, however, percentage depletion allowances are often less than 27i percent of gross income since they are limited to 50 percent of the net income from the property. On the average, net income before depletion for the industry was 3 1 .8 # per barrel of oil in 19^0, Percentage depletion at 50 percent of net income would have amounted to 1 5 *9 # per "barrel, or more than two and one-half times cost depletion. Eor the first 9 months of I9 U1 , percentage depletion computed on the same basis approximated 20# a barrel or about three and one-half times cost depletion. A study of the income tax returns for 1931-1937 of one of the leading oil companies shews that it had in the ground more than threequarters of the original oil reserves in 10 of its properties located in the East Texas field. Yet this company recovered through percent age depletion, and the related option to expense intangible development expense, more than the entire cost of the properties and of intangible development. If, on the remaining reserves, this company should obtain depletion allowances at the rate enjoyed thus far, the aggregate deduc tion for depletion would approximate four times the cost of the properties. (See Exhibit 2). Although the Revenue Act of 19^1 imposed income taxes at the rate of 31 percent, and excess profits taxes ranging up to 60 percent, oil companies in general did not approach these rates. Some actual examples of oil companies that made provision for Eederal income taxes for 19^1 of less than 31 percent of net income reported to stock holders are listed in Exhibit 3 . Each of the four major oil companies listed in that exhibit set aside for Eederal income and excess profits taxes less than 26 percent of its 19^1 net income reported to stock holders. The 13 minor companies, which generally speaking were engaged more exclusively in production, set aside an even smaller part of income, the percentage varying from 18 percent to as little as 2 percent. - 5The striking difference between the percentage of income absorbed by taxes for these companies and the statutory tax rates is to some extent attributable to differences between book income and taxable income common to all corporations. In the main, how ever, it is attributable to the special percentage depletion allowance. The companies ordinarily report depletion to their stock holders on a cost basis, but receive for tax purposes a very much larger allowance in the form of percentage depletion. Despite the statutory provision limiting percentage depletion to 50 percent of the net income from each property, the use of per centage depletion instead of cost depletion enables many companies to cut their taxable income by much more than 50 percent,>=■/ Exhibit ^ and Chart I give a few actual examples. Eor the first two companies cited, percentage depletion converted sizable net incomes into defi cits, for the third company, it reduced net income by more than 75 percent, for the fourth company, it almost completely wiped out net income. The examples given in this exhibit are not unusual. Percentage depletion not only discriminates between taxpayers receiving percentage depletion and other classes of taxpayers, but it also results in discriminations among producers within the oil and mining industries. Because of differences in the ratio of net income to gross income, a percentage depletion allowance based on gross income produces marked variations in the tax burden in rela tion to net incomes. This is aggravated by the provision that the depletion allowance may not exceed 50 percent of net income computed without allowance for depletion, since only the more prosperous i j Reductions in taxable income by more than 50 percent, despite the statutory limitation, are possible because the law speci- ■ fies that percentage depletion be computed with respect to each property separately. Consequently, after the taxable income of -oroperties showing net income has been reduced by a maximum of 50 percent by depletion allowances, it can be reduced still fur ther by the deduction of losses on other properties or operations. ~ 6 - producing units can take full advantage of the depletion allowance.— 1 Elimination of percentage depletion, and placing all of the oil and mining enterprises on a cost depletion basis, would restore a desirable element of tax uniformity among these taxpayers. It may be pointed out that the continuance of percentage deple tion at the rates established in 1926 results in a far greater subsidy than was the case at the time these rates were fixed. This results from three factors: (l) a much larger proportion of oil wells now are drilled on a scientific basis with the result that the risk in volved is substantially less (see page 10 below); (2) improvements in the techniques for getting oil out of the ground have considerably increased the recovery from successful wells; and (3 ) tax rates have substantially increased, Thus, the oil producer still gets as a depletion allowance 27lg- percent of all the oil produced (subject to the 50 percent of net income limitation), although the amount pro duced per well drilled has greatly increased; and the amount so allowed has resulted in a greatly increased tax benefit. There is no basis for continuing at the present time a subsidy which is even larger than it was in 1 9 2 6 , C. The Reasons Advanced in Favor of Percentage Depletion Are Unsound. A variety of arguments have been made from time to time in sup port of percentage depletion. We believe that these arguments are all lacking in merit. They are discussed below. 1, The elimination of percentage depletion will not endanger the supply of raw materials needed for the war effort The claim that the elimination of percentage depletion will endanger the supply of raw materials needed for the war effort cannot be accepted. 1/ The ratio of an oil property's net income (before depletion) to its gross income must be 55 percent or more to permit the allow ance of percentage depletion at the rate of 27i percent of gross income; for metal mining properties the ratio must be 30 percent or higher to permit percentage depletion at the rate of 15 percent of gross income* 7 - a. The oil industry i. Production and reserves. The production oí crude oil in 1941 was the highest in our history. At the same timo the known reserves oí crude oil increased to an all-time high. Total reserves oí 20*3 billion barrels were about fifteen times the output in 1941. (Exhibit 5 and chart II) Even the record output of 1*4 billion barrels in 1941 was below the maximum achievable. The pro duction of oil in at least some States, including Texas, is still proceeding under proration regulations designed to reduce output to probable market demand. While military requirements for oil products in 1942 will in crease very substantially over 1941* civilian consumption will de crease greatly because of the transportation and rubber shortage, so that total production will decline. The problem of oil supply is a proolem of transportation and not of production or limited reserves. ii. Stripper wells. It has been claimed that the elimination of percentage depletion would load to the widespread abandonment oi stripper wells — the wells with relative low output and high cost of production. Careful examination does not sustain this argument. Most stripper wells produce small amounts of oil under conditions that leave little or no book profit. The operators of such walls get little, if any, benefit from percentage depiction because of the statutory limitation of percentage depletion to 50 per cent of net income from the property. The continued operation of these properties cannot bo dependent on the continuance of percentage depletion. They are continued in operation because current revenues exceed “out of pocket11 costs, although they may not exceed total cost, including depreciation, depletion, and overhead. In a sample study, based on the tax returns for a largo number of properties in Pennsylvania, it has been found that of the proper ties producing fewer than 400 barrels a year nearly one-half showed no net income even before any allowance for depletion. These proper ties get no percentage depletion under existing law. Other properties get only a negligible amount of depletion because of the 50 percent - 8 ~ net income limitation. Only about 8 percent of the properties got percentage depiction equal to 27 ^ percent of gross income, the maximum amount allowed by existing law. In order to qualify for this maximum percentage depletion allowance, these properties had to have net incomes in excess of two times 272 percent or 55 per cent of gross income. Such a large margin of profit is not characteristic of the stripper well. In support of the claim that the elimination of percentage depletion would lead to the abandonment of stripper wells, it has been maintained that the provision for percentage depletion intro duced in the Revenue Act of 1926 led to a substantial increase in production from the eastern part of the United States. It is true that there was a substantial increase in the production of crude oil in Pennsylvania and New York after 1926. However, this increase seems directly traceable to the development of water flooding methods, methods that were first permitted by local law in 1 9 2 1 . 1 / The resulting increase in production manifested itself prior to the enactment of percentage depletion. Between 1921 and 1926 there was a steady increase in production, the increases being minor from 19 2 1 to 19 2 4 , but substantial from 19 24 to 19 2 5 , and again from 19 2 5 to 1926. Naturally, the full effect of this new technique for extract ing oil was not felt at once and continued to operate after 19 2 6 . (Exhibit 6 ) iii. The effect of price. The effect of percent age depletion on production is negligible compared to the effect of price changes. It is estimated that the tax relief attributable to percentage depiction in 19 4 1 amounted to about 5 cents per barrel of oil produced. In that year the price of oil went up 10 cents a barrel. In Pennsylvania it rose by even more — since August, 1940, by 90 cents a barrel including an increase of 2 5 ^ per barrel granted by the Office of Price Administration to stimulate output in that area. 1/ Pa. Laws, 1921, pp. 912-913 (amended by Pa. Laws, 1923, p. 115, and by Pa. Laws, 1929, p. 821). - 9 - b. Tige mining industry Iho conditions of supply vary widely for difforent metals. Some are in abundant supply; others are limited as to known deposits still others, like aluminum and magnesium, are limited by the avail ability of power, processing plants, and materials for exploitation, for example, explosives and ruining equipment made of steel. Those variations in supply conditions have boon recognized by the agencies dealing with the problem of war production. In the case of some metals, premium prices have been established to stimu late production; in other cases direct assistance in adding to equipment for recovery has been extended. This approach clearly indicates the diversity of situations in the mineral industry and the difficulty of trying to accomplish specific results by any general tax relief such as percentage doplotion. . case of certain minerals, especially where the avail— aolo reserves are small, there is a special problem arising out of the acceleration of production for war purposes in years of high oax rates, ihe Treasury has given careful study to this question, and is presenting its views in a separate memorandum in which it is recommended that provision be made for excess profits tax relief in the cases where war production may lead to substantial hardship. PoFccntago Depletion cannot bo .justified as to exploration and discovery. a* stimulus ” ~ The oil industry We now know that the 1913 fear of oil shortages was unfounded. It is also clear that we did not need the special discovery provisior to obtain exploitation of our natural resources, and that the pro vision has been extremely costly in terms of revenue. In the period following 1913, tno automobile industry expanded enormously. The extended use of automotive transportation created a strong demand ¿or oil products which led, in turn, to s. high level of crude oil prices; it also stimulated technical advances to raise the gasoline recovery ratio# It was these factors and not percentage depletion, that accounted for the increa.se in reserves and in output. - 10 - i. The influence of prices« The importaice of the price of oil products in stimulating or retarding the search for oil is clearly revealed by Exhibit 7 and Chart III, ■which show for the period 1917 to 1941 the number of wells drilled and the average price of oil per barrel. In twenty of the twenty-five years covered by the exhibit the number of wells drilled changed in the same direction as the average price per barrel, rising when the price rose and declining when the price declined. ii. The influence of technical developments. While price changes have been the major stimulus to the search for new oil the effectiveness of this search has also depended in large part upon developments in the technique of discovery and on pure chance. Immedi ately after the first World War there was a great advance in the application of scientific knowledge to the discovery of oil. Accord ing to a study by the National Research Project, scientific approaches have accounted for an increasing proportion of oil discoveries, while wildcatting based on ^hunches1’ has become relatively less significant. This study shews that the ultimate production from wells discovered by scientific methods between 192 2 and 1938 vras estimated at about 14 billion barrels, whereas the corresponding figure for Trolls dis covered by other methods was only slightly over 5 billion barrels. (Exhibit 8 and Chart IV) The application of scientific knowledge to the search for oil has not, however, reduced the discovery of oil to a routine matter. The unusual strike, such as that in East Texas, respects neither price nor technology. Such exceptionally fortunate discoveries of large pools are naturally irregular. Provisions en acted in the law will not make them otherwise. iii• The influence of war priorities. Percentage depletion should be a particularly negligible factor in the dis covery of oil during the war period. The shortage of steel has led the War Production Board to restrict the use of steel in drill ing oil wells to such an extent that drilling will be curtailed by from 40 to 50 percent in 1942. This restriction is limited primarily to the drilling of development wells rather than discovery or wild cat wells. The latter have been granted a priority rating of A-2, - 11 - the xormer of A-3. In addition, the Office of Petroleum Coordinator is urging the industry to drill at least 4 ,0 0 0 wildcat wells in 1942 compared with 3 ,1 0 0 drilled last year, even though the total number of wells drilled will probably be reduced from 3 2 ,0 0 0 in 194 1 to fewer than 19,000 in 1942. The forced restriction in the drilling of development wells will release substantial funds for the drill ing of the wildcat wells. The saving from the drilling of some 13 ,0 0 0 fev/er development wells in 1 9 4 2 will exceed the cost of all wildcat wells expected to be drilled in 1942. The shortages necessitating curtailments in the drilling of development wells are^likely to continue, and, indeed, to be intensified during the entire war period. b. The ineffectiveness of percentage depletion as a stimulus to the prospector Even if percentage depletion contributed to the stimulation of exploration and discovery, it would be an extremely wasteful and costly method. It would have been cheaper for the Government to have paid the entire cost of drilling all tho dry holes classified as wildcat vrells in 1941. Tho estimated cost of drilling these holes was about 3 5 0 million, 1 / the estimated loss in revenue from percentage depletion attributable to oil and gas wells was more than $65 million. The chief difficulty with the argument for per centage depletion as a stimulus for oil discovery is that it is not confined to discovererst in actual operation, a large part of the benefit accrues not to prospectors but to operators and royalty owners. 1* The operator. Twenty major integrated companies have been reported to account for about 53 percent of the total crude petroleum production of the United States. While data for those 20 companies are not available, it was estimated that the major companies in 1941 accounted for only 25 percent of the vdld cat wells drilled and 36 percent of the footage drilled. 2/ Their 1/ 2/ At an average drilling cost of ‘ 317,300 per hole (reported for 1935 in Petroleum and Natural Gas Production. National Research Project, Works Progress Administration, p. 203), the 2,761 dry holes reported for 1 9 4 1 (see Exhibit 9 ) involved an expenditure of 347,765,000. At an average cost per hole of 320,000 (an out side figure allowing for possible increases in cost) the 2 ,7 6 1 dry holes in 1941 represented a total drilling cost of 355,220,000. Oil Weekly, March 2, 1942. share in the direct benefits of percentage depletion is much larger than their share in the prospecting for new oil, since they frequently purchase properties with potentialities which have been established by the activities of independent prospectors. lit The royalty owner. Royalty owners who bear little or none of the cost of prospecting obtain disproportionate benefits from percentage depletion. They have little or no investment to charge against income, which makes the percentage depletion allowance par ticularly valuable to them. The benefits of percentage depletion to royalty owners are confined largely to taxpayers having ownership prior to the discovery of oil. Purchasers of royalty interests in developed properties ordinarily pay a sufficiently high price to en title them to larger depletion allowances under cost depiction than under percentage depletion. c• Other provisions favoring the prospector There are other statutory provisions designed, to provide relief to the prospector. Section 105 of the Internal Revenue Code limits the surtax on individuals to 30 percent of the selling price in the case of an oil or gas property, the principal value of which has been demonstrated by discovery work done by the taxpayer. In addition, Section 721 of the Code provides for relief under the excess profits tax in the case of abnormal income resulting from exploration, dis covery, and prospecting. d. The mining industry The unimportance of percentage depletion in stimulating discovery and exploration is even clearer with respect to the mining industry than in the case of the oil industry. The development of mining properties in the field of the basic metals has passed beyond the stage of prospecting risk and adventure, and has settled down to a predictable scientific, and commercial business enterprise involving the use of low-grade ores. - 13 Except for the metals that have more recently become of commercial importance , domestic deposits of high grade ores were fully explored many years ago. Growing demand and technological development, further stimulated by the war emergency, have led to more extensive exploration of lovf-grade ores. Tills cannot be termed "discovery11, since the deposits for the most part have been known to exist. A recent proposal by the Secretary of the Interior calls for a program of extensive exploration of additional low-gre.de ores — to be carried out at Government expense. 1 / Moreover, most mineral deposits — including metals of more recent commercial importance — are not developed by original prospectors. 3 • Percentage depletion cannot be .justified by any special risks in the oil industry The hazardous character of the oil industry has been cited as a reason for retaining the specially favorable tax treatment accorded the industry through percentage depiction. The possibility that percentage depletion may permit the recovery of considerably more than the actual cost of exploration and development of a productive well has been said to be justifiable on the ground that the excess is needed to compensate for the cost incurred in connection with wells that never become productive. The answer is that percentage depletion is largely ineffective in accomplishing the desired objective and that the law contains other provisions for the offsetting of losses against gains. Further, the past two decades have seen changes in the organization of the oil industry that have made it better able to boar the risks of prospecting. Larger companies have become more important and have shouldered a larger part of the cost of prospecting. 1/ Department of the Interior, Press Release, February 16, 1942. - 14 - a. Provisions for the offsetting of losses against profits Percentage depletion is of no help to the operator who loses his capital in repeated unsuccessful vcutcures, since he gets the benefit of percentage depletion only if he develops property that yields a net income. On the other hand., the operator who’engages in both successful and unsuccessful ventures is permitted, both under the present law and the Treasury’s proposals, to offset the cost of dry holes and unproductive leases against current income from productive property^ he may also carry forward operating losses for two years. Consequently, even without percentage deple tion, substantial provision is made for the offsetting of losses on unsuccessful ventures against gains in successful ventures. No satisfactory reason has been offered why one operator should be permitted to recover untaxed more than his capital investment be cause another has lost his capital. b. Changes in the structure of the industry During the twenty years of discovery and percentage depletion the structure of the oil industry has changed substantially. The industry is now in a much better position to offset losses against income from successful wells, and thus to distribute the prospect ing risk. Domestic production of crude petroleum in 194-1 was about four times as great as in 1918. The estimated investment in crude petroleum production of $5«7 billion in 19355 together with invest ment in transportation, refining, and marketing, makes the combined petroleum industry the fourth largest in the country in terms of investment. (Exhibit 10 ) The gross investment in petroleum properties, plant and equipment more than doubled from 1921 to 1938, increasing from $6.5 billion to $14-.8 billion. (Exhibit 11.) This increase by the integration marketing with the distributed over a in the size of the industry has been accompanied of production with transportation, refining and result that the risks of prospecting arc actually very large aggregation of capital. The twenty 15 - major integrated companies already referred to as accounting for about 53 percent of the crude petroleum production of the United States, also have 72 percent of the mileage of crude oil pipe lines, 87 per cent of the tonnage of oil tankers, 76 percent of the crude oil re fining capacity, and 80 percent of the gasoline calcs of the entire petroleum industry in the United States, (Exhibit 12) This integra tion is the development of recent years. Six important refining and marketing organizations that ovmed no important producing properties in 1918 nofr account for 38 percent of the crude petroleum production of the 20 major companies and 16 percent of the national total, (Exhibit 13) Although those largo producers account for a smaller share of prospecting and exploration than of production, they now boar more of the cost of exploration, either directly or indirectly, than they did when discovery depletion was first enacted. The use of scientific methods for locating oil deposits, deeper well drilling, and other factors increasing capital requirements have tended to favor the large operator* Large producers also make what arc termed dry hole contributions to independent wildcat tors and pur chase leases in prospect areas from the wildcatter. c. Loans to finance drilling Concern has been expressed that the elimination of percentage depletion would make it ¡difficult to borrow money, to finance drill ing for oil* But the indicated practice is that bank loans arc commonly made only on the basis of productive properties. The servicing of such loans depends on the ability of the operator to recover his capital investment and to earn a sufficient margin over his operating costs to pay interest on the loan. The Treasury proposal would in no way interfere with the recovery of the capital investment since depreciation and depletion allowances would be permitted equal to the amount invested. Moreover, the interest paid on the loan is an allov/ablc deduction from gross income in computing taxable income. Consequently, percentage- depiction does not bene fit the taxpayer unless his income exceeds the amount needed to repay capital cost and to pay interest on outstanding loans, i.c., unless he is a good credit risk Yiithout the benefit of percentage depletion. - l6 - 4. The elimination of percentage,depletion m i l simplify the computation of the tax Percentage depiction is not a simple method of computing the depletion allowance. Under existing law percentage depletion is computed separately for each property. This involves serious difficulty, first, in determining the price of the product at the property, and, second, in allocating expenses. The extensive litigation that has resulted from the necessity of computing per centage depiction for each property separately is sufficient evidence of its complexity. Moreover, the provision for percentage depiction has not obviated the necessity of computing depletion based on cost. Since taxpayers have the option of using the one or the other basis, they generally compute cost depiction in order to protect themselves. Furthermore, corporations now have cost depiction figures available, for they ordinarily use cost depletion rather than percentage deple tion in their reports to stockholders. It is also necessary to compute cost depletion under the present law for the purpose of determining Hearnings or profits” so as to tell whether a distribution by a corporation is taxable as a dividend or not. Th:e excess of percentage depletion over cost depletion is included in. ”earnings or profits.” 1 / C. Percentage depiction is not .justified, as an offset to the heavy burdens of other taxes It is claimed that special relief from the income tax in the form of percentage depiction is justified because the oil industry now bears a heavy tax burden in the form of gasoline taxes, property taxes, and State production or severance taxes. This claim cannot be accepted. Neither the property nor the production taxes arc restricted to the oil industry alone. They affect other industries as well and justify no special relief for this particular industry, irihile the gasoline taxes are peculiar to the oil industry, they arc borne in large part by the consumer rather than the producer. V Regs. 103, Secs. 19 115-3 and. 1 9 .1 1 5 -6 . Sec also Charles F. Ayer, 12 B.T.À. 2845 Elton Ifoyt, 2nd, 34 B.T.A. 1011. - 17 - II. ELIMINATION OF THE INTANGIBLE DEVELOBiENT EXPENSE OPTION The Regulations now give taxpayers the option of expensing intangible development costs of oil and gas properties. They also permit the expensing of the development costs of mines except the excess of costs over receipts for mines that have not yet reached the state of production. 1/ This excess must be charged to capital account to bo recovered through depletion. The Treasury recommends that the expensing of development costs be eliminated and that all development costs of productive properties be capitalized. It is estimated that at levels of business for the calendar year 1942 and at the tax rates in the House bill the elimination of the expensing of development costs alone, without the elimina tion of percentage depletion, would increase the revenue by $87 million. 2/ The combined effect of eliminating percentage depletion and the expensing of development costs would be to increase the revenue by over $200 million. Both of these figures relate to the corporate tax alone and do not include some additional revenue that would be obtained from individuals. V 2/ Eor oil and gas wells, the Regulations give the taxpayer the option of charging Mintangihlo development costs11 to expense, or to capital account to be recovered through depletion. The Regulations define ttintangible development costs*’ as ’’wages, fuel, repairs, hauling, supplies, etc., incident to and necessary for the drilling of wells.” /Regulations 103,Scc.19.23(m)-l67 For mines, the Regulations provide that all development costs may be charged to expense except development costs in excess of re ceipts while the mine is in the development stage. The latter shall be charged to capital account recoverable through depletion. /Sec. 19*23 (m/-l57 Development costs for mines are expenditures incurred in the development of the mine other than expenditures on depreciable property. $62.5 million from oil and gas and $24*6 million from mining properties• - 18 - When a taxpayer takes advantage of the option to charge intangible development costs to expense, he gets a deduction for part of his capital investment* When he takes further advantage of the percentage depletion ¿illowancc under the existing law, he ordinarily gets an allowance which is considerably in excess of the capital investment other than the intangible development costs which have been expensed* The expensing of development costs, there fore, amounts to allowing a double deduction, once when the costs arc incurred, and again through percentage depletion. (For illustra tions of excessive allovjancos, sec Exhibit 2) If percentage depiction were eliminated and cost depiction substituted, the option of expensing development costs would not involve a double deduction. In that case, if development costs were capitalized, they would be included in the ba^so to be depleted and would be recovered through depletion allowancesj if the costs were expensed, the base to be depleted would be smaller and hence the depletion allowance less. Expensing of development costs should be eliminated, however, regardless of the action taken with respect to perccnta.go depletion. This privilege is not permitted to other groups for comparable capi tal outlays. The drilling cost of a productive -well is a capital investment. There seems no more justification for allowing the capi tal investment in the well to be deducted from current gross income than for allowing the retailer or mnnuf a ctur or to deduct his capital investment from his gross income at the time when the investment is made. The original option for oil and gas wells dates bs.ck to 1917« The regulations bontemplate d development work done directly by an operator; they are written in terms of expenditures by an operator on wa.gcs, fuel, and other items. i/ The trend in the industry since 1 / n ...such incidental expenses as arc paid for wages, fuel, repairs, hauling, etc., in connection with the drilling of wells and further development of the property, may, at the option of the operator, bo deducted as an operating expense or charged to capital account. 11 Art. 170 of Regulations 33 3 promulgated October 3 5 1917. - 19 - the adoption of the regulations has been toward drilling by indc— pendent contractors. In such eases. the drilling costs arc even more clearly capital expenditures instead of current expenses* Furthermore, at the time the option Vías originally extended, depletion vías based upon and limited to cost, so that no double deduction was involved in the option to deduct intangible drilling costs* If the costs were deducted, there was that much less capital investment to recover through the depiction allowance. The expensing of develop ment costs should certainly have ceased when percentage depletion was introduced in 19 2 6 . It may be suggested that the expensing of development costs could be disallowed merely by changing the Regulations • This would lead to litigation and uncertainty which would probably not bo finally settled for several years* It might be claimed that the interpretation given by the Regulations has become imbedded in the statutef since it is of long standing and has been retained un changed in the Regulations concomitant with several re-enactments of the basic legislation* To avoid controversy, it would be best to eliminate the expensing of development costs by statute rather than by amending the Regulations* The elimination of the option to expense intangible development costs has been objected to on the grounds that taxpayers would have difficulty in segregating such expenses from others. The experience of the Bureau of Internal Revenue does not support this claim* Statements have been made by the Independent Drillers Association that more than 80 percent of all oil wells arc drilled by members of their Association* Most of these are drilled at a fixed price under a contract that differentiates intangible costs from others* III. POSSIBLE ALTERNATIVES TO TIE ELIMINATION OF PERCENTAGE DEPLETION The Treasury is firmly convinced that percentage depiction should be completely eliminated* In ease the Committee prefers some modification of percentage depletion at this time, the following suggestions along that line are offered. - A. 20 - Reduction of the percentage rates. Percentage depletion might be retained with a reduction in the percentage rates allowed. Estimates of the revenue effect of various changes in the rate arc presented in Exhibit 14.. The reduction should apply not only to the percentage of gross income but also to the net income limitation. The latter might be reduced from 50 ¡ocrcent to 25 percent of the net income from the property. B. Limitation on aggregate amount of deduction. If it is thought that the percentage form of computation offers some measure of simplicity in determination of taxable income, there should at least be a limitation so that the aggregate amount of depletion deducted cannot exceed the taxpayer’s capital investment in the property. Such a limit should be provided even if the rates of percentage depletion arc reduced as mentioned in the preceding paragraph. C. Continuance of percentage depletion for stripper •wells and marginal mines only. If the Committee should conclude that it is desirable to continue percentage depletion for stripper wells and marginal mines, the Treasury is prepared to make suggestions as to the limits and details for carrying such a policy into effect. D. Continuance of percentage depletion for new discoveries. If the Committee should feel that the subsidy of pcrcenta.ge depletion is desirable so far as it is actually effective to stimulate new discoveries, the Treasury is also prepared to make suggestions as to provisions which would confine the special, allowance to those who actually bear the costs and risks of exploration and discovery. - IV. 21 - CONCLUSION The Treasury has made many studies of percentage depletion and related allowances in the past several years. It has given Co-iufiu. consideration to the -objections repeatedly advanced against the elimination of those special allovanccs. These objections have been re-examined in the light of the special needs for the war progrcm It is found that the elimination of percentage depiction and the expensing of development costs m i l not interfere with the v/ar effort} vd.il yield over $200 ndllion of much needed revenue, and will remove from the statute a long standing and inequitable privilege • ibus 3 it vd.ll contribute subs tantia,lly to the v-/ar effort, in terms of revenue and national morale. Exhibit 1 Average selling price, net profit and cost depletion per barrel of oil produced in 1939, 1940 and the first nine months of 1941. • • * 1939 » • Average selling price • 1940 • • • • 1941 (9 mo*) $1.022 $1.018 $1.105 Net cost of production .785 .759 .756 Net profit margin .237 .259 .349 Depletion based on cost .064 .059 .055 Net profit before depletion ( 3 ^ 4 ) .301 .318 .404 50$ of net profit before depletion .151 .159 .202 Ratio, cost depletion to average selling price (4 $ l) Ratio, 50$ of net profit to average selling price (6 ? l) Source* 6.3$ 14.8 5.9$ 15.6 5.0$ 18.3 Data from U. S. Tariff Commission. Based upon a questionnaire survey covering approximately 2,500 operators with 70$ of the nation’s oil production. EXHIBIT 2 Percentage depletion and intangible development costs of a leading oil company for 10 oil properties In the East Texas field 1. Cost of properties (including additions to cost) ¡#3.,001,318 2. Depletion sustained on cost 3. Depletion allowed under existing law 4. Ratio of depletion allowed to cost of properties 121.1% 5, Intangible development costs expensed 3,083,271 6, Total deductions for depletion and intangible development costs 6,718,815 Cost of properties plus intangible development costs 6,084 ,589 7. 8, Ratio of total deductions to cost of properties plus intangible develop ment costs 701,604 3,635,544 110.4$ 9. Original oil reserves (barrels) 64,408,000 10, Remaining oil reserves (barrels) 48,704,533 11. Percent of original reserves remaining Source: 75*6$ Schedules filed 'with income tax returns 1931-1937. EXHIBIT 3 Net income and provision for Federal income taxes of selected oil companies for I9HI, with provision for Federal income taxes less than 31 P er cent of net income, as reported in Moody’s Industrials Supplement • Net income : Provision Taxes : before Federal : for Federal a percent • taxes : income taxes l/ of net income • Company • Major Companies $2 3 ,5 1 5 .5 3 5 7 ,6 7 9 ,3 2 6 6 7 ,7 0 ^ ,6 8 1 7 .7 0 0 ,7 3 2 $ 6 ,0 7 8 ,5 5 8 1 ,7 6 6 ,0 0 0 15,830,000 i ,H6 i ,5 0 0 Bishop Oil Co. 5 6 ,5 6 2 Devonian Oil Co. 7 1 0 ,9 0 7 Houston Oil Co. of Texas 1 ,2 3 5 ,1+00 Kirby Petroleum Co. 1 8 6 ,0 3 0 North American Oil Consolidated 207,101 Plymouth Oil Co. 1,73^,590 Republic Natural Gas Co. 3/ 7*+5.759 Republic Petroleum 1 2 2 ,6 9 5 Superior Oil Co. 16H ,5 0 3 Texas Gulf Producing Co. 3 Ho,99H 3 5 0 ,1 2 3 Universal Consolidated Oil Co. Wellington Oil Co. 2 0 8 ,59H Wilcox Oil Gas Co. 3H9,25H i ,Ho o Phillips Petroleum Co, Skelly Oil Co. Texas Corporation Union Oil Co. of California 2 5 .8$ 2 3 .O 2 3 .H I9 .O Minor Companies Source: 16,57*+ 2U .3 0 3 18,609 3 7 ,0 0 0 63.356 85,600 15,619 18,000 2+t,2 6 U Hi, 250 15,9*+S 9,500 2/ 2/ 2/ 2/ 2] 2/ 5/ 2/ 2.5 2.3 2.Ó 10.0 I7 .9 3.7 II.5 I2 .7 IO.9 7 .I 11.8 7*6 2.7 Moody’s Industrials Supplement through March 28, I9H2 . l/ l’or Phillips Petroleum Co., includes $302,100 for excess profits taxes; no other company in this table reported separately reserves for excess profits taxes. 2f May include State income taxes. 3 / Fiscal year ending June 3 0 , I9HI. 4 / Reserve established for F e r r a i taxes, shown in reported balance sheet. Exilibit 4 Net income of selected oil. companies r^-norted! for income tax purposes compared vith npt income on the basis of cost derletion end tax spying from prrcpntage depletion (In thousands of dollars) Company * Year ' Depletion claimed : for Income tax : Cost purposes 1/ ..: depletion : Taxable net income re ported 2/ Net income based on cost depletion 2/ Tax saving from percentage depletion Under 1937:Under H.R. 7378 Act rates: rates A 1937 9,800 600 -5,000 4,200 630 1,890 B 1937 10,100 2,900 »5,900 1,300 195 585 C 1937 3,600 400 800 4,000 480 1,440 D 1938 5,300 1,900 6 3,400 645 3/ 1,527 f' Source: . . *v Form 1120, Corporation Income Tax Return 1/ tinder percentage depletion privileges. ?J After deduction of 85% of dividends received. 3/ Under 1938 Act rates. EXHIBIT 5 United States petroleum production, consumption, imports, exports, and estimated reserves 1926 - 19iU (Millions of barrels) Year Production: Domesti c consumpt ion of t crude oil: All oils : Gasoline : Duel Oil : Imports : Exports : Estimated of : of :reserves of crude oil : crude oil :crude oil l/ 1926 1927 192S 1929 193O 111 901 901 i»oo7 898 780 8O3 861 9U0 927 267 305 339 323 398 340 339 384 4i5 369 60 58 80 79 62 15 l6 19 26 24 1931 1932 1933 m k 1935 851 725 906 90S 997 903 835 868 92O 984 408 378 380 4io U35 335 308 324 340 3b7 ^7 45 32 36 32 26 27 37 4i 51 5/ 5/ 12,177 1 ,1 0 0 1 .2 7 9 i t2 1 b 1 ,2 6 5 1,352 1 .3 9 2 I.O93 1,170 I .1 3 7 1 ,2 3 1 1,323 1,483 482 519 523 556 589 660 4n 442 409 458 500 32 27 26 33 ^3 1/ lì 50 67 77 72 52 it 1 3 .0 6 3 15,507 1 7 ,3^8 18,483 19.025 2 0 ,3 0 0 1936 1937 I9 3 S 1939 1940 13kl 2 / Source: y It 5/ hi hi Petroleum Facts and figures Miro ij End of year figures, estimated by American Petroleum Institute. Includes only re serves in known and proved fields, and recoverable by production methods then known. / Estimated by Oil and Gas Journal, January 29» 19^-2. / Data not made public. 4/ Wo comparable estimate available. EXHIBIT S Production of crude oil in Pennsylvania and New York and average orice 1911 - 1929 Year Production (in thousands of barrels) 9,201 8,713 8 ,865 9,109 8,726 s, 467 8,613 8,217 8,983 8 ,344 1911 1912 1913 1911 1915 1916 1917 1918 1919 1920 1921 1922, 1923 1924 1925 1926 1927 1928 1929 Source: 8 ,4 0 6 8,425 8,859 8,926 9,792 10,917 11,768 12 ,5 5 9 15,197 : Average price : Penna, crude (per barrel) : $ 1 .3 2 1.64 2.49 1.91 1.59 2 .5 2 3.25 4 .0 0 4.15 5.97 3 .3 3 3.21 3 .3 3 3 .6 1 3.62 3 .5 6 3 .06 3.27 3.79 Bureau of Mines, Minerals Yearbook, 1911-1929. EXHIBIT 7 Total number of wells drilled for oil and gas and U. S. average price of crude petroleum at the wells, 1917 - 1941 m Year ; : 1917 191S 1919 ■ 1920 1921 1922 1923 1924 1925 1926 1927 1929 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 Total wells drilled 23,407 25,687 29,173 33,911 21,937 n / 0 1 C O y TS 2 1,W t i 2 5 ,6 2 3 29,319 O / T f e 22,331 2 6 ,3 5 6 21,240 12,432 1*5*040 12,312 18,197 21,420 25,390 33,075 27,493 27,717 30,040 32,140 : : : II. S. average price of crude petroleum per barrel 1.5 6 1.93 2.10 3 .0 8 1.73 1 .6 1 1.34 1.43 1.68 1.8b 1.3 0 1.17 1.27 1.19 •6 5 .87 .67 1.00 .9 7 1.09 1.18 1.13 1.02 1.02 1.12 1 / Source î For 1917 - 1839, Petroleum Facts and Figures (1941) pp. 79 and 82; (1837) pp. 79 and 92* For 1940 and 1941, data on number of wells from Oil and Gas Journal. January 29, 1942, data on average price from the Bureau of Mines. 1/ Preliminary. EXHIBIT 8 Humber of oil fields discovered with more than 1 million barrels of ultimate production and ultimate production, by method of discovery, 1522 - 1538 Tear 1922 1923 1924 1925 1926 1927 192s 1929 193c 1931 1932 1933 1934 1935 1936 1937 1938 : • : : Humber of oil fields • • Geo: Geo: Random : logical : physical : drilling : Ik 13 26 19 27 23 3*+ 2k 18 9 * 10 14 26 58 56 63 78 Total 1 9 2 2 -1 9 3 8 5 1 2 Source: — 1 2 3 1 10 k 8 k 7 18 30 38 8 8 1 2 4 3 2 3 1 Total : 64 1 1 4 3 4 2 22 21 27 22 33 29 37 37 23 20 15 21 45 92 97 ill 144 234 50 796 3 Ultimate production (millions of bbls.) : i Total : Geo : Geo:Geological : Random : logical : physical : and :drilling : Total : :Geouhvsical: 3*+3 532 550 544 1 .7 0 3 644 2 .3 6 s 847 166 55 152 180 385 635 424 331 281 1 0 ,1 3 8 - 5 8 208 90 S3 44 363 13 87 623 680 372 754 524 3^3 532 550 549 1,711 852 2,458 93O 210 418 l64 267 1,008 I .3 1 5 796 1 ,0 8 5 805 3.854 1 3 .9 9 2 501 148 17 7 243 22 7 83 3 .4 3 0 1 / 1 30 8 11 7 844 680 567 556 1,954 874 2.465 1 ,0 1 3 3 .6U0 1 ,1 6 5 199 267 1 ,0 0 9 1,345 804 1 ,0 9 6 812 5 .2 9 7 1 9 .2 8 8 747 “ 34 Petroleum and Hatural Gas Production, national Research Project, Works Progress Administration, July 1939. PP. 336-7. Rote: Bue to rounding, the sum of the individual items will not add to totals in all cases. 1/ Includes East Texas discovery. EXHIBIT 9 Humber of w ildcat o i l and gas w ells d r ille d , 1937 - 1941 i Wildcat w ells d r ille d Year : T o tal «Successful: Dry -------J ........... .. „....... JL ,... ,%e.U.s__L ..... .fafllea 1937 2,224 281 1,943 1938 2,638 369 2,269 1939 2,589 270 2,319 1940 3,038 366 2,672 1941 3,264 503 2,751 Source: Fre d e ric Laiiee, W ild c a t D r il li n g of W e lls ,H B u lle tin of American Associa t io n of Petroleum Geology. V o ls. 2225. EXHIBIT 10 Gross investment in the American petroleum in d u stry, by d iv is io n s o f the in d u stry , 1935 D iv is io n Producing N atural gasoline Transportation Refining Marketing T o ta l î Gross investment: *(in m illio n s o f : s d o lla r s ) : 1 5,6 6 5 270 2,127 3,400 1, 814 13,276 Percent of to ta l 42.7$ 2.0 16.0 2 5 .6 I 3 .7 100.0 Source: T.N.E.C# Hearings, Part 14A, p. 7701 "EXHIBIT 11 Gross investment in properties, plant and equip ment of the American petroleum industry, 1 9 2 1 - 19 3 8 | Year • 1921 1922 ]P23 1924 1925 1926 1927 1928 ,1929 1930 1931 1932 1933 1934 1935 1936 1937 19 33 * Gross investment . (in millions of dollars) 6,5 5 0 7 ,877 8,000 y2 - - l jjl 9 5500 10 .0 0 0 10 .5 0 0 11.0 0 0 11.500 12.000 12,100 12,200 12,300 12,700 13,276 13,775 i a ,525 14,750 ■- Source: ............. T.N.E.C* Hearings, Part 14A, p* 7700. - - .... -— EXHIBIT 12 Relative importance of twenty major oil companies in the petroleum industry of the United States : : Year or date Domestic production of crude petroleum (in thousands of barrels) : : 1937 Mileage of crude oil pipe lines: Trunk line Gathering line Total June 30, 1936 Oil tankers; Number Deadweight tonnage Sept. 3 0 , 1938 Daily crude oil refining capacity (in thousand barrels of crude oil input) Sales of gasoline (in thousand barrels) Source: VI « tt « II it Jan. 1, 1938 1938 All companies : ; Twenty major oil companies :Ratio of twenty : major oil :companies to :all companies l,2 7 9 ,löO 6 7 1 .9 9 2 57.820 5 2 ,7 6 0 110,580 ^9 .3 7 1 30,281* 79.655 85.4 57.4 7 2 .O 396 4 ,1 6 8 ,4 5 0 333 3 ,631*,650 84.1 8 7 .2 52-5f u,3 5 1 .2 3 .2 9 I.5 7 5 .6 5 0 9 ,6 6 5 1 / 1*0 7 ,6 8 9 2 / 80.0 Temporary National Economic Committee Hearings, Petroleum Industry, Part l4-A, pp. 7714, 7720, 7730, 7731. 7817. i-»jcui / Total U. S. gasoline consumption. / Includes only 18 companies. EXHIBIT IS Gross production in 1933 of major oil*companies having no important producing properties in 1918 1/ Name of company Atlantic Refining Co. Continental Oil Co. : 1933 production : (in thousands of ; barrels) 1 5 ,4 1 7 27,337 Socony Vacuum Oil £0. 2/ 58,431 Starami Oil Co. (Ind. ) 37,401 Standard Oil Co. (N. J.) 60,620 Standard Oil Co. (Ohio) Total t-jL' 6 companies 199,617 Total for 20 major companies 528,437 Total for 6 companies as a percent of total for 20 major companies Ü. S. Total Total for 6 companies as a percent of total for U. £. Source; "mJ 2/ 2/ ____2§1 37.3% 1,214,355 2/ 16.1% Production data from T'!EC Hearings. Part H - A , p* 7779, Ini ormation as to crude production of companies in 1913 from description of company’s operations in Moody’s* 1919, Standard Oil of New York, a component of Socony Vacuum Oil Company, acquired important producing properties in 1913* Petroleum Facts and Figures. 1941, p. 6 4 EXHIBIT Ik Estimate of net increases in revenue 1/ from various changes'in the percentage depletion allowance, and the_ja!4mination of the option to expense intangible development costs (Millions of dollars) I. j?^*aina'fcing option to expense intangible development costs, a (a) Eliminating percentage depletion * * (b) Reducing percentage depletion to: (1) Rates in Schedule A (2) Rates in Schedule B (3 ) Rates in Schedule C 11 * option to expense intangible development costs, and (a) Eliminating percentage depletion * (b) Reducing percentage depletion to: (1) R ates in Schedule A (2) Rates in Schedule B (3 ) Rates in Schedule C Schedule Present law Schedule A Schedule B Schedule C ,1/ : Oil and : :gas wells : Metal mines : : Coal mines : Oil and :Mining gas wells : Total 172.7 31.0 2 0 3 .7 133.^ 1 2 0 .7 108.2 2 7 .8 2 2 .5 2 0 .6 161*2 1^3*2 128.8 9 8 .0 2 6 .1 12U.1 U7 .2 36.1 2 6 .3 1 2 .U 7.0 5.7 59.6 ¡*3-1 3 2 .0 Sulphur 27^ 15$ 5$ 23# 15i 17Ì 20 8 10 11 5 5 5 12| 15 i6§- At rates of tax under the Revenue Bill of I9U2 (H. R. 737s) by the House of Representatives July 20, 19U2 . a,s passed CHART I AVOIDANCE BY 4 MAJOR OIL COMPANIES Due to Excess of Percentage Depletion Over Cost Depletion MILLIONS 0 ______ I______ 2 3 4 OF D O LLAR S 5 6 7 8 9 10 Company A (1937) Ü Cost Depletion Percentage Depletion TAX SAVING: Under 1937 Act Rates Under H.R. 7378 Rates Compony B (1937) Cost Depletion Perce:..age Depletion TAX SAVING: Under 1937 Act Rates I Under H.R. 7378 Rates Company C(I937) Cost Depletion Percentage Depletion TAX SAVING: Under 1937 Act Rotes ■ Under H.R. 7378 Rotes Company D(I938) Cost Depletion t m m m m Percentage Depletion TAX SAVING: Under 1938 Act Rates Under H.R. 7378 Rates 3 4 5 MILLIONS OF 6 7 8 D O L L A R S 10 II Saurea: Saa Exhibit 4 Office of the Secretary o f the Treasury Division of la x Research B -3 3 5 CHART E ANNUAL ADDITIONS OF RESERVES, TOTAL PROVED RESERVES AVAILABLE, AND ANNUAL PRODUCTION 1920 1922 1924 1926 1928 1930 1932 1934 1936 1938 1940 (942 Office of the Secretary o f the Treasuy Division o f l a x Research C -4 3 6 CHART m NUMBER OF WELLS DRILLED FOR OIL AND GAS AND PRICE OF CRUDE PETROLEUM, 1917-1941 Office o f the S ecretary o f the T reasury Division of Tax Research C — 426 CHART JSL OIL RESERVES DISCOVERED BY SCIENTIFIC AND RANDOM DRILLING, 1922-1938 NUMBER NUMBER OF FIELDS 1922 ’23 24 *25 ’26 ’27 ’28 ’29 ^0 *31 ’32 ’33 ’34 ’35 ’36 '37 '38 '39 ’40 ’41 ’42 ’43 Ultimate Production From Fields Discovered BILLIONSOF BAR RELS Amount of Production by Method of Discovery 3.5 — BILLIONS OF BARRELS yn ^ 3.0 2.5 2.0 1.5 1.0 .5 0 1922'23 24 '25 26 ’27 ’28 ’29 ’30 ’31 '32 ’33 ’34 '35 ’36 '37 ’38 ’39 ’40 ’41 ’42 ’43 PERCENT' PER CE NT Percentage of Production by Method of Discovery 100 — P771— P77I— I 100 75 50 25 0^1922 '23 ’24 ’25 '26 ’27 '28 ’29 ’30 '31 ’32 ’33 '34 '35 Sourct: Sat Exhibit 8 Office of the Secretary o f the Treasury Division of Tax Research ’36 '37 '38 '39 ’40 '41 '42 '43 rA . A J\ì V. Xf X n&kmm vwmmm rm mmm* mmxm m m w m s Presa Service g ^ u rd ay , Amami 8 . 1942. w m Secretary of the Treasury Mergenthau announced last night that lepcrta fro« the Federal Reserve Banka indicate that subscriptions for the additional issue of 2-1/2 percent Treasury Bonds of 1962-6? aggregated ♦964,776,800, through August 7, divided among the several Federal Reserve Districts and the Treasury as felloes i Federal Reserve District Boston Hew forte Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury Government Investment Accounts TOTAL Total Subscriptions flMftfald * Allotted ♦ 65,180,300 612,138,200 42.864.700 20,848,500 12.419.000 3*936*800 40.103.200 3,633,000 13.200.000 6,937,300 . 1 0 6 1 0 .2 0 0 16.787.700 350,600 U 5 .7 6 9 .1 0 0 ¡964,77«,«» sad th. aubscrl/tli t, TREASURY DEPARTMENT Washington FOR RE L E A S E , M O R N I N G N E W S P A P E R S , S a t u rday, A u gus t 8, 1942. 877/42 --------------~ S e c r e t a r y of night that reports that s u b s c r i p t i o n s T r e a s u r y Bonds August 7, Press Service No. 32-74 the T r e a s u r y M o r g e n t h a u a n n o u n c e d last f r o m the Fe d e r a l R e s e r v e Banks for the a d d i t i o n a l issue of 2-1/2 p e r c e n t of 1 9 6 2 - 6 7 a g g r e g a t e d & 9 6 4 , 778,800, divided among the several i n d icate th r o u g h Federal R e s e r v e D i s tricts an d the T r e a s u r y as follows: F e d eral R e s e r v e District Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas S an Francisco Treasury G o v e r n m e n t Inv e s t m e n t Accounts TOTAL Total S u b s c r i p t i o n s R e c e i v e d ¿c A l l o t t e d $ 65,180,300 612,138,200 42.864.700 20,848,500 12.419.000 3,936,800 40.103.200 3 , 6 3 3,000 13.200.000 6,937,300 10.610.200 16.787.700 350,600 115,769,300 $>964,778,800 TREASURY DEPARTMENT Comptroller of the Currency Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, August 11, 1942. 8/10/42 1 Press Service No. 32-75 During the month ended July 31, 1942, authorizations were issued to receivers for payments of dividends to the creditors of six insolvent national banks. Dividends so authorized will effect total distributions of $666,700 to 40,462 claimants who have proved claims aggregating $17,477,200, or an average payment of 3.81 percent. The minimum and maximum percentages of dividends authorized were 0.1 percent and 14.63 percent, while the smallest and largest payments involved in dividend authorizations during the month were $4,700 and $397,400, respectively. Of the six dividends authorized during the month, four were for final dividend payments and two were for final and partial interest payments. Dividend payments so authorized during the month ended July 31, 1942, were as follows: DIVIDEND PAYMENTS TO CREDITORS OP INSOLVENT NATIONAL BANKS AUTHORIZED DURING- THE MONTH ENDED _________________JULY 51, 19U2______________________ Name and Location of Bank Pirst Nat* 1 Bank of Du Quoin, Illinois Nature of Dividend Pinal Number and Percentage of Dividend Authorized Distribution of Funds by Dividend Authorized Total Percentage Authorized Dividends to Date 7*rll-i+2 6 th 8 .65^ $ 7 3 ,3 0 0 8 3 .65$ 2,181 Date Authorized Amount Claims Proved Number of Claimants $ 81+7,000 7-29-1+2 5 th I.I5# 35,900 3 1 .1 $ 5,8^3 3 ,1 2 1 ,6 0 0 Pirst Nat1! Bank of Joliet, Illinois Pinal Partial Int. 7-20-1+2 6 th 2 .21$ 72,300 1 0 0 .21$ 1 0 ,0 5 9 3 ,2 7 3 ,0 0 0 Middlesex Nat*l Bk Lowell, Massachusetts Pinal 6 th .1 $ 9,508 1+, 681,000 Pirst Natfl Bank Pontiac, Michigan. Pinal Partial Int. 7-7-U2 7 th 1-31% 3 9 7 ,^ 0 1 0 2 .97$ 11,385 1+,9 8 6 ,8 0 0 Pirst Nat rl Bk of Centerville, South Dakota Pinal 3 rd lU.63# 8 3 ,1 0 0 5i+.63$ 1 ,1+86 567,800 7-25-U2 i '— 7-18-U2 0 0 Pinal — I* «— 4 Ayers Nat'1 Bank of Jacksonville, Illinois 5 3 .¥ TREASURY DEPARTMENT Washingto n FOR RELEASE, MORNING NEWSPAPERS, Tuesday, August 11, 1942. 8/10/42 Press Service No. 32-76 The Secretary of the Treasury announced last evening that the tenders for $>350,000,000, or thereabouts, of 92-day Treasury bills to be dated August 12 and to mature November 12, 1942, which were offered on August 7, were opened at the Federal Reserve Banks on August 10. The details-of this issue are as follows: Total applied for - $>594,007,000 Total accepted - 350,648,000 Range of accepted bids: (Excepting three tenders totaling |100,000) High - 99,925 Equivalent rate approximately 0.293 percent Low - 99.904 !f n " 0.376 ,r Average Price - 99.905 u " ” 0.372 M (51 percent of the amount bid for at the low price was accepted) -oOo- TREA3URT SSPABMÄT Washington fOR JUSLSA8E, MOHHINQ KES3PAPKRS, Taeaday. August II. 1912_______ Prees Service 1 •A0A3 Secretary of the Treasury Morgenthau announced last night that reports from the Federal Reserve Banks indicate that subscriptions for the additional issue of 2-1/2 percent Treasury Bonds of 1962-67 aggre gated $1,026,595*400, through August 10, divided among the several Federal Reserve Districts and the Treasury as follows? Federal Reserve District Total Subscriptions Received & Allotted Boston hew York Philadelphia Cleveland Richmond Atlanta Chicago St» louis # 66,621,900 654*620,300 46,171*600 22,541*300 14,407,700 4,498,000 42,905*400 3*926,400 14,397*000 7,307,100 10*910,600 17,935*400 383*200 115*769,300 Minneapolis Kansas City Dallas San Francisco Treasury Government Investment Accounts TOTAL 0 ¿1,026,595,400 0 Ö TREASURY DEPARTMENT. Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, August 11, 1942_________ 8 / 1 0 / 4 2 ------------------ Press Service No . 32-77 Secretary of the Treasury Morgenthau announced last night that reports from the Federal Reserve Banks indicate that sub scriptions for the additional issue of 2—1/2 percent Treasury Bonds of 1962-67 aggregated $1,026,595,400, through August 10, divided among the several Federal Reserve Districts and the Treasury as follows: Federal Reserve District________ Total Subscriptions Received & Allotted Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury Government Investment Accounts TOTAL -oOo | 68,821,900 654.620.300 48,171,800 22,541,300 14,407,700 4,498,000 42.905.400 3,926,400 14,397,000 7,307,100 10,910,600 17.935.400 383,200 115.769.300 $T"/026,595,400 ÎRgàSUKT DSPAETMEMt ttbahington Frasa Servie« FOR BûiSDIATI EELMSR, Tu«td»r. Augutt 11. 19i2 Sécrétary ©f tha traaaïur; y announced tha «ubacription figure» and tha basis of allotaie«t for tha cash off«ring of 7/8 per cent Treasury Certificat»» of îndabtadnaa» of Sari«« 0-1943* Report» recaived from tha Fédéral Raeerva Bank» show that •ubacription» aggregate $3,273,000,000, Subaeription» in anoont» up ta and including 125,000, totaling about 871,000,000, wara allottad in full* Snbseriptlona in «uaounts orar $25,000 wara allottad V? P«r- cant, on a »traight percentage baaia, but not la»» than $25,000 on any »ubacription, with idjuitaaati, wliara neceaaary, to tha $1,000 dénomination* Détail» a» to aubaorlption» and allotments will ba announced when final report» ara raoaivad from tha Fédéral Reeerve Bank»* TREASURY DEPARTMENT Washington FOR IMMEDIATE R E L E A S E Tuesday, August 11, 1942 Press Service Eo. 32-78 Secretary of the Treasury Morgenthau today announced tne subscription figures and the basis of allotment for the cash offering of 7/8 percent Treasury Certificates of I n debtedness of Series B-1943. Reports received from the federal Reserve Banks show that subscriptions aggregate § 3,273,000, 0 0 0 . Subscriptions in amounts up to and including ^ 2 5 ,0 0 0 , totaling about $71,000,000, were allotted in full* Subscriptions in amounts over $ 2 5 ,0 0 0 \n q t q allotted 48 percent, age basis, but not less than $ 2 5 ,0 0 0 w i t h a d j u s t m e n t s , where necessary, on a straight percent on any one subscription, to the $1,000 denomina tion. Details as to subscriptions and allotments will be a n nounced when final reports are received from the federal Reserve Banks* -0O 0- TBEASUBY d e p a r t m e n t W ashington FOB i m m e d i a t e b e l e a s e , Wednesday, August 12, 19^2. Press Service No* 3 2 -7 9 The Bureau of Customs announced today preliminary figures for imports of commodities within quota limitations provided for under trade agreements, from the beginning of the quota periods to August 1, 19^2, inclusive, as follows; Commodity Cattle less than 200 pounds each ; Established Quota ¡Unit of ; Imports as of ¡Period & Country:Quantity;Quantity ; August 1, 19^2 1 0 0 ,0 0 0 Head Cattle, 700 pounds or more each (other than dairy cows) Quarter year from July 1, 19^2 Canada . 5 1 ,7 2 0 Other countries 8,280 Head Head Whole milk, fresh or sour Calendar year 3>000,0 0 0 Cream, fresh or sour Calendar year 1,500,000 Gallon 547 Fish, fresh or frozen filleted, etc*, cod, haddock, hake, pollock, cusk and rosefish Calendar year 15*000,000 pound 2,S4l,.398 White or Irish potatoes Certified seed Other Calendar year 12 months Sept. 1 5 , 12 months September from 19^1 9 0 ,0 0 0 ,0 0 0 from 15 60,000,000 55,828 7 .9 0 4 (Tariff rate quota filled) Gallon 2,914 Pound 33.030.53^ Pound 1,249,542 Cuban filler tobacco, unstemmed or stemmed (other than cigarette leaf tobacco), and scrap tobacco Calendar year 2 2 ,0 0 0 ,0 0 0 Bed Cedar Shingles Calendar year 2,617,111 Square 1,958,422 ^1,77^ Number 1 5 .7 3 6 Silver or black foxes, furs, and articles; Foxes valued under $250 ea, and whole furs and skins Tails Pound (unstemmed equivalent) Period - May Nov, 19^2. All countries 12 months from December 1, 19^1 5§C00 14,206,372 Piece (import quota filled) - 2 - Commodity V l iI : Established Qjiota ? Unit of ¡Imports as of : Period & Country : Quantity : Quantity ¡August 1, 19U2 Silver or black foxes, furs, and articles: Paws,head, or other separated parts Piece plates Articles, other than piece plates Crude petroleum, topped crude petroleum, and fuel oil 12 months from December 1, 19^1 500 Pounds (Import quota filled) H 550 Pounds None M 500 Unit Calendar year Venezuela 2,082,57^,771 Gallon 3 1 7 ,3 6 6 ,1 1 1 6 3 0 ,0 9 7 ,1 9 6 Gallon 251,71^,859 Netherlands 9^*662,^90 11 Other countries 150,868,3^3 n Colombia | j Molasses and sugar sirups containing soluble nonsugar solids equal to more than 6$> of total soluble solids 2k Calendar year 1,500,000 Gallon (Import quota filled) (Import quota filled) 6 6 5 ,6 6 1 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, Au.gu.st 12, 19*42. Press Service No. 32-80 The Bureau of Customs announced today that preliminary reports from the collectors of customs show imports of cotton and cotton waste chargeable to the import quotas established by the President's proclamation of September 5» 1939* modified by the proclamation of December 1 9 , 19*40, and June 2 9 ^ 19*42, as follows, during the period September 2 0 , 19*41, to August 1 , 19*42: COTTON HAVING A STAPLE OP LESS THAN l-ll/l6 INCHES (OTHER THAN HARSH OR ROUGH COTTON OP LESS THa N 3 /*+ INCH IN STAPLE LENGTH AND CHIEPLY USED IN THE MANUFAC TURE OP BLANKETS AND BLANKETING, AND OTHER THAN LINTERS). Annual quotas commen cing September 2 0 , by Countries of Origin; __________________________ (In Pounds)_______ ______ _________________________ : Staple length less ¡Staple length l-l/8 H or more Country of : than 1-1 /8»____________ ? but less than l-ll/l6»______ I Origin j ; Imports Sept. : :Imports Sept. : Established : 2 0 , 19*41, to : Established :2 0 , 19*41, to --- -- ---------- ---- j Qjdota____ : August 1, 19*42: Quota :August 1, 19*42« Egypt and the AngloEgypt ian Sudan 783,8 1 6 Peru...... 247.952 British India.*•••«•••.« 2,003,483 China,....... «• §....... 1*370,791 Mexico,,,,. .......... *., 8,863,259 Brazil,*,,, 618,723 Union of Soviet ■ Socialist Republics... 1*75,124 Argentina............ . 5 .2 0 3 Haiti........... •••»..« 237 Ecuador....... . 9.333 Honduras.............. . 752 Paraguay. 871 Colombia* 12*4 Iraq...... ............. 195 British East Africa..... 2,2*40 Netherlands East : Indies................ 7 1 ,3 8 8 Barbados.......... Other British West Indies................ 2 1 ,3 2 1 Nigeria...,............. 5.377 Other British West Africa 2/ ........... 1 6 ,00*4 Algeria and Tunisia..,.. Other French Africa ¿/.. 689 Total 1*4,5 1 6 ,8 8 2 1/ 2/ 3/ S/ 2 4 7 .9 5 2 70,26*4 8,883,259 6 1 8 ,7 2 3 20 3 2 9.333 ~ — — *4-3 .1451*566 2 .0 5 6 ,2 9 9 6*4,9*42 2 ,6 2 6 3,808 *42,062,663 3 ,1 2 2 ,3 0 0 1 9 6 ,9 3 0 3 435 506 - 6 # — ** A — — — - - - 29,909 41,759 - 1 2 ,5 5 4 - 30,139 30 _ — 9 .8 2 9 ,7 6 6 - 2,002 1,63*4 « *45,656**420 k/ *45,*423,6 6 1 - Other than Barbados, Bermuda, Jamaica, Trinidad, and Tobago. Other than Gold Coast and Nigeria. Other than Algeria, Tunisia, and Madagascar. Figures are shown by country of origin, although a ttglobal*1 quota was established by Presidential proclamation of June 29, 19*+2, effective July 29, 19*12. (2) 2/ COTTON CARD STRIPS,/COMBER Wa STE, LAP WASTE, SILVER Wa STE, AND ROVING WASTE, WHETHER OR NOT MANUFACTURED OR OTE1ERWISE ADVANCED IN VALUE, Annual quotas commencing September 20, by Countries of Origin: Total quota, provided, however, that not more than 33-1/3 percent 2/ of the quotas shall be filled by cotton wastes other than card strips zf■and comber wastes made from cottons of I-3/16 inches or more in staple length in the case of the following countries: United Kingdom, Prance, Netherlands, Switzerland, Belgium, Germany and Italy: Country of Origin United Kingdom..... . Canada..... . France.... British India«*«•«••• Netherlands,••,»••••• Switzerland.......... Belgium...... ......* Japan................ Chino,# Egypt......... . Cuba. ...... . Germany.... . Italy....... . Total l/ 2/ (In ; : Established ; : TOTAL QUOTA : Pounds) TOTAL IMPORTS : Established: Imports Sept, , Sept* 20, 1941,I 33-1/3$ ! 20, 1941, to Aue, 1, 1942. » to Aug. 1,1942 : Total Quota: 4 .3 2 3 ,4 5 7 2 3 9 ,6 9 0 227.420 6 9 ,6 2 7 68,2*4-0 *+4,388 38*559 341,535 1 7 .3 2 2 8,135 6 ,5 *+*+ 7 6 .3 2 9 2 1 ,2 6 3 434 2 3 1 .6 1 3 6 9 .6 2 7 — — — —• 1,441,152 75,807 •22,747 1 4 ,7 9 6 12,853 — — •— — 2 5 .4 4 3 7,088 434 5.482,509 3 0 1 ,6 7 4 1,599,286 434 — — — — — — — Included in total imports, column 2. The President1s proclamation, signed March 31» 19^2» exempts from import quota restrictions card strips made from cottons having a staple 1—3/16 inches or more in length. TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Wednesday, August 12, 19^2» Press Service No. 32-81 The Bureau of Customs announced today preliminary figures showing the quantities of coffee authorized for entry for consumption under the quotas for the twelve months commencing October 1, 19^-1» provided for in the InterAmerican Coffee Agreement, proclaimed by the President on April 15, 19U1 , as follows: Country of Production : Quota Quantity ; (Pounds) 1/ Signatory Countries: Brazil Colombia Costa Rica Cuba Dominican Republic Ecuador El Salvador Guatemala Haiti Honduras Mexico Nicaragua Peru Venezuela 1 ,8 2 1 ,8 3 6 ,0 2 5 6 1 7 ,4 8 3 ,1 5 1 39,185.7 0 7 1 5 ,7 2 6 ,0 2 9 2 3 .5 2 3 .3 0 2 29.4i5,l4o 123,781,103 104,900,424 53,868,211 4 ,1 9 1 ,6 9 4 9 6 ,4 3 8 ,7 2 8 ‘*0,893,390 4 ,8 9 7 ,1 2 2 5 7 .O8O .6 6 5 Non-signatory Countries: British Empire, except Aden and Canada Kingdom of the Netherlands and its possessions Aden, Yemen, and Saudi Arabia Other countries not signa tories of the Inter-American Coffee Agreement 1/ 2/ Authorized for entry for consumption As of (Date ) ; (Pounds) August 1, 19^2 905,382,528 ^ 1 ,5 8 3 ,2 2 3 August 8 , 19^2 2 / 3 0 ,7 1 7 *8 2 9 August 1, 19^2 ~ 6 ,5 5 6 ,0 0 7 (Import quota filled) August 8, I9 I+2 2 / 1 8 ,4 4 9 ,7 3 8 August 1, 1942 82,541,382 August 8, 19^2 2/ 9 1 ,5 0 9 ,4 4 6 it **0 .4 3 0 ,1 5 3 1/ 11 2/ **.15**. 769 August 1, 19^2 3 8 ,5 4 2 ,2 7 9 11 27,847,741 August 8, 19^2 2/ 3 ,1 1 0 ,9 0 1 tt 4 7 ,8 1 6 ,7 6 0 1/ 11 2 2 ,9 7 6 ,4 7 4 (Import quota filled) 25,570,406 August 1, 19^2 5,034,821 1 5 .9 5 9 .7 6 1 11 (Import quota filled) (Quotas revised effective February 2 6 , 19^2» and July l6 , 19^2* Per telegraphic reports* -oOO' 1 3 ,1 0 7 ,1 9 1 1 ,3 1 6 ,5 6 9 TREASURY DEPARTMENT Washington EOR IMMEDIATE RED*BASEI Wednesday, August 12, 1942. press Service No. 32-82 The Bureau of ¿¡ustoms announced today preliminary figures showing the quantities of wheat and wheat flour enteied^ or withdrawn from warehouse, for consumption under the import quotas established in the President's proclamation of May 28, 1 9 4 1 , as modified by the President's proclamation of April 13, 1942, for the twelve months commending May 29, 1942, as follow®-; Country of Origin Canada China Hungary Hong Kong Japan United Kingdom Australia Germany Syria New Zealand Chile Netherlands Argentina Italy Cuba Prance Greece Mexico Panama Uruguay Poland and Dansig Sweden Yugoslavia Norway Canary Islands Rumania Guatemala Brazil Union of Soviet Socialist Republics Belgium • Wheat flour, semolina, •crushed or cracked wheat, WHEAT !and similar wheat products : Imports 1 ; Imports Established :May 29» 1942, to Established tMay 29, 1942, to » Quota :August li 1942 ; Quota ; August 1 . 194?« (Bushels) (Bushels) (Pounds) (Pounds) 795,000 .100 100 100 100 2 ,0 0 0 100 1 ,0 0 0 100 — 1 ,0 0 0 100 100 100 100 800,000 795.000 — — — m — — « « — — — — — — 3 ,8 1 5 ,0 0 0 24,000 1 3 ,0 0 0 1 3 ,0 0 0 8 ,0 0 0 7 5 ,0 0 0 1 ,0 0 0 5 ,0 0 0 5 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 14,000 2 ,0 0 0 1 2 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 1 ,0 0 0 _ 3,674,106 — — _ rT 44 ¿mà _ § — _ £ — — — » — — « 795,000 -o0 o~ — — 4,000,000 ** — 3.é74,X50 ro lla« N tN sé» cui e tta r lis titi tione fetft (3) ** #a«t* r# girietia© tf 6 ia *ì)llltia * lappisi tisi» ruliisg* fisi# p M l l « ¿U si fih^ll m % be ¿«en«d to teÉ& bii or etècrsric© veptvN t tri® ordlcery par«boa#» sul®, N aasfcr» piange, cr cf# or sibilar dmling in, »ecurifclac «U«k are iseued fegr9 « r là® a b ilitim i of 9 «ow Walltppiac m to p ro ib ii ar r c a tr ic t ixiauscciiaoc lncidcntal Unirete# ( 4) &s umcX la tb l» pescami ^ 1 .111% tlw team *?fellippt&* eacpaip» «fe&ll ama* (a ) àny pastacarshipt « a fc ^ la tlo n , t e r ; e re d oti m vUmx erg siateti«® arg-aiiisad satócr tèa 1«;»» #f tèe fMlX?vX m ItXiiisC* mé chtós prior fca 2wmm$ X, 194% mtXmé 1% principe! imem fm tu « Fliilipplfò« Xal&&$»$ (è) la ? aala ps^prNt^rehlp ablah prter to Jeauery Xt 1945, deriwà ita principili £rm§ m à ma pri&mril^ caf&.gcé la bucine« in , tta» Philipp!»* Xalimégj acci {©Ì ¿aay m$m% traete® » tem ei c r c r pe^in^ egest, or ether repreeentetlv« of ar far fttilip piae eoasf^ay te tè# « N a t N at l t cete ee sueh* / s / / f ^ r i O i-ofjbk, 3- 10-42 P^X^u^St m m or m n u i w a w r i M fui# * iSE^HMgr «ai fiatata* f w m m ly g w ^ r I • testar? o m M S f ^piotassi f ta# f t e « w H f f t u a - O « » * * ! ML1« * « untar lattata«* *•« ***** •* /"J***4 * Ssectttlw Ottar i#* 9193* Statica* M a l m a t w M JS£ l m è t & & »i%h ita» ta#«r à é % a» w * «Irta gip fNpttrt s@%|t X^éXf ItalaM«# te t#r#l|Pfc “■• * p m % m m m m 9 i M i i m *£ ita A U 6 1 2 $*ViO* 10*i 8BBG9X3EV* i S É i H0« &3&9» # M B ® ® ® # J B W W t l * dtK22R VB* tlSli «K?t2i® 3Ì$) M i f f w §^ tHE' ttaiiss «iti fi® » s t a *c?» m à m M m m m w f U M t a ttaSie nsr# ¿ m » w u t w i t© w ® Ìl) tóLsBS t o t o r l i M % a Itatata tota*«!? m £ r n 0 m t» tata g m m & k rollatis {* } In FMUp le# tafcftifflr i t o l i ito » ta f m P ^ H «** «a^ tminiiniinij « t o l t i « * ta* * * r* ita « ita la ta * tata#* Stata# gaf nr «ita m t o tat tot I M t r t o toLta®ton #r «f* «r ©lata C%) m tata « t o t o * p m m m . - «tali ratatota- «itala ita taitaé itata# t o r%4to?» pta*r « ÌBdi3FWlj^ spìsìus gif* pur » swmsi » (a) tai «t nr ta *tas»tai$ii «ita* ntsta|p.ita^ nr «tal*- ^ p^ì ImSì # « h§? jPtaytay^Sm» ***Y righi* mqp frtaltata «ita rtap»i ta* #r stirto!? «* fe«X^ ta# «ita tarata ta * tata tata f%taippte« «tapagr «ita netantai# èta?# «toltali«# «r •afta#® « ini«## « t a m i i » potatasi# a» t a p t o t a t a ita«### «r t a t o M t&ariM Uw Ì0MM& «V «I» *«ar*terj- ai te« U t fMiri«ilan»« ¿iasfetlitt«« * ftoi I B i - m m «**»• r*»®w # il ®tó«r l i a i t a U o M ter ***** .v* s#ì't ‘ 1 fitau ii$ «to # é i s#$* 2f # Stai* I| M ita i* m i Fto«le ««• JS4* Tfta i« # « « « » 55 «tata «3*1 ¿ptiX M » Ì Ì W * ta « a t o t o W 1*« Gttor W S 5 # él^ M y i m » I** m $ > trnmmm® ^ ¿6« Ita!» «to i** f T O # 0«Ì3r % .a# «a^intot S w » Ì4# lf4l# *to Éptii Ì0f waJ #&,%«6E ■^-: -;;r :V ^Ì;-v ijBmiti vAr:;H gJ,ì^ ? > .^ ¿vSÌi-; -saè# isiSSiiafsB-: w IPilPSSS >-* U t ^941# 2 2 ? m U ffe ifpf. Wta» ■:Cr-i- aHi ■•" 2 - JltjHras pointed out by Treasury representatives that Philippine companies would not be permitted to use today’s ruling to avoid paying their obligations in any case where funds were available and such pay ments could be made on an equitable basis. In such cases the Treasury will license payments upon appropriate application by interested parties* /"Moreover, the Treasury expects Philippine companies to furnish their 1 ~T creditors upon demand with information concerning their present ability to pay their obligations. Any failure to furnish such information will be dealt with appropriately by the Treasury. treasury department Washington, D. C. Press Service No. i-J FOR IMMEDIATE RELEASE Wednesday, August 12, 1942 J^he Treasury Department today announced a moratorium on obligations of Philippine companies held in the United States. This moratorium does not apply to the obligations of the Philippine Government. Ypursuant to General Ruling No. 10-A issued today under the Presidential freezing orders^no Philippine company may make any payment in this country on its obligations and no person may enforce in the United States any claim or obligation against a Philippine company. Such payments can be made and such claims can be enforced only if a Foreign Funds Control license is first obtained. /Treasury officials stated that today*s action was intended to make it clear that the assets in the United States of Philippine companies were fully frozen so that the interests of all the parties involved could be fully and properly protected. It was pointed out that some of these Philippine companies had assets in the Philippines worth many millions of dollars before the war and only a relatively small amount of funded indebtedness. The companies do not have assets in the United States at this time to meet maturing obligations and since no one knows or could know, the present condition or value of property in the Philippines, it is, at the present time, impossible to deal fairly with the respective rights of stock holders, bondholders and other creditors. Under today*s ruling, the situation will be frozen until it is possible to ascertain the facts. TREASURY DEPARTMENT Washington POR IMMEDIATE R E L E A S E Wednesday, August 12, 1942. Press Service No. 32-83 The Treasury Department today announced a moratorium on obligations of Philippine companies held in the United States. This moratorium does not apply to the obligations of the Philippine G-overnment. Pursuant to General Ruling No. 10-A issued today under Presidential freezing orders, no Philippine company may make any payment in this country on its obligations and no person may enforce in the United States any claim or obligation against a Philippine company. Such payments can be made and such claims can be enforced only I f a foreign funds Control license is first obtained. Treasury officials stated that t o d a y ’s action was intend ed to make it clear that the assets in the United States of Philippine companies were fully frozen so that the interests of all the parties involved could be fully and properly p r o tected. It was pointed out that some of these Philippine companies had assets in the Philippines worth many millions of dollars before the war and only a r e l a t i v e ^ small amount of funded indebtedness. The companies do not have assets in the United States at this time to meet maturing obligations and since no one knows or could know, the present condition or value of property in the Philippines, it is, at the present time, impossible to deal fairly wi t h the respective rights of stockholders, bondholders and other creditors. Under t o d a y ’s ruling the situation will be frozen until it is possible to ascertain the facts. It was pointed out by Treasury representatives that P h i l ippine companies would not be permitted to’ use t o d a y ’s ruling to avoid paying their obligations in any case w h e r e %funds were available and süch payments could'be made on an equitable basis. In such cases^ the Treasury will license payments upon appropriate application by interested parties. Moreover, the Treasury expects Philippine companies to furnish their creditors upon demand w i t h information concern ing their present ability to pajr their obligations. Any fail ure to furnish such information will be dealt with appropri ately by the Treasury. -0 O0 TREASURY DEPARTMENT, Office of the Secretary, August 12, 1942 GENERAL RULING NO. 10-A UNDER EXECUTIVE ORDER NO. 8389, AS AMENDED, EXECUTIVE ORDER NO. 9193, SECTIONS 3(a) AND 5(b) OR THE TRADING WITH THE ENEMY ACT, AS AMENDED BY THE FIRST WAR POWERS ACT, 1941, RELATING TO FOREIGN ________________FUNDS CONTROL._________________ (1) Unless authorized by. a license expressly referring to this general ruling: (a) No Philippine company shall make any payment, or perform and covenant, duty, condition cr service within the United States on, or with, respect to, any direct or indirect obliga tion or security of, or claim against, such company. (b) No person shall exercise within the United States any right, remedy, power or privilege with respect to, or directly or indirectly arising out of or in connection with, any obliga tion or security of, or claim against, any Philippine company, including any right, remedy, power or privilege with respect to any guaranty, covenant or agreement that such Philippine company will perform any covénent, duty, condition, or service. (2) Unless otherwise provided, an appropriate license or other authorization issued by the Secretary of the Treasury shall remove all the restrictions, disabilities and other limitations imposed by this general ruling to the same extent as such restrictions, disabilities and other limitations have been imposed by this general ruling. (3) This general ruling shall not be deemed to prohibit or otherwise restrict the ordinary purchase, sale, transfer, pledge, or hypothecation of, or similar dealing in, securities which are issued by, or the obligation of, any Philippine company or to prohibit or restrict transactions incidental thereto. (4) As used in this general ruling, the term "Philippine company" shall mean; (a) Any partnership, association, corporation or other organiza tion organized under the laws of the Philippine Islands and which prior to January 1, 1942, derived its principal income from the Philippine Islands; (b) Any sole proprietorship which prior to January 1, 1942, derived its principal Income from, and was primarily engaged in business in, the Philippine Islands; and to) -Any agent, trustee, transfer or paying agent, or other representative of or for any Philippine company to the extent that it acts as such. RANDOLPH PAUL Acting Secretary of the Treasury TREASURY DEPARTMENT Comptroller of the Currency Washington FOR RELEASE, MORNING- NEWSPAPERS Thursday, August 13, 1942_________ Press Service No. 32-84 8/12/42 During the month of July, 1942, the liquidation of ten insolvent national banks was completed and the a f fairs of such receiverships finally closed. Total disbursements, including offsets allowed, to depositors and other creditors of these ten rec e i v e r ships, amounted to $29,726,606, while dividends paid to unsecured creditors amounted to an average of cent of their claims. 7 7 .5 2 per Total costs of liquidation of these receiverships averaged 7.11 percent of total col lections from all sources, including offsets allowed. Dividend distributions to all creditors of all a c tive receiverships during the month of July, amounted to $1,215,664. receiverships followst Data as to results of liquidation of the finally closed during the month are as INSOLVENT NATIONAL BANKS LIQUIDATED AND FINALLY CLOSED ______________DURING THE MONTH QE JULY, 1942__________ Name & Location of Bank Date of Failure Total Disbursements to Creditors Including Offsets Allowed First American NB & Tr Co. Berwyn, Illinois 6-2 1 -3 2 Joliet Nat*l Bank Joliet, Illinois 2-1 0 -3 2 3,860,438 12-9-33 262,476 First Natfl Bank Tamaroa, Illinois $ 4 0 7 ,4o4 Percent Dividends Declared to all Claimants 2 0 .2 Capital Stock at Date of Failure $ 72.33 I7 5 .OOO Cash, Assets, Uncollected Stock Assessments, etc.. Returned to Shareholders $ - 0 - 7 0 0 ,0 0 0 - 0 - 40,000 - 0 - 1 0 0 ,0 0 0 - 0 - 1 ,0 0 0 ,0 0 0 - 0 - 400,000 - 0 - 1 0 0 ,0 0 0 —» 0— 6 ,1 5 6 4/ l! 3 8 .9 First Nat’l Bank ¿/ Rochester, Michigan 12-1 2 -3 3 1 .5 5 3 .6U8 8 0 .1 3 6 / Commercial Nat*l Bank High Point, N. C. 2- 1 0 -3 2 6 ,5 3 6 ,0 8 4 99.68 11-15-33 4 ,3 ^1 ,6 5 2 84.25 4- 1 6 -3 1 2 ,6 7 1 ,8 9 2 53* 2- 1 0 -3 3 1 7 6 ,3^7 1 1 7 .9 9 2 1 / 100,000 11-1 5 -3 2 9 ,8 1 2 ,3 1 7 84.92 6/ 6 0 0 ,0 0 0 - 0 - 10-2 0 -3 1 104,348 2 5 ,0 0 0 1 1 ,7 1 6 4 / First Nat’l Bank Grand Forks, N. D. ll Monongahela NB Brownsville, Pa* Citizens Nat’l Bk Irwin, Penna. ll 1 / Diamond Nat1! Bk Pittsburgh, Pa. First Nat*1 Bk Cowen, W. Va. §_/ 2/ 1 1 6 .5 1/ - 2 - Receiver appointed to levy and collect stock assessment covering deficiency in value of assets sold, or to complete unfinished liquidation. 2/ Receiver elected by shareholders to continue liquidation after payment of principal and interest in full to creditors* %J 100$ principal and interest in full paid to creditors*. 4/ Partial return to shareholders of stock assessments previously paid in pursuant to election for continuance of receivership« ¿/ formerly in conservatorship. 6/ Including dividends paid through or by purchasing bank. TREASURY DEPARTHERT Washington EOR RELEASE, MORRIRG- RSWSPAPERS, Eriday, August 1 4 , 1 9 4 2 WW& Lhe Secretary of the Treasury, vites tenders for $350,000,000, | ' ury bills, bidding. ---- t- ^ -------- by this public notice, or thereabouts, in of 91-day Treas- to be issued on a discount basis under competitive The bills of this series will.be dated August and will mature November 18, payable without interest. ! — 1 9 , 1942, 1 9 4 2 , when the face amount will be They will be- issued in bearer form only, and in denominations of $ 1 ,0 0 0 , # 5 ,0 0 0 , $ 1 0 ,0 0 0 , # 1 0 ... $ 5 0 0 ,0 0 0 , and # 1 ,0 0 0 ,0 0 0 0 ,0 0 0 , (maturity value). ^ Tenders will be received at Eederal Reserve .Banks and Branches up. go fcne closing nour, two o ’clock p. m., Eastern War lime^ honday, August 1 7 , 1942. Tenders will not be received at the Treasury Department, Washington, Each tender must be for an even multiple of $1,000, and the price offered must be ex- • pressed on the basis of 100, with not more than three decimals, e. g., 99.92.5 . Enactions ^may not be used. It is urged that I.; tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Eederal Reserve Banks or Branches o n .application therefor.. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recogni_zed dealers in investment securities. Tenders from others must be .accompanied by payment of 10 percent of the face amount of Treas ury oixls applied for, unless the tenders are accompanied by an express guaranty of payment by an incorporated bank or trust company. ( | ! j| Immediately after the closing hour, tenders will be opened a_t "t*10 Eederal Reserve Banks and Branches, following which publie announcement will be made by the Secretary of the Treasury of chc amounb and price range of accepted bids. Those submitting .tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to a c cept or^reject any or all tenders, in whole or in part, and his action in any such respect shall be final* Payment of accepted tenders at the prices offered must be made or completed at the Eederal Reserve Bank in cash or other immediately available funds on August 19, 1942. 32-85 Over - 2 - ; ^he income derived from Treasury bills, whether interest or g a m from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treatmenr, as sucn, under Pederal tax Acts now or hereafter enacted ahe bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Pederal or State, but shall be ’exerrot iiom all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the united States, or by an.v local taxing authority. Por purposes ¡es of taxation the amount of discount at which Treasury bills are originally sold oy the United States shall bo considered, to be interest. Under Sections 42 and 117 (a) (1) of the Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other t h a n l i f e insurance companies) issued hereunder need include in his income tax return only the difference between the price paid for such bills, whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which] the return is made, as ordinary gain or loss. ■ Treasury [Department Circular Bo. 418, as amended, and this notice, prescribe^the terms of the Treasury bills and govern the conditions of their issue. Copies of the circular mav be obtainec from any Pederal Reserve Bank or Branch. -oOo TREASURY DEPARTMENT Washington FOR RELEASE, HORNING NEWSPAPERS, m d s y , August U , 1942._______ Press Service B/xyu Secretary of the Treasury Morgenth&u today announced that the subscription books for the current offering of 2-1/2 percent Treasury Bonds of 1962-6? will close at the close of business Satur day, August 15* Subscriptions addressed to a Federal Reserve Bank or Branch, or to the treasury Department, and placed in the m i l be fore 12 o *clock midnight Saturday, August 15, sill be considered as having been entered before the close of the subscription books* Announces«nt of the amount of subscriptions and allot ments and their division among the several Federal Reserve Dis tricts will be made when final reports are received from the Federal Reserve Banks* (p TREASURY DEPARTMENT Washington POR RELEASE,' MORNING NEWSPAPERS, Priday, August 1 4 > 1942 ^ ’ _______ 8/13/42 : Press Service N o . ,32-86 Secretary of the Treasury Morgenthau today announced that the subscription books for the current offering of 2-1/2 percent Treasury Bonds of 1962-67 will close at the close of business'Saturday, August 13. Subscriptions addressed to a federal Reserve Bank or Branch, or to the Treasury Department, and placed in the mail before 12 o 1clock -midnight Saturday, August 1 5 , will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and allotments and their division among the several federal Reserve Districts will be made when final reports are received from the federal Reserve Banks. -oOo- TREASURY DEPARTMENT Washington POR RELEASE, MORNING NEWSPAPERS Friday, August 14, 1942 B 7 I 3 7 Î 2 ---------- — 1 ------------ Press Service No. 32-87 Secretary Morgenthau today announced that the Government of Mexico and the Government of the United States have, operation, in co taken steps to further, supplement the measures aimed at preventing the disposition within the Western Hemisphere of currency looted by the Axis. The Government of Mexico has prohibited the importation into that country of all United States currency other than bills of two dollar denomination and United States coins. At the same time all United States currency presently within Mex ico has been ordered into the Bank of Mexico and associated banks. Such currency will not be released by the Mexican Gov ernment but in those cases in which persons who have turned over such currency can prove that the currency was legitimately acquired and free from Axis taint, the peso equivalent will be turned over to the person surrendering the United States cur rency. It was announced that persons failing to turn in United States currency in their possession would be treated as enemies of Mexico within the meaning of the Mexican laws dealing with trading with the enemy and enemy property. In order to supplement the Mexican decree the Treasury an nounced that on and after August 14, 1942, it would be illegal * to export to Mexico any United States currency other than coins and bills of two dollar denomination. Furthermore, all United States currency brought into this country from Mexico on and after August 14, 1942 (except coins and bills of two dollar de nomination), will be required to be surrendered to the United States Customs authorities at the border. Such currency will be turned over to the Federal Reserve Banks in accordance with the procedure established under General Ruling No. 5» as amended The effect of this joint measure of the United States and Mexican governments is to prevent use being made of Mexico as a place in which Axis agents may dispose of dollar currency looted abroad. Treasury spokesmen stated that the new regulations would in no way interfere with the legitimate activities of residents 2 on either side of the U n ited States-Mexico border who have long been accustomed to using pesos and dollar currency without dis tinction on bo t h sides of the international line. The exemp tions provided in bot h the Mexican and United States rulings will allow pesos to enter and leave the Unit e d States and A m e r ican two dollar bills and coins to enter and leave Mexico freely It was further said that the new regulations would not a f fect the free passage across the border of checks, drafts, t r a v e l e r ’s checks and other credit instruments in the same m a n ner as has been true up to the present time, likewise nothing contained in the present regulations Will prevent Americans from maintaining bank accounts in Mexican banks or Mexicans from maintaining accounts in banks within the United States, Such accounts, many of wh i c h now exist, will remain entirely unaffected* This action supersedes the previous Treasury Department ruling wh i c h had allowed a ny person arriving in the United States from Mexico to bring w i t h him up to §250 in United States currency regardless of the denomination of the bills im ported. It was poin t e d out that tourists going from the United ^ States to Mexico would be subject to no inconvenience w h a t s o ever in connection w i t h the new rulings, provided that before departing for Mexico they converted such funds as they intended taking wi t h t h e m into t r a v e l e r ’s checks, bank drafts or other credit instruments or into two dollar bills or coins. Treasury spokesmen stated that the two dollar bill had been eliminated from the restrictions imposed on the importa--^ tion and exportation of other U n i t e d States currency to and from Mexico by reason of the fact that very few such bills have fallen into Axis hands whereas it is known that large amounts of United States currency of other denominations have come u n der the control of the aggressors. The Treasury also announced that iany person leaving the United States going through Mexico en route to any other coun try would be allowed to carry U n i t e d States currency in any denomination having an aggregate value of §250, plus § 2 5 0 for each accompanying dependent. -oOo- TREASURY DEPARTMENT Washington FOR RELEASE, MORNING- N E W S P A P E R S , Friday, A u g u s t 14, 1942. 8713/42 ~ ~ ~ ~ ------------- Press Service No. 32-88 Secretary of the T r easury Morgenthau announced last night that reports from the Federal Reserve Banks indi cate that subscriptions for the additional issue of 2-1/2 percent Treasury Bonds of 1962-67 aggregated #1,143,085,200, through Augu s t 13, divided among the several Federal R e serve Districts and the Treasury as follows: Federal Reserve District Boston New York Philadelphia Cle v e l a n d Richmond Atla n t a Chicago St. Louis Minneapolis Kansas City Dallas San Fran cisco T r easury Government Investment Accounts TO T A L Total Subscriptions Rec e i v e d & Allotted $ 74,894,200 716,411,500 71,662,200 23.945.700 17,713,800 4,871,200 45,844,200 4.596.800 14,867,900 9.356.800 13.024.700 ' 19,624,200 402,700 125,869,300 fr; 1 4 3 ,0 8 5 , 2 0 0 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Saturday, August 15, 1 9 4 2 . Press Service No. 32-89 Market transactions in Government securities for Treasury Investment and other accounts in July, 1942, resulted in net sales of $2,295,000, Secretary Morgenthau announced today. -oOo- DEPARBiERT Washington n u s o m FOR IMMEDIATE RELEASE, Saturday. August 15» 1942« 3 y Press Service Secretary of the Treasury Morgenthau today announced the final subscrip tion and allotment figures with respect to the current offering of 7/8 percent Treasury Certificates of Indebtedness of Series 8*1943. Subscriptions and allotments were divided among the several Federal Re serve Districts and the Treasury as followsi Federal Reserve District Total Subscrip tions Received Boston Mew fork Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury ♦ 159,515,000 1,US, 236,000 142.119.000 . 1 58 6 27.000 100.147.000 117.730.000 559.485.000 109.993.000 48.294.000 94.237.000 84.357.000 250.062.000 16.000 TOTAL #3,272,818,000 Total Subscrip tions Allotted 78.454.000 698.529.000 70.408.000 80.633.000 49.922.000 59.005.000 278.189.000 . 56 309.000 26.385.000 47.999.000 . . 4 1 8 7 2 .0 0 0 121 606.000 16.000 #1 ,609 ,327,000 TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Saturday, August 15, 1 9 4 2 « Press Service No. 32-90 Secretary of the Treasury Morgenthau today announced the final subscription and allotment figures with respect to the current offering of 7/8 percent Treasury Certificates of Indebtedness of Series B-1943. Subscriptions and allotments were divided among the sev eral Federal Reserve Districts and the Treasury as follows; Federal Reserve District Total Subscriptions Received Total Subscriptions Allotted Boston New York Philadelphia Cleveland Ri chmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury $ $ TOTAL 159,515,000 1,448,236,000 .142,119,000 158,627,000 100,147,000 117,730,000 559,485,000 109,993,0*0 48,294,000 94,237,000 84,357,000 250,062,000 16,000 $3,272,818,000 -oOo- 78,454,000 698,529,000 70,408,000 80,633,000 49,922,000 59,005,000 278,189,000 56,309,0*0 26,385,000 47,999,000 41,872,00* 121,606,000 16,000 $1,609,327,000 TREASURY DEPARTMENT Washington POR RELEASE, MORNING NEWSPAPERS Tuesday, August 18, 1942._______ 8 /1 7 / 4 2 Press Service No. 32-91 The Secretary of the Treasury announced last evening that the tenders for # 3 5 0 ,0 0 0 ,000 , or thereabouts, of 9 1 - day Treasury bills to be dated August 19 and to mature November 18, 1942, which were offered on August 1 4 , were opened at the federal Reserve Banks on August 1 7 . The details of this issue are as follows: Total applied for - #711,549,000 Total accepted - 352,409,000 Range of accepted bids: High - 99.925 Equivalent rate approximately 0.297 percent Low — 99.905 ** ** 0.376 Average { Price — 99.906 ” H u O .372 (30 percent of the amount bid for at the low price was ac cepted . ) \ A TREASURY DRPARXMi&T Washington FOE nfiffiDIATE RELEASE, Tuesday. August IE* 1942. *v Press Service The Secretary of the Treasury today announced the final subscription and allotment figures with respect to the current offering of the additional issue of 2-1/2 percent Treasury Bonds of 1962-67* Subscriptions and allotments were divided among the several Federal Reserve districts and the Treasury as follows: Federal Reserve District Total Subscriptions Received and Allotted Boston Kew York Philadelphia Cleveland Richmond Atlanta Chicago St. Louie Minneapolis Kansas City Dallas San Francisco Treasury Oovemnent Investment Accounts TOTAL # «4,202,400 751,668,300 77,511,200 32 ,828,400 20 ,712,500 5,992,300 50,462,200 5,802,300 | 22,580,900 10 ,836,500 14,588,300 22,470,200 9,421,000 < 125.869.300 «.,234,945,800 f t & »*■ i TREASURY DEPARTMENT Washington Press Service No. 32-92 The Secretary of the Treasury todsy announced the final subscription and allotment figures with respect to the current offering of the additional issue of 2-1/2 percent Treasury Bonds of 1962-67. Subscriptions and allotments were divided among the sev eral Federal Reserve districts and the Treasury as follows; Federal Reserve District Total Subscriptions Received and Allotted $ Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Treasury Government Investment Accounts TOTAL -oOo- 84,202,400 751,668,300 77.511.200 32,828,400 20.712.500 5.992.300 50.462.200 5.802.300 22,580,900 10.836.500 14,588,300 22.470.200 9,421,000 125,869,500 $1,234,945,800 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Friday, August 21, 1942. .8/20/42----- Press Service No. 32-93 (The following address of SECRETARY MORGENTHAU at the ceremonies designating Roanoke, Virginia, as the first "Treasury Flag City" in the War Savings Bond campaign is scheduled to be delivered in Roanoke at 6 p.m., Eastern War Time, Thursday. August 20, 1942, and is for release upon delivery at that time.) Just before coming to Roanoke for this great demonstration it was my privilege in the past five days to inspect Army camps in the V/est and South at the invitation of General Marshall. By way of preface I can assure you that your boys are being well housed, well fed and well prepared for the fighting that lies ahead of them. No praise of mine can be too high for the job the Army has done, and is doing, in equipping and training the manpower of America for war. One impression above all that I bring away with me is of the magnificent spirit of these men. We civilians used to think, in our superior way, that we - 2 - needed to send morale officers among our troops. To day it would do all of us good to have some of these soldiers come among us as morale officers for a time. Believe me, they know what this war is all about. They know the effort and sacrifice that it will take to win. They are ready for it with a cheerful courage that is an inspiration to all who see it. You in Roanoke have done your full share in equip ping, maintaining and training this Army of ours. You have not only furnished your share of men but your WarBonds have helped to pay for the weapons that the Army will use in battle. And in the buying of War Bonds your city has set a record and an example for other cities to follow. Roanoke is the first city in the United States in which every company can claim that at least ninety percent of its employees are buying War Bonds regularly out of current earnings through a pay roll savings plan. Every company or labor union that can show such a record is entitled to fly the blue Minute Man flag, and these two hundred Minute Man flags which I see before me today are the symbols of a great achievement. - 3 I am especially glad that this has been accom plished in the home city of Congressman Woodrum, and that he is here with us today. I have looked upon Congressman Woodrum as a friend ever since my old days at the Farm Credit Administration back in early 1933 when I first came before his committee for an appropria tion. In the years since then he has always been a friend of the Treasury; he has been a friend of sound finance who has helped to create a sound public under standing of our financial problems. It must make him especially proud to see his own city buying ”A Share in America” regularly week after week, for he believes, as I believe, that if millions of Americans own Government securities they will take a more active and helpful interest in the way their money is being spent, not only now but in the years to come. To those who may be listening on the radio I should like to say that there is no special reason of geog raphy, economics or human nature that makes Roanoke any different from a hundred other cities of its size. - 4 - Roanoke is in fact just an average American community. It has no particular concentration of war industry in its area. Its incomes have not been doubled and tripled by war work. The only explanation of its War Bond record is that its employers and workers have seen their duty in these war-time days and have done it. Ify hope now is that all communities of the United States will follow this lead, one after another, and will report every firm enrolled in payroll savings, with the employees setting aside an average of at least ten per cent of their earnings every payday to help finance the war. War expenditures have already reached unprecedented heights, and will continue to mount as our own partici pation on the fighting front increases in extent and intensity. To pay the bills that will come in ever- increasing volume we shall have to draw upon every available source of funds. Congress will, in the final analysis, determine how much we must pay in taxes. balance we shall have to borrow, not only from banks The \ - 5 and other institutions, but from individuals, men, women and children, rich and poor, in every state and county of the nation. You have heard many times that this is a total war. That means simply that no one can escape his own personal responsibility to make his maximum con tribution to the total effort. by armies and navies alone. weapons too. This war is not fought It is fought with economic It is fought on the farms and in the factories, in the mines and on the merchant ships and railroads, but it is fought too in the homes where men and women curtail their normal expenditures to save money and materials vitally necessary to supply our fighting men. Every time you buy a War Bond you too are fighting on this economic front. You are not only helping to pay for the war, you are not only helping to protect the value of your dollar, but you are helping to pro tect your own personal future as well. - 6 - We simply do not have an unlimited store of the materials needed for war production and supply. Every time you buy something that is not absolutely necessary you are actually competing with our armed forces for materials without which we cannot win the war. Remember, on the other hand, that every time you forego unnecessary and unpatriotic spending you help to win the war, not only on the economic front but on the fighting front too. At a time like this it is not enough to buy War Bonds with whatever we may have left over from our normal budgets. We must cut these budgets drastically to conserve the materials needed for the war, and to place our savings at the disposal of our Government to pay for these materials. Millions of us still place the buying of War Bonds last in our family budget for the month, yet we have passed the time when we can afford to put the war last in our thoughts or in our daily lives. It is time for us to put the buying of War Bonds first on the family & - 7 - budget. The millions of people who are now on pay roll savings plans are doing precisely that. In this way they are making the purchase of War Bonds a first charge upon their income. It is urgent that all of us do likewise. We on the home front have got to fight much xharder from now on. We have got to discipline ourselves to do without things we would like to have but do not actually need, and to put our earnings into War Bonds instead. It is high time for all of us to cut deeply into our accustomed ways of living so that we can help our country in this war for survival and for freedom. About thirty million men and women work for regular pay in this country. More than eighteen million of them are setting aside a part of their pay every payday for the buying of War Bonds, and I give them full credit for the patriotism, the effort, and in many cases the real sacrifice which this regular in vestment involves. But they are setting aside an average of only six percent of their pay. Why not ten percent? And how about the millions of workers who are not taking part in payroll savings plans at all? - 8 - It should no longer be necessary for the Treasury to come to every American, hat in hand, to ask for subscriptions to War Bonds and at 2.9 percent interest. By this time every American should be coming forward, willingly and gladly, to lend a part of his earnings to his country. After all, we have been at war for more than eight months. Thousands of our men have been in action; millions more are in training for the battles that are to come. I have seen them this week, marching along dusty roads in the heat of Summer, toughening themselves and master ing their weapons, learning to kill and to avoid being killed. Take my word for it: a tough war. too. They know that this is It is up to us to prove that we know it From now on it is up to every one of us to prove that we are worthy of our fighting men by buying War Bonds — until it hurts. o 0 o TRE.ABURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS Friday, August 21, 19^2» ELECTS------ — R------- The Secretary of the Treasury, by this public notice, in vites- tenders for 1 3 5 0 , 000 ,000 , or t h e r e a b o u t ^ of 9 1 -day Treasury bills, to be issued on a discount basis under compet itive bidding. The bills of this series will be dated August 2 6 , 19^2^ and will mature November 2 5 , 1 9 ^-2 , -when the face amount will oe payable without interest, form only, They will be issued in bearer and -in denominations of $ 1 ,000 , $ 5 ,000 , $ 1 0 ,000 , $1 0 0 ,000 , $ 5 ^ 0 ,0 0 0 , and $ 1 ,00 0 ,0 0 0 (maturity value),. Tenders will be received at Federal Reserve Banks and Branches u p .to the closing hour, two o'clock p.m., Eastern war time, Monday, August 24, 19^-2. Tenders will not be received at the Treasury Department,. Washington. Each tender must be for an even multiple of $1 ,000 * and the price offered must be expressed on the basis of 1 0 0 , with not more than three decimals, e. g . , 99*9.25. Fractions may not be used. It is urged that tenders be made on .the printed forms and forwarded in-the special envelopes which-willtbe supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of 1 0 per cent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of -payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which p u b lic announcement will be mad.e by the Secretary of the Treasury of the amount and price range of accepted bids. Those sub mitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Pay ment of accepted tenders at the prices offered must be made or comoleted at the Federal Reserve Bank in cash or other imme diately available funds on August 26, 19^2. (o v e r ) 32- 9 ^ 2 - The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills shall not.have any exemption, as such, and loss from the sale’or other disposition of Treasury bills shall not have any special treatment, as such, under Federal tax acts now or hereafter enacted The bills shall be subject to estate, inheritance, gift, or other excise taxes, whether Federal or State,, but shall be exempt from all taxation now or hereafter Imposed on the principal or intern 44- ^ e^eo^ ^y any State, or any of the possessions-of the united States, or by any local taxing authority. For purposes of taxation the amount of discount at which Treasury bills are originally sold by the United States shall be considered to be interest. Under Sections * 2 and Ilf (a) (1) of the Internal Revenue Code, as amended by Section 1 1 5 of the Revenue Act of J*1? amount of discount at which bills issued hereunder are soid shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are excluded from .consideration as capital assets. Accordingly the owner of Treasury bills (other than life insurance companies) issued hereunder need -include in his income tax return only the difference between the price paid for such b i l l s ,■whether on original issue or on subsequent purchase, and the- amount ac tually received either upon sale or redemption at maturity dur ing the taxable year for which the return is made, as ordinary gain,or loss. , , - . '' . Treasury Department Circular No. ^-1 $, as amended, and this notice, prescribe the terms of the Treasury bills and o-overn the conditions of their issue. Copies of the circular may be obtained, from any Federal Reserve Bank or Branch, -0O 0- TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Thursday, August 2 0 , 1 9 ^ 2 , Press Service No, 32-95 The Bureau of Customs announced today that provi sion will be made at customs ports of entry to enable importers to present entries for consumption covering coffee the produce of countries not signatories of the Inter-American Coffee Agreement, at 12 noon, Eastern War Time, on September 1 , 19 1 *2 , 11 a.m,, Central War Time, 10 a.m., Mountain War Time, and 9 a*m«, Pacific War Time* Executive Order No, SS 6 3 , of August 21, 19*4-1, al locating for the present quota year the quota provided for in Article VII of the Inter-American Coffee Agree ment for countries which are not signatories of the Agreement, terminates on September 1, 19*4-2. Therefore, any unentered portion of the over-all quota for coffee the produce- of non-signatory countries at the close of business August 3 1 , 19*4-2, shall be open to the entry for consumption of coffee the produce of any non-signa tory country at the hour specified above,“ cn September 1, 19*4-2. The unexhausted portion of the quota as of August 1 5 was approximately 1 5 ,50 0 ,0 0 0 pounds. The acceptance of entries will be authorized with in the quota limitation in the order of the time of their presentation in proper form at the customhouse in the port where the coffee has arrived. If entries for consumption presented at the time specified above on September 1, 19*4-2, cover a total quantity of coffee the produce of non-signatory countries in excess of the quota limitation, the quantity which may be admitted to entry will be prorated on the basis of the quantity presented for entry. Executive Order No, SS 63 ceases to be effective on September 1, 19*4-2, and no order will be issued allocat ing the non-signatory quota for the year beginning October 1, 19*4-2, Statement by Randolph E. Paul on the administrative and compliance problems involved in collection at source August 221 1942 A» Proposed changes in procedure for collection at source In the period since collection at source was adopted by the House of Representatives, the Treasury has carefully re-examined the contemn plated procedure in order that it might be adapted as much as possible to the needs of employers and payors of dividends and interest* We have held extensive discussions with employers and with payors of interest and dividends. We have made a detailed examination in the field of the methods used by several hundred employers in preparing their payrolls and the changes that would be necessary to incorporate collection at source* The businessmen whom we have consulted have been extremely helpful and cooperative* (They have been more than generous in giving us the benefit of their practical experience and knowledge. Our discussions with them and our re-examination of the problem have suggested a number of important modifications in the plan originally approved by the House. These modifications will simplify the operations of the plan, and will reduce the additional personnel and machine needs of business* 1 * For wages and salaries, wo suggest the adoption of a plan of the typo suggested by Mr. Gretz of the American Telephone and Telegraph Company whereby employers could use a simple table to determine the amount of tax to be withheld. A sample table is attached. By moans of this table, the tax could be determined directly from the gross wage without any computations. Out of 454 employers interviewed, almost twothirds expressed a preference for the use of such a table. In many cases the use of the table will entirely eliminate the need for additional machines. 2 . Several other minor changes for wages and salaries are designed to meet specific problems raised by employers. These changes are: (a) the employer would not be required to get withholding deduction certifi cates from employees hired and employed for less than a week and paid less than $1 1 ; (b) the employer will be permitted, if he wishes, to get information on the employee’s imarital and dependency status on a differ ent form from the one he will have to file at the end of the year giving total wages and total tax withheld, instead of, as in the original pro cedure, using the same form for both purposes; (c) the employer would be given 30 days* time to prepare a receipt for an employee terminating employment instead of having to give the receipt along with the last paycheck; (d) the employer would be given 30 days within which to give effect to a change in an employee’s marital and dependency status. 3. For dividends, we suggest that the payor corporation be permitted to give an annual receipt instead of a receipt with each dividend payment. - 2 - Dividend, payors have informed us that this change will greatly simplify their problem. For example, one dividend payor has indicated that the substitution of an annual receipt for a quarterly receipt would halve the additional expense of collection at source. U. We also recommend that dividends paid by credit unions, saving and loan associations, building and loan associations, cooperative banks, and farm cooperatives be exempt from withholding. These types of divi dends are typically paid in small amounts to a very large number of per sons, They should be exempted in the same way as interest on saving deposits. 5* One of the major complaints made by representatives of the American Banking Association was that the collection at source system would seriously threaten the nominee and street name systems of registra tion of corporate stocks. The proposed system for the treatment of the nominee problem eliminates any ground for this complaint. This system provides for gross withholding from the nominee, for the issuance of a receipt to the nominee by the payor corporation, and to the actual owner by the nominee. We have discussed this proposed treatment with repre sentatives of the American Banking Association and they agreed that under it the present nominee system could be continued. The proposed treatment involves essentially a continuation of the present method of handling information returns, It will be recalled that one of the points to which the Commissioner called particular attention was a statement in the re port by the American Bankers’ Association that one bank had estimated that it would require the services of a crew of 12 men for at least 12 months to transfer the stock now held in nominee form. Under the pro posed procedure this would be entirely unnecessary since the nominee relationship would not be disturbed. 6. The other suggested modifications for dividends would give the corporation more time within which to give effect to exemption certifi cates and would place the responsibility on the stockholder to notify the withholding agent that the stockholder is exempt from withholding. 7* For coupon interest, we have developed a number of modifications. However, in view of the testimony before the Senate Finance Committee as to the very large number of small coupons, and the problems imposed on the initial paying bank and the final obligor by the absence of evidence on the identity of the owners of the coupons, we now propose that coupon bond interest be completely exempted from withholding. The amount of revenue involved is very small, only $+0 million in 19^-3 $80 million in 19Ì+Ì+. These objections do not apply to withholding from dividends or registered bond interest, which offer a much simpler problem. Moreover, the revenue from dividends is substantial, amounting to about $200 million in 19^+3 an<i about $^00 million in 19^* 3 - ^All of those changes have heen discussed with employers and payors of dividend and interest. They were developed jointly with the Bureau of Internal Revenue, which agrees with their desirability if collection at source is enacted* It is uniformly agreed that they will greatly simplify the problem of withholding. ®• Administrative problem of the Bureau of Internal Revenue In a statement before your subcommittee on Wednesday the Commissioner of Internal Revenue outlined the administrative problems this bill would impose on the Bureau of Internal Revenue. There can bo no doubt that additional burdens would be imposed on the Bureau. At the same time, I am firmly con vinced tha/t the statement given by the Commissioner greatly overstated these burdens. Some of the most important steps under collection at source are part of the present administrative procedure, or replace other stops that are part of the administrative procedure. Furthermore, the major part of the addi tional burden will not occur until 1944 giving over a year in which to make the adjustment. 1. The Commissioners statement makes the point that 11,000 additional employees will be required to administer collection at source. However, ac cording to the Bureau*s estimate, very few of these employees will be required until after April 1, 1943, and most of them will not be required until 1944. At most, between 3,000 and. 4,000 additional employees will be required during all of calendar 1943. There should thus be ample time for the recruitment of addi tional pe rsonnel• 2 . Some months cugo, the Bureau indicated to the Treasury that a large part of its personnel problem arose from the fact that its priority classi fication for personnel was class 5. At the representations of the Treasury, the Bureau of the Budget changed the Bureau to class 2 in order to facilitate the administration of collection at source. This gives the Bureau a priority for personnel subordinate only to military needs. 3* The Commissioner*s statement indicated that collection at source would require about 1 0 0 ,0 0 0 , 0 0 0 forms to be filled out annually for employees, stockholders and bondholders. Approximately 75 to 80 million of these forms would be required under the present information-at-soiirce system even in the absence of collection at source. Only l/4 or l/5 of these 100,000,000 forms can be attributed to collection at source. Collection at source will supplant the present system of information at source. 4. The Commissioner*s statement called attention to the need for seven different forms to administer collection at source. Four of these forms re place forms now in use. 5. The statement read by the Commissioner stressed the additional ma chines the Bureau would require. We have been informally assured by repre sentatives of the War Production Board that the Bureaus stated needs could be met and would be given priority. The Secretary of the Treasury has written a letter to Mr. Kelson asking for formal assurance on this point. 6 . Hardly any of the additional machinery will be needed prior to April 1 , 1943, and much of it.will not be needed until 1944. 4 7» The Commissioner*s statement made the point that there would "be 750,000 delinquent employers each quarter, out of a total of about 2,700,000 withholding agents* This estimate seems unduly large* According to the Commissioner, there are only 250,000 delinquent employers each quarter under the social security tax* The number of withholding agents will be about the same as the number of employers paying social security taxes, and the quarterly return will be considerably simpler than that now required under social security* (The attached table shows the estimated number of persons subject to withholding and the number of withholding agents*) 8. It should be noted that in most cases delinquency merely means that the employer is late in filing his return* In addition, delinquent employers are overwhelmingly small employers, accounting for a very small percentage of all employees* 9* The plan for administering collection at source was developed jointly by the Bureau of Internal Revenue and the Treasury* The Bureau was consulted at every stage* While the Bureau has repeatedly emphasized the administrative difficulties of the procedure, it has always agreed that the plan was administratively feasible* In a statement read to the House Ways and Means Committee on May 2 2 , 1942, the Commissioner said; "I have no doubt that a withholding tax could be satisfactorily administered in normal times * e * * Since these are not normal times, if withholding is to be a part of our tax plan, the work cannot be done unless the Bureau is given a priority status respecting personnel, equipment, and space subordinate alone to the military forces*" The statement read by the Commissioner at that time expressed no doubt that collection at source was entirely feasible if such priority status could be obtained* C* Compliance burden on industry We are firmly convinced that undue stress has been placed not only on the administrative problems of the Bureau but also on the compliance problems of employers and payors of dividends* 1 » Collection at source imposes much the sane problem on employers as does the social security tax* Employers have handled and axe handling the social security taxes without serious difficulty* Canadian employees are handling a system very similar to the one here proposed with no great difficulty* 2* As stated in our report to you on our field survey of em ployers1 problems, that survey suggested that more than two-thirds * of all employers in the country are in firms indicating no need for additional equipment; a„nd fewer than one-third in firms indicating a - 5- need for additional equipment. Moreover much of this apparent need for additional equipment will he eliminated by the changes we have suggested. 3. Most firms that indicated a need for additional equipment are now using their machines no more than 8 hours a day. Further, the indicated need for additional machines was small relatively to the machines now in use — in the neighborhood of 10 percent. Con sequently, more extensive use of existing machinery would in very many cases make new machines unnecessary. U. The need for additional personnel by employers is fairly widespread, but the additional number needed is relatively small, and few or no employers expressed serious concern that they would be unable to obtain the additional personnel needed. 5. The Commissioner's statement laid great stress on the estimates of the American Bankers' Association as to the cost of withholding from interest and dividends. These estimates were based on a complete misunderstanding of the plan. They were based on the assumption that the paying agent would need to prepare five copies of a receipt along with each dividend check and that the proposed system would necessitate the elimination of the "nominee" and "street name" systems of registration of corporate stocks. Neither of these assumptions is valid. Our original proposal contemplated only one receipt with each dividend check; and our revised procedure con templates only one a year, to be prepared as a duplicate of the in formation return sent to the Bureau. The nominee system would not be disturbed. The estimates of the American Bankers' Association are therefore many times too high. The additional burden on payers of dividends would be relatively slight. 6 . In general, for both employers and payors of dividends, much of the work required under collection at source replaces work now being done in the preparation of information returns, 7. It should be noted that of employers interviewed, 88 per cent were favorably disposed to collection at source; and only 6 per cent definitely opposed. D, Attitude of employers We have just received preliminary results from the Office of War Information on the special study of employees they are making for us. So far, they have interviewed 172 employees in Baltimore and Minneapolis. Of these employees, 76 percent were favorable to with holding, and only 1 ^ percent opposed. Eighty-four percent said that withholding would have no effect on their bond purchases and only 8 percent said it would cause them to reduce their bond purchases. Conclusion? From ny remarks, I hope it will be clear to the Committee that the Treasury has labored assiduously to ease the administrative and com pliance burden of collection at source, end that this burden can be borne by the Bureau of Internal Revenue and the business non of the United States without interfering with the war effort« We realize that the administrative burden is substantial and have never suggested anything to the contrary« Wo are sure, however, that this country can do what other countries have done« If collection at source were unimportant, we would not ask to have it incorporated in the law« Collection at source is, however, essential if our income tax is to be flexible and capable of quick expansion in the light of wartime needs« Further, present methods of collection arc completely inadequate for a mass incotae tax at high rates* Collection at the source adapts the income tax to the needs of the masses of the people accustomed to budgeting in terms of weeks or months rather than quarters or years« If the incono tax is to occupy its proper place in our wartime fiscal program, the problem of introducing collection at source must be faced sooner or later during this war and it will be harder to face it later than to face it now* As a postscript, I night mention the fact that if the Rural plan is seriously considered, collection at the source is all the more needed in order to carry into actual effect the. desire that the tax paid in a year shall, insofar as possible, be on the income of that year« In case the Rural plan should be adopted, collection at source should by all means bo integrated with it# Estimated number of workers receiving wages at some time during calendar year 1 9 *+2 , number of such workers subject to filing an income tax return, and number subject to withholding tax; also number of withholding agents (All figures are in thousands) Total number: Number of persons or persons : Subject to receiving :filing regular Subject wages at income tax to some time : returns under withholding during year : H,R„ 7378 Exempt from withholding tax: Agriculture Domestic Casual Military (full year of service) 1/ Self-remployed Total 3 ,0 0 0 2 ,0 0 0 1 ,0 0 0 2 ,0 0 0 * 8 ,0 0 0 300 *+00 200 800 1 ,0 0 0 2 ,7 0 0 *+,000 1 ,5 0 0 2 ,0 0 0 Subject to withholding tax: Federal government 2 / State and local governments All other - Railroad employees, plus persons covered by social security Total 2 ,0 0 0 3 ,0 0 0 1 ,5 0 0 2 ,0 0 0 *+9,000 54,000 25.,300 28,800 Total 6 2 ,0 0 0 ..3 1 ,5 0 0 1,1*00 1 ,0 0 0 800 800 * 2 3 ,5 0 0 2 7 ,0 0 0 1 / 3 1 ,0 0 0 Withholding agents (The employers of the workers listed in each column above) 1 ,5 0 0 2 ,0 0 0 Subject to withholding tax: Federal government 2 / State and local governments All other - Railroad employees plus persons covered by social security J>/ Total 2 ,*+*+0 2 ,7 0 0 Total 6 ,2 0 0 treasury Department Sivision of Research and Statistics See page 2 for footnotes. —— —— *+00 525 _ „ 0 0 Exempt from withholding tax: Farmers Housewives Casuals *+/ Total 60 200 — 925 — 60 200 2,*+*+0 2 ,7 0 0 — J_,6£5 July 3 0 , 19*+2 -2 - *Uot included. 1/ While the military personnel spending the full year in active service will increase in the calendar year 1 9 ^+3 1 it is assumed that the increase will he replaced in civil life, so that at the level of income of the calendar year 19^+2 the estimated number of persons sub ject to withholding under H.R. 7378 is still 27 million. 2/ Excludes the military forces. Excludes persons employed at any time during the year in agricultural, domestic, or governmental work. b/ Withholding agents for casuals are included under house wives or under other agents who have employees subject to withholding. Statement by Randolph E. Paul on Ruml plan In a press release of August 23, 1942, Mr. Beardsley Ruml criticizes the Treasury's objections to his original Pay-As-You-Go income tax plan. He directs his comments principally at two points: (l) the Treasury's statement that the plan would be unacceptable without collection at the source and (2 ) the modified method of tax cancellation suggested by the Treasury. Mr. Ruml's statement reveals a serious misunderstanding of the Treasury's position. Before proceeding with any changes in the income tax so revolutionary as that suggested by Mr. Buml, it is essential that this misunderstanding be cleared up; and that the basic issues be clearly understood. The basic objective of the "pay as you go" plan proposed by Mr. Ruml is to get taxpayers on a current basis. met widespread public approval. This objective has deservedly The present method of collecting income taxes is poorly suited to a mass tax at high rates. The amounts individuals pay in any year depend not at all on their income in that year, but rather on the income of the preceding year. of catching u p The taxpayer is always in the process with himself and never succeeding. The Ruml plan as originally proposed fails, however, to accomplish its objectives. A change in names does not change facts. Under the Ruml plan, the amount paid in 1943 would be called a "tentative tax on 1943 income." But it would be computed by assuming that 1943 income would be the same as 1942 income. Calling the amount paid in 1943 a "tentative tax on 1943 income" - 2 - does not make it a tax on 1943 income if, as in the original Euml plan, the amount paid is computed as it now is on the "basis of 1942 income* In many causes the problem is made even worse than it now is, since under the Huml plan a taxpayer will have to settle in the following year for any difference between his 11tentative*' tax and his actual tax. Hr. Jones, let us say, is married with no dependents and has an income of $3,000 in 1941 and 1942, $10,000 in 1943, and $3,000 in 1944. His tax liabilities at the new rates passed by the House are $324 on $3,000 of income and $2,152 on $10,000 of income. How much will Mr. Jones have to pay under the original Ruml plan? 1943: Income $10,000 Tax payments: Tentative tax on 1943 income computed on the basis of a 1942income of $3,000 Adjustment for difference between tentative tax paid in 1942 and actual tax on 1942 income Total payments 1944: 324 Q. 324 Income 3,000 Tax payments: Tentative tax on 1944 income computed on the basis of a 1943 income of$10,000 2,152 Adjustment for the difference between tenta tive tax paid in 1943 and actual tax on 1943 income ($2,152 - $324) ,k x§,2A Total $ 3,980 - 3 In 1943, Mr. Jones pays only f>324 out of a $10,000 income— the same amount he would pay under existing methods of income tax payment. In 1944, Mr. Jones must pay almost $4,000 out of a $3,000 income. He has a high tentative tax because his income was high in the preceding year. In addition he has a big adjustment to pay because his income was low two years ago. name only. This is current tax payment in True, Mr. Jones will in 1945 receive credit for his overpayment in 1944. But in 1944 he must finance this extra pay ment out of his reduced income. It is no answer to this example to say that most taxpayers do not experience such wild fluctuations in income. It is precisely such fluctuations that make current tax payment necessary and that the Rural plan is designed to cure. If everybody’s income stayed the same year after year, the present method of tax collec tion v/ould do well enough. There would be no need of the Ruml plan or any other plan for current payment. The best way to cure this defect in the Ruml. plan is to couple the Ruml plan with collection at the source. Collecting as much of the tax as possible from income as it is earned is truly "pay as you go.” Collection-at-source is a practicable way by which the tax paid in any year can be computed and paid on the basis of actual income received in that year. It is "current" collection in fact as well as in name. It is for this reason that the Treasury finds the Ruml plan completely unacceptable unless it is linked with col'lection-at-source at the combined normal and first bracket surtax rate. Collection-at-the-source is essential not only to serve the convenience of the taxpayer but also to make the income tax a flexible instrument to meet war-time final needs. Under the original Ruml plan as now, a change in tax rates would not affect tax collections until the following calendar year. M t h collection-at-the-source, a change in tax rates can be effective almost immediately. Under the original Ruml plan as now, a change in national income will not affect tax collections until the following calendar year. 1/vith collection-at-the- source, it will affect tax collections immediately. The other major defect in the original Ruml pl*n is the clear and striking injustice of cancelling all 194-1 liabilities. Mr. Ruml would do this in order that tax payments made in 194-2 could be treated as a tentative tax on 1942 income. Once again.the objective, namely to bring all taxpayers current immediately is admirable. But the results are not. Many an individual had a higher income in 1941 than in most other years of his life. Cancelling his 194-1 liabilities would be a pure windfall, a windfall that would have to be made up by other taxpayers who had not been so fortunate. The man who in 1941 received $500,000 would have a tax liability of almost $350,000 cancelled, although his income in 194,2 and later years may be much lower and although the $500,000 may be traceable directly to the w&r program. Moreover, such a taxpayer is unlikely to need the cancellation in order to wipe out his debt to the Government. Few men who have such an income are so improvident as to make no provision for the tax as the income is received; or are so unfortunate as to have no substantial amount of capital with which to wipe out the debt. To meet this obvious defect the Treasury has suggested that the Ruml plan would be greatly improved if only part oi tax xraoilities be cancelled, and that, for simplicity, the cancellation refer to 1912 liabilities. The part to be cancelled would be uhe entire normal tax - or 4 percent at existing rates — plus the first bracket rate 01 the surtax — or 6 percent at existing rates. The cancellation would not as Mr. Ruml erroneously stated, apply only to the first $2,000 of net taxable income. It would apply to the entire net taxable income but at only the first bracket rate. For example, a married person with no dependents with $500,000 income in 1942 would (ignoring, for simplicity the earned income credit) have a net taxable income of ,¿498,500 under existing exemptions. The amount cancelled would be 10 percent of thus or .¿49?850 out of a total tax at existing rates of 4345?350. A man with ¡¿10,000 income would have a net taxable income of $8,500. Again ignoring the earned income credit he would have $850 cancelled out of a total liability of $1,305 , leaving about .¿450 to be paid during the next two years. - 6 - The Treasury’s suggestion applies equally to all taxpayers? but it does not permit high income taxpayers to cancel their liabilities under higher surtax rates. As noted above, persons subject to these higher rates are most likely to make advance provision for taxes, and hence do not need to have all their liabilities cancelled. This statement does not imply Treasury approval of the Ruml plan. Its purpose is rather to clarify the considerations that must be taken into account in judging the plan, and to indicate the modifications that should be made in it if the Senate Finance Committee should deem it an appropriate part of the 194-2 tax bill. August 24, 1942 Speech delivered by Erwin U. Griswold Consulting Expert, Treasury Department before the Tax Section of the American Bar Association Detroit, Michigan on Tuesday,; August 35, 1942. WAR TAXES — PROBLEMS M B PROGRESS The Treasury and the Committees of Congress have now been working eight months on the Revenue Act of 1942, and it is still several weeks before the task will be completed. As soon as it is enacted, work must be begun on the Revenue Bill of 1943. It is a continuous and never finished task, and in these days of the tremendous demands of war, no one will deny that it may fairly be called stupendous as well. The subject of this talk is the problems and the progress of our war tax bill. There is not much that I can say about progress that is not already well known. Progress is undoubted ly being made today by the Senate Finance Committee in Washington which is now considering the bill. But there is much that can be said about problems. They have been many and difficult. Some have been faced and solved. Others are still with us. The problems two main groups. And there are the types have had to presented in formulating a tax bill fall into There are innumerable technical questions. major questions of policy. Many issues of both be met in preparing the present bill. Technical Problems The Treasury has made a sincere effort in this bill to urge upon Congress the desirability of removing inequities which have grown up in our tax law. The present bill as it passed the House of Representatives is 320 pages long and a large proportion af this space is occupied with what might be called technical amendments. You are familiar with many of them. The bill deals with annuity trusts, thus, in effect, overruling the case of Burnet v. Whitehouse which should have been overruled many years ago. The bill deals with improvements made by a lessee of real property, thus negativing the result of Helvering v. Braun. The deduction for bad debts is modified so that the old require ments that the debt be Mascertained to be worthless and charged •ff during the taxable year1* are eliminated. Under the bill, the only question is when the debt became worthless. Of course, this is in many cases a difficult question of fact. In order to prevent hardship which might arise from uncertainty in determining 2 - this fact, the hill provides a seven-year period during which the statute of limitations is left open for adjustment of the issue. The hill makes provision for cases where had debts or prior taxes are recovered after deduction in a previous year in which no tax benefit was received. The hill provides that alimony shall he taxable to the recipient and deductible by the payor, thus reversing the result of the early case of G-ould v, Gould. It provides for amortization of premium on bonds. It overturns the rule of the Enright case with respect to the accrued income of a taxpayer at the time of his death. It eliminates the narrow restriction on liquidating dividends. It changes the methods of taxing capital gains and losses. It provides a careful revision and restriction of the law with respect to pension trusts. The taxation of insurance companies is completely overhauled. For the first time, comprehensive relief provisions are included under the excess profits tax. Amendments to the estate tax deal with problems which have long existed with respect to powers of appointment and the proceeds of life insurance. I have enumerated only a small portion of all the technical changes that have been made in this long bill. These changes have all been important in themselves. Each one has required a large amount of careful study and the preparation of repeated drafts of the statutory language necessary to carry the change into effect. Many of the changes seem very simple, but in fact have required very elaborate additions to the statute. For instance, let us take the problem of the Enright case, under which income earned by a decedent at the time of his death is lumped together with his other Income and taxed as a unit in his final return. This led to harsh results, extremely unfair in many cases. It was not very difficult to reach the conclusion that it should be changed. Offhand, one would think that the change could be made in a few lines; it need only be provided that the income should be taxable to the one who actually receives it. But when the problem is actually examined, it is found to be more complex than that. Probably the most serious difficulty comes from the inter relation of the income tax and the estate tax. Under the rule of the Enright case, there was an income tax due, but this income tax was a liability of the estate and thus was deductible in computing the estate tax. If the rule of the Enright, case, alone, were changed, there would be an income tax saving in the decedent* s last return, but there would be an increase in estate tax, and an eventual income tax to the recipient of the payment. - 3 ~ In many cases, the net result of the change of the Enright rule would he an increase in total tax liability. It became neces sary, therefore, to make provision for a deduction from the income tax eventually due of the amount of the estate tax which was paid on the income payment. The net result of all of this is 10 pages in the Revenue Bill, A simple question is in fact quite complex. It is solved satisfactorily only with a large amount of labor. Similarly, the amendment regarding the amortization of bond premium occupies 8 pages of the bill. The amendment as to alimony requires 6 pages, the complications here resulting chiefly from the neces sity of providing for the cases where payments are made through trusts and in the form of annuities. Another problem arose in connection with the estate tax amendments, For some time it has been apparent that the present provision relating to powers of appointment is inadequate, and allows an unnecessary amount of tax avoidance. Accordingly, the Treasury recommended to the House Committee a provision which would tax the exercise or non-exercise of all powers of appointment except those which are limited to the spouse or issue of the donee, or to the spouses of his issue, or to charity. In addition to general powers, this operates to tax a considerable number of special powers. Since special powers have not hereto fore been taxed at all, it was felt that some provision should be made by way of relief to those who now hold special powers which were created at a time when it was thought that they would not be taxable. Accordingly, the House bill includes a section which provides that a special power shall not be taxable if it is released by the donee within two years after the date of enactment of the amendment, A corresponding provision is in cluded in the gift tax amendments so that such a release will not be subject to gift tax. This provision for release was intended to be a relief provision, but it has led to curious difficulties. In the first place, it soon appeared that many special powers could not be released, or at least that there was considerable doubt as to whether they could be released. In order to take care of this situation, it was suggested that the new amendments should not apply if the power is released within two years, ££ if within that time, a statement is filed with the Commissioner by the donee declaring the donee*s intention not to exercise the power, and if in fact he does not exercise it. This would take care of the non-releasable powers, but then another problem was encountered. Some special powers are held by infants or incompetent persons, and others are now wholly contingent until the happening of some future event. Various expedients were considered to deal with - 4 - these situations, such as allowing the filing of a statement by the guardian or committee of the donee, or providing for the filing of a statement within two years after the donee attains majority, or regains competence, or within two years after the power vests. This is all pretty complicated, as you can see, and would probably lead to a good deal of litigation. And it all results from the Treasury's effort to provide a really effective relief provision in view of the change in the law. The Treasury would prefer to require an actual complete release, but the fact remains that many special powers probably cannot be validly released under applicable state law. Thus the filing of some sort of a statement with the Commissioner to take the place of a release seemed a necessary expedient. What would be the effect of such a statement? It would ap parently have no legal effect at all. The donee would still be free to exercise the special power if he wanted to. If he did exercise it, a tax would, of course, be due. But he would be free to exercise it, which he could not do if he had actually released the power. Though the statement might be legally in effective, would it nevertheless have some moral value? Very likely it would. Many donees who had formally declared their intention to the Commissioner not to exercise their powers might feel a very considerable obligation not to violate that statement. On the other hand, they would be just the persons who might not find it possible to file such a statement because they would feel that it was violating the trust imposed on them by the donor of the power. Perhaps the way to handle this situation is to provide that the new amendment shall n»t apply to any special power outstanding on the date of enactment of the amendment unless the special power is in fact exercised. This would do away with all questions of release and releasability, and filing statements with the Commissioner, and would eliminate possible litigation over difficult questions such as when a person regained competence, or when a power vests. It does not have the conclusive effect of a release; but most powers may not be releasable. It does not have the moral value of a statement filed with the Commissioner; but that may not be very great. It would seem to achieve in the great majority of cases, the same result as the more complex methods. It is very simple and should load to almost no litigation. It does leave the donee free to exercise the power, but only at the cost of pay ing the tax. Powers hereafter created would in any event be fully subject to the amended law, sort, I will not bother you with more illustrations of this You are tax lawyers and are undoubtedly familiar with ~ 5 ~ the problems and with what has been done to meet them. You may not think that enough has been done and you may not like the way it has been done, but I think that you, more than any other group of citizens, will appreciate the fact that what has been done, for good or bad, is the product of a very large amount of real labor. These are the technical problems. They have been worked out by the staff of the Tax Legislative Counsel in the Treasury and in cooperation with the staff of the Division of Tax Research. The conclusions of these men are then cleared through Mr, Paul and are presented to the staff of the Joint Committee on Internal Revenue Taxation. When all of these groups have agreed and approved them, the recommendations are ready for presentation to the Committee of the Congress. These problems are important. They are the every day grist of tax lawyers. We should make the details of our tax laws as fair and as sound as possible. In no bill in recent years, I think, has so much progress been made in this direction. But this, too, is clear: These matters are not the most important problems to be faced in the formulation of a revenue bill. Policy Problems I would like to turn, then, to a consideration of some of the basic problems of policy with which the Treasury and Congress have been confronted. During the present fiscal year the Federal Government will spend about $77 billion. Under the rates of tax fixed by the bill passed by the House of Representatives, we will raise about $23 billion of this sum by taxation in a full year. This is obviously not enough. It leaves some $54 billion to be raised by borrowing, and the problems thus presented for our economy are very real. Thus, we have presented the basic problem with which the Treasury has been confronted in the development of the present tax program. We must have a great increase in revenue, both to pay a part of the costs of the war, and as a means of combating inflation. With these facts in mind, the Treasury put before the Ways and Means Committee of the House of Representatives a program which on an annual basis would add $8,700,000,000 to our tax revenues. That was the chief policy decision in this revenue bill. The Treasury believed that decision was a sound one, and has stuck to it in its presentation before the Committees of Congress. ~ 6 - Obviously, taxes of this magnitude cannot he raised with out imposing a burden on someone. The problem is then presented: How can this burden be most equitably shared? One of the certain things about taxes is that nearly everyone thinks that somebody else ought to pay them. This has often been true in the present bill. The Treasury concluded that the fairest way to spread the burden in time of war was through a large increase in the ex cess profits tax and income tax on corporations, and a further increase in the income tax pn individuals. It is true that the income tax does not directly reach every individual in the land, but under the rates fixed in the House bill, it does reach every single person with a net income of $11 a week or more, and every married couple with an income of $23 a xveek or more. How much of the tax burden should in fairness be borne by persons whose incomes are less than these amounts, having in mind that they already bear a considerable portion of the burden through the indirect effect of taxes which are passed on to them in the things they buy? Sales Tax At this stage of the problem, it became necessary for the Treasury to make an important policy decision. There was pres sure for a sales tax. The Treasury decided to oppose this because it concluded that a sales tax was not an equitable way to distribute the wartime tax burden. At its very best, a sales tax is regressive. It distributes the burden most heavily on those least able to bear it. The little man with a sub-standard scale of living pays at the same rate as the big man who has an ample surplus. A retail sales tax large enough to take 10$ of the income of a person with an income of $500, would amount to 6$ on an income between $3,000 and $2,500, and 3$ of an income over $10,000. It would have an effect similar to imposing an income tax without exemption at the rate of 10$ on an income of $500, at 6$ on an income of $2,500, and at 3$ on an income above $10,000. Such a tax would, of course, be fantastic, and there seems to be no reason for achieving the same distribution of the tax burden through a sales tax. But this was not the only reason why the Treasury decided to oppose the sales tax. In the first place, the yield from a sales tax is disappointing unless it is applied without quali fication or exception to absolutely everything that is sold. Even at that, a large part of the present volume of transactions Would not result in any tax because it consists of goods which are made directly or indirectly for the Government. The - 7 - effective tax base, therefore, consists of that diminishing supply of goods which is riot "being furnished ultimately to the Government for war purposes. Chief among these is food. Should the sales tax apply to food? Many advocates of the tax think that it should not. How about fuel and clothing and medicines and such items which can "be classified as necessities of life? If these things are eliminated, the yield of the sales tax falls disastrously. Should w® impose a sales tax on items which are already subjected to heavy excise taxation, such as tobacco and liquor? If these are eliminated, there is a further fall in revenue. The yield question is not the only factor. There are at least two more elements which must be considered. These are the problems of administration, and the effect of a sales tax on the whole problem of stability of prices and inflation, A manufacturers* sales tax would be relatively easy to administer* There would only be a few hundred thousand taxpayers, and they would almost all have adequate books and records, so that pay ment would be fairly sure, and checking up would be fairly easy. A tax at the wholesale level would be more difficult. It would be paid directly by some 306,000 taxpayers, but it could be administered with a relatively small force. A wholly different problem is presented, though, when we come to consider a retail sales tax. There are over S3 million business units selling at retail in this country. A tax on retail sales would require constant tax collections and frequent tax returns from every one of these more than million tax payers, The administrative force required would be very large, Hot only is the problem one of number of employees, but it is one of their skills, and of giving them the special training they would need. Personnel of the type needed are in great demand by war industries and by many branches of the Government in connection with the management of the fighting effort. Accounting and business machines, desks, chairs, filing cases, stationery, forms, office space, and transportation for the field staff all raise additional problems. How let us look at the effect of a sales tax on the price control problem. It is very easy to see that a tax imposed at any other stage than the final retail sale plays havoc with our whole system of price control. A tax imposed at the manufacturing or wholesale stage would have to be treated as an ordinary cost of doing business. Mr, Henderson wrote to the Ways and Means Committee that nI confess that I shudder at the thought of how our office would be swamped if such a tax were passed,** These arguments are so forceful and persuasive as to make it very plain that in the present circumstances a general ~ Q u sales tax can "be imposed, only on retail s'ales* Quite apart from the question of who should hear the burden, we are thus forced squarely up against the major problems of administration which have been outlined before. These problems are such in the judge ment of the Treasury as to make the imposition of a retail sales tax a matter of the very last resort, Now let me consider with you certain other questions of policy on which the Treasury has been working. Tax on Increased Income of Individuals I may mention first, the proposals sometimes made for an individual excess profits tax, or what might perhaps be better called a tax on the increased income of individuals. It has been suggested that those whose incomes have increased during these war years should pay an extra tax on that increase, much the way that corporations which have increased incomes pay an excess profits tax. Such a tax has considerable charm. It is urged that it would impose the burden where the burden can best be borne, and where it should in fairness be borne, upon those who have profited from wartime wage and profit increases. It is plainly true that a mere increase in ordinary income tax rates is far from equal in its operation. Large elements of our population have reduced income at this tine resulting from the many wartime dislocations. To impose increased income taxes upon them is to add to the burden which they already carry. This is recognized, and some system which would throw a larger part of this burden on incomes which have in fact increased would have elements of appeal. Nevertheless, such a tax would present very serious problems. It would mean that two persons receiving, say, $4,000 a year would pay very different amounts of tax because one of the persons had always received $4,000 a year, while the other had only made an average of $3,000 in the years before the tax period. It would not be easy to tell the $2,000 a year man that he must now pay more taxes than the $4,000 man even though their incomes are the same, because his had formerly been less. He would be likely to reply, and with some reason, that he was less able to pay the tax now than the other man because he had gone through the previous years with much less margin. The administrative difficulties of such a tax would also be very great. It would introduce into every individual income tax return many of the complexities of the excess profits tax, with determinations of pre-war base period income, with compli cated adjustments analogous to those in the corporation excess profits tax* and so on. It is hard to believe that it would not be widely evaded. It would certainly greatly increase the problems of auditing and policing in the case of the small individual income tax returns. Collection at the Source Another important question has been presented by the problems of collecting the tax at the source. One of the major difficulties here is the nhumptt, that is, the fact that a mere change to collection at the source means that taxpayers must pay two years* liability out of one year's income, for this year's tax would be collected at the source while last year's tax is still due to the Government. The House bill solves this by a compromise; it in cludes a provision for withholding at the source but at the low rate of 5$, with the expectation that this rate will be increased in later years. It is not surprising that efforts have been made to find some other way to meet this situation, and to put the individual income tax on a wholly current basis. The most prominent presentation of a scheme towards this end is the so-called Ruml, or the pay-asyou-go, tax plan. Under this plan, the taxpayer would pay in 1943 a tax based upon his 1942 income, but this payment would be a tentative tax payment on his 1943 income to be credited against 1943 liability, with an adjustment to be made at the end of the year to take care of any excess or deficiency in the tax. The major obstacle to the Ruml plan is the fact that it calls for the outright cancellation of one year's tax liability. This would confer a windfall on persons who had abnormally high incomes in the year of cancellation, There are several ways in which this defect could be reduced, but not eliminated. All of them, however, are complicated. The Ruml plan, itself, involves a great deal of complexity, particularly in view of the adjustments which must be made at the end of the year. A combination of the Ruml plan with collection at the source, and various other modi fications, offer interesting possibilities. Debt Relief Another problem has been insistently presented in connection with the current tax bill. This is the question of debt relief. Taxpayers who have principal payments to make on outstanding debts are confronted with a serious problem in view of increasing tax rates which they did not contemplate when the debts were incurred. 10 - Interest on the debts is deductible, and accordingly does not present a serious tax problem; but the principal payments are not deductible. The taxpayer must not only pay the principal but the income tax on the principal as well. This may leave him far less to live on than he had anticipated, and leave him with no alternative but to find some way to reduce his princi pal payments, if he can. The problem is presented both to corporate and to individual taxpayers. In the case of corporations, it arises chiefly where they have outstanding obligations payable serially, or through a sinking fund with a fairly heavy annual charge. It is also presented in the case of corporations who have undertaken to make payments on debts measured by a percentage of gross sales, or by a percentage of net income before taxes. In some cases, adjust ments of one sort or another can probably be made. Where such adjustments cannot be effected, these corporations will be con fronted with a very serious problem directly resulting from the incidence of wartime taxes. In the case of individuals, the problem arises in various forms. The individual may have a mortgage on his house with annual principal payments due. He may have an outstanding in debtedness resulting from some liability he has incurred or for which he was responsible, such as the defalcation of an employee or an automobile accident. Somewhat related is the situation where he has insurance premiums to pay. These are not strictly debts, but there may be a certain element of compulsion about then particularly where policies have already been obtained. Many of the debt cases present situations with real hard ship. It would be a great saving for many taxpayers to allow a deduction for amounts used to pay debts. You can readily see what an effective form of relief such a deduction would be. But it raises serious problems. In the first place, it would cost the Treasury a great deal of money unless it were very narrowly confined. Perhaps even more important, such a deduction would be a very serious discrimination against those who were not in debt. Why should a man who has lived frugally, and never bought anything unless he could pay for it in cash, pay a tax on all of his income without deduction, while his neighbor who has splurged and bought various things on tine and margin is allowed to deduct from his taxes the amounts he now pays for his purchases? The only fair solution, it seems, is to treat debt payments as a form of saving and to allow to all taxpayers a deduction for amounts saved whether by way of debt payment or insurance premiums or war bonds or otherwise. - 11 - Unless some limitation were imposed, this would obviously be a very serious drain on the' revenue. As an inducement to saving, it might have a very considerable anti-inflationary ef fect, and that is an element of importance in these days. If deductions for debt payments and savings are allowed without restriction or limitation, the scheme would amount in substance to a spendings tax, that is, a tax on theamount which a person spends without including what he saves. In this way, it might be a satisfactory substitute for a sales tax, because it could have adequate exemptions and be graduated in amount. Perhaps such a spendings tax could be superimposed upon the income tax, but if that were all that was done, there would be little relief for the taxpayer in debt. There is a very serious administrative difficulty with any of these plans. That is the question of shifting of assets. What is to keep a man from selling asset A to get the money to pay off debt B and thus got credit on his tax return for the payment of a debt? What is to keep a manfrom borrowing from A in order to pay B, and then borrowing from C to pay A, thus getting a series of debt payment deductions although he remains constantly in debt? As a matter of fact, what is to prevent a man today from redeeming a war bond to get the money to buy another war bond to fulfill his 10 percent pledge? The only way to prevent these shifts is to require the taxpayer to file with his tax return a complete balance sheet listing all of his assets and liabilities, and to allow the deduction only for a net decrease in outstanding liabilities, or increase in assets. Obviously, this is very complicated. Many individual taxpayers could not file the data for such a return. The problem of checking up on the data they did file would be very great. Any effort to deal with the debt problem has so far foundered on these difficulties, but it remains a problem which is very real in the case of many individuals, and some corporations. How Should Corporations Be Taxed? I would like to close with the presentation of one final problem which is more or less in the nature of long-range tax policy. The problem of the proper way to tax corporations is one of great seriousness and difficulty. At the present time, we have a heavy excess profits tax, and an ordinary income tax on corporations at the rate of 45 percent under the House bill. Among other things, this places a tremendous premium on debt financing, A corporation with outstanding bonds can deduct the interest on the bonds in computing its taxes. If the same amount were out standing in preferred stock, it would have to pay not only the - 12 - dividend on the stock, "but also the tax on the income used to pay the dividend, so that the ultimate cost to it might he increased anywhere from 50 to 80 percent. There is some effect the other way because equity capital would he included in full ih invested capital under the excess profits tax, while debt capital is counted only 50 percent. But this is not important where the average earnings method is used, and it is not of first importance even under the invested capital method. There are two ways of dealing with this question. One would he to deny any deduction for interest paid, thus putting interest on an equality with dividends. Obviously, this would he disastrous. Many corporations would he quickly thrown into bankruptcy at the current tax rates. The only other alternative is to allow a de duction for dividends as well as for interest. If we could approach this question with an open mind, it seems to me that there are many reasons why this solution should he an attractive one to all concerned. The difficulty is that it amounts largely to an undistributed profits tax, that, is, the corporation would he allowed to deduct in computing its tax all of the amounts which it distributed either as dividends or interest. It would thus remain taxable only on that portion of its total income which it did not distribute. The undistributed profits tax has become surcharged with emotion, and it is difficult to get a dispassionate appraisal of the question. It seems hard to think, though, that business men in general would not be interested in a plan which allowed them to deduct their dividends as well as interest payments in computing corporate taxes, and thus eliminated all existing discrimination between debt and equity financing. Certainly, it would be in the general public interest to encourage equity financing, and our present tax laws work heavily in the other direction. If businessmen should come to feel that a tax which provided for the deduction of dividends as well as interest was a desirable thing even though it resembled the unlamented undistributed profits tax, it seems not unlikely that they might find a sympathetic ear at the Treasury. Conclusion I have tried to outline some of the problems which have been faced in formulating the current tax bill. There is one more point which I would especially like to try to put before this audience as earnestly and as pleasantly as I can. What is the function of the organized bar, particularly of the organized tax lawyers in our bar associations, in solving these problems of war taxation? I have felt for some tine, and I know / 1 3 that Mr. Paul shares this view, that the Bar Association night play a more important role in these natters than it has in the recent past. We have here a great reservoir of highly specialized knowledge held by men of known public spirit who often give freely of their time in many public causes. Yet, the recommendations of the Bar Association in the federal tax field are often confined to the smallest matters, and very often are limited to points which primarily affect lawyers themselves as a class in the community, or the particular interests of their clients. Except for those of us who take refuge on the public payroll, we must all have private clients* That is all to the good. Lawyers who appear avowedly for clients perform a real service in the legislative process. But the bar is also a public calling, as Chief Justice Stone once emphasized in the title of his important address; rtThe Public Influence of the Bar*w The organized bar is one of the important means by which lawyers can bring their powers to bear on public questions. It seems not impossible that the usefulness of the organized tax bar would be enhanced, and its influence extended, if it could find a way to approach many of these questions from the broadest point of view* Its recommendations would then rise above the atmosphere of special pleading for a limited group. They would strike at the heart of the basic problems with which we are now confronted« The bar might thus assume a position of leadership in the development of our tax program* TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, A 25, 1942. 8/ 24/42 ------------ f ------------------------- — — " Press Service No. 32-96 The Secretary of the Treasury announced last evening that the tenders for $350,000,000, or thereabouts, of 91-day Treasury bills to be dated August 26 and to mature November 25, 1942, which were offered on August 21, were opened at the Federal Reserve Banks on August 24. The details ©f this issue are as follows: Total applied for - $891,602,000 Total accepted - 352,883,000 Range of accepted bids: k°w Average price “ 99.925 Equivalent rate approximately 0.297 percent ~ 99.906 Equivalent rate approximately 0.372 percent - 99.907 Equivalent rate approximately 0.369 percent (73 percent of the amount bid for at the low price was accepted) -oOo- TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Monday, August 25, 19^-2; Press Service No. 32-97 The Bureau of Customs announced today preliminary figures for imports of commodities within the quota limitations pro vided for under the Philippine Independence Act, as amended by the Act of August 7> 19^9» from January 1 to June 3 0 , 1 9 ^ 2 , inclusive, as follows: Products of Philiunine Islands : : Established Quota : Quantity : Period : Unit of : Imports as of Quantity : June 30, 1942 Coconut oil Calendar year 448,000,000 Pound 31,149,515 Refined sugars Calendar year 112,000,000) Pound 2,346,712 Sugars other than refined f ) ) ) Calendar year 1,792,000,000) Pound 43,232,544 Cordage Calendar year 6,000,000 Pound 323,826 Buttons of Pearl or shell Calendar year 850,000 Cross 72,057 Cigars Calendar year 200,000,000 Scrap tobacco and stemmed and unstemmed filler tobacco Calendar year 4,500,000 Number 521,366 Pound 209,465 1/ The duty-free quota on Philippine Sugars applies to 850,000 long tons, of which not more than 50,000 long tons may he refined sugars. THIS RELEASE IS TEMPORARILY DISCONTINUED AS OE THIS DATE. - 0O 0- TREASURY DEPARTMENT. Washington j F O R .RELEASE,'MORNING NEWSPAPERS, Friday. Angust 28,. 1942.________ 8/27/42 The Secretary of the Treasury, hy this public notice, invites tenders for $350,000,000, or thereabouts, of 91-day Treasury bills, to be issued on a discount basis under competitive bidding. The bills of this series will be dated September 2, 1942, and will ma.ture December 2, .1942, when the faee amount will be payable without interest* They will be issued in bearer form only, and in denomina tions of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value). • Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o*clock p, m. , Eastern war time, Monday, August 31, .1942. Tenders will not be received at the Treasury Department, Washington. Each tender must be for an even multiple of $1,000, and the: price offered must be expressed on the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or Branches on application therefor. Tenders will be received without deposit from incorporated banks and trust companies and from responsible and recognized deal ers in investment securities. Tenders from others must be accom panied by payment of 10 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guar anty of payment by an incorporated bank or trust company. Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which public an nouncement will be made by the Secretary of the Treasuiy of the amount and price range of accepted bids. Those submitting tenders will be advised of the acceptance or rejection thereof. The Secre tary of the Treasury expressly reserves the right to accept or re ject any or all tenders, in whole or in part, and his action in any such respect shall be final. Payment of accepted tenders at the prices offered must be made or completed at the Federal Reserve Bank in cash or other immediately available funds on September 2, 1942. 32-98 (Over) The income derived from Treasury hills, whether interest or gain from the sale or other disposition of the hills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury hills shall not have any special treatment, as such, under Federal tax Acts now or hereafter enacted, The hills shall he sub ject to estate, inheritance, gift, or other excise taxes, whether Federal, or State, hut.shall he exempt from all taxation now or here after imposed on the principal or interest thereof hy any State, or any of the possessions, of the United States, or hy any local taxing authority. For purposes of taxation the amount of discount at which Treasury hills are originally sold hy the United States shall he con sidered to he interest. Under Sections 43 and 117 (a) (l) of the In ternal Revenue Code, as. amended hy Section 115 of the Revenue Act of 1941, the amount of discount at which hills issued hereunder are sold shall not he considered, to accrue until such hills shall he sold, re deemed or otherwise disposed of, and such-hills are excluded from consideration as capital assets. Accordingly, the owner of Treasury hills (other than life insurance companies) issued hereunder need include.in his income tax.return only the difference between the price paid for such hills, whether on original issue or on subse quent purchase, and the amount actually received either upon sale or redemption at maturity during the taxable year for which the return is made, as ordinary.gain or loss. ? 'Treasury Department Circular Uo. 418, as amended, and this notice, prescribe the terms of the Treasury hills and govern the con ditions of their issue. Copies of the circular may he obtained from any Federal Reserve Bank or Branch. TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Tuesday, September 1, 1942. Press Servi No. 32-99 The Treasury Department today made public the following message from Secretary Morgenthau to the American Bankers Asso ciation which, this year, has abandoned its annual convention as a conservation measure : We have come through a year of stress and strain since I last had the privilege of addressing the American Bankers Association on the subject of our financial and economic problems. When I spoke to you in Chicago last October, coming events were already casting their shadow. At that time, and in the light of our financial experi ences in the former World War, I reviewed the perils of inflation facing us, and I asked you to constitute yourselves sentinels of the nation, in your own banks and your own communities, to guard against any private encroachment upon the resources of materials or of credit needed for the national effort. If this were not a moment of such deadly serious ness for our nation and for all free men, I might be tempted to think that we had not done too badly in our war financing in the year that has passed. By Mwe” I mean, of course, the American people, but also, in a special sense, the Treasury, the Federal Reserve . System and the bankers, working together in a new partnership which we have entered into for the duration of the war — indeed, I hope for a much longer time, for our partnership must look beyond victory to the peace we shall have to win together. - 2 - In the fiscal year that ended June 30, $36 billion poured into the Treasury in tax revenues and in all forms of borrowing. There is no parallel in our history for this money-raising achievement, nor has the Government ever been able to draw upon such a wide variety of funds. We have not only raised $13 billion from taxes, but we have also borrowed a net amount of $3 billion through the sale of Tax Anticipa tion Notes, We have not only resorted to the conven tional forms of borrowing from the banks and regular investors, but we have also enlisted additional insti tutional funds by issuing new types of securities, and we have sold War Savings Bonds to some 20 million Americans to a total of $6 billion in the fiscal year just ended. Without wishing to seem complacent -- for com placency is as dangerous as a dozen of the enemy*s mechanized divisions — I think it only right to call attention to these unprecedented borrowings, so smoothly carried out that the country as a whole has hardly become aware of their magnitude. We are surrounded at this moment by economic as well as military dangers, yet it is cause for some satisfaction that inflation has been more effectively controlled to date in this war, in the face of a production and expenditure pro gram of immensely greater dimensions, than in the corresponding stage of our participation in the World War of 25 years ago. I have just seen an estimate by the Department of Commerce showing that the people*s savings in the first two quarters of 1942 were more than twice as great as in 1941, due partly to price ceilings, credit restrictions and to the growing shortages of many kinds of consumers’goods, but also in very large measure to the people’s awareness of the need for saving. The estimate shows individual savings at an annual rate of almost $25 billion in the second quarter of this year, as compared with an annual rate of approximately $10 billion for the same period last year. These results would not have been possible without the voluntary cooperation of millions of Americans representing every state and section, every occupation, every national background, race and creed. In this voluntary program the bankers of America have stood in the forefront. They have given the equivalent of 25,000 full-time employees to the sale and promotion of War Bonds, and 85 per cent of the sales made have been through the banks. They have been fighting in the front lines of our battle on the home front by carrying out the restrictions of Regulation W on consumer credit, by keeping a careful watch on all applications for non-essential loans, and by helping to freeze foreign funds which the enemy might have used to spy upon our war effort, to sabotage our production, or to demoralize our people. They have given their time and energy to this effort without thought of any compensation except the knowledge that they were helping their country in its time of greatest need. I have said before on repeated occasions that we at the Treasury are deeply grateful to the Federal Reserve System and to every individual oanker who has helped the program of war financing, and I should like to express my thanks once more for a splendid exhibi tion of cooperation and patriotism. Yet we cannot afford to congratulate ourselves at this critical stage of the war. Whatever was accom plished in the past fiscal year is of little relevance when we remember the size of the financial as well as the military job ahead of us. It would be carrying coals to Newcastle to explain to the bankers of America the magnitude of the finan cial problem confronting our Government this year in meeting the many and urgent demands of the war. You - 4 know that we shall have to borrow more than $50 bil lion in one way or another in the present fiscal year, even if Congress enacts a tax bill to yield $8.7 bil lion of additional revenue, as we at the Treasury have urged. Without any elaboration from me you can appre ciate what the borrowing of $50 billion will entail. The problem itself involves more than simply raising the money to pay thé bills. To begin with, we have to manage our fiscal affairs so that the financial burden is distributed equitably. In achieving this, we must avoid any maneuver that threatens to hinder the maximum efficiency of our war production. Above all, we must find the means to devote more than half of our national income this year solely to war purposes, yet without slackening the determination of the American people to win this war and win it out right. Our taxes and our borrowings must not handcuff the hands already willing to work for victory. You would, I suppose, like me to give you some guidance as to the methods by which the Treasury pro poses to raise these truly colossal sums. I wish that I could give you that guidance, but frankly, none of us can see more than a few months ahead through the murk of this most unpredictable of all wars. Besides, the decision in all cases does not rest with the Treasury alone. I would not venture to guess, for example, what the new tax bill will yield, although I know that the American people are ready for a courageous tax program. In fact, they are ready to bear even greater burdens than the Treasury^ minimum proposals of $8.7 billion in new revenue would impose upon them. I would not hazard a guess as to the future of rationing, although I feel deeply that we shall have to extend the scope and the severity of rationing before this year has ended. - 5 I can, however, offer what I may call broad hints, based upon the principles which we have so far followed in our wartime financing and upon the dimensions of the task in which we are now engaged. You may take it for granted that we shall con- . tinue to seek funds both from current and accumulated savings. In the field of taxes, we shall follow the enactment of a new revenue bill with renewed efforts to make the collection of taxes more effective. To this end we must intensify the sale of Tax Anticipation Notes, which afford millions of taxpayers the easiest possible method of saving in advance for the taxes that will be due next Spring. In borrowing from the people directly, we intend to make every effort to reach and surpass our announced goal of $12 billion from the sale of War Bonds and Stamps in the fiscal year that ends June 30, 1943. As I write these lines, the sales figures for July, amounting to more than $900 million in a month, give us real ground for encouragement. So also does the fact that the sales of Series £ bonds in the smaller denominations have shown a striking increase in recent months. Most encouraging of all is the in crease in the number of workers purchasing War Savings Bonds through payroll deductions. There are now more than 110 thousand firms, employ ing over 25 million workers, that have a payroll savings plan in operation. In the month of July alone more than 18 million workers subscribed $200 million out of their pay for War Bond purchases, and payroll deductions are increasing at the rate of about $40 million per month. We confidently expect that by the end of 1942 well over 20 million employees will be regularly investing at a rate approaching 10 per cent of their gross earnings - 6 - through payroll savings. This will mean that from $350 million to $400 million a month would be de ducted voluntarily from payrolls next year to buy War Bonds. During 1943, on this basis, nearly $5 bil lion worth of War Bonds would be purchased in this way — all out of current wages and salaries, and all representing what we can regard as non-inflationary borrowing at its best. Even if the War Bond sales realize all my expecta tions, we shall have to borrow increasingly and in utterly unprecedented amounts from other sources. The members of the American Bankers Association are acutely aware of the hazards we run if we rely more than is necessary on the sale of government securities to commercial banks. I often think, how ever, that the distinction between sales of government securities to commercial banks and sales to others is over-emphasized. What we are really trying to do is to sell as large a proportion of our securities as possible in such a way that their proceeds, when spent by the Government, will not constitute a net addition to the total spending of the economy. I think it worth remembering that sales of govern ment securities to commercial banks do not add to the total spending of the economy if they are offset by decreases in the loans or other investments in banks, or if they are offset by the accumulation of balances in the banks which are genuine savings of depositors. It is necessary, therefore, that we at the Treasury should go far deeper than the superficial distinction between sales of government securities to banks and those to others and that we should look closely at the real sources of the funds. The most desirable source of funds, is, of course, money borrowed from the current savings of the country. A substantial proportion of the proceeds of all classes of government securities - 7 - sold — including some of those sold to commercial banks — comes directly or indirectly from this source* Yet inflation cannot be curbed merely by the passage of a courageous tax bill or by the successful borrowing of vast sums from current savings, or by a combination of bold and intelligent taxing and borrowing. We undoubtedly shall find it necessary to adopt more drastic control of consumer spending, in one form or another, than anything yet applied. I should not like to predict at this stage, for pre diction is more than ever dangerous, but I do want you to be prepared for new controls and new sacrifices as the war moves into a new and more intense phase. We have heard so much talk lately about the func tion of finance in winning this war and in checking inflation that I should like to clear the air on one point. Financial policies do not of themselves win wars. Wars are decided by battles. But the necessity for winning battles does not diminish the importance of raising the money to fight them. Nor does it lessen our responsibility for raising the money in a way that husbands the strength of the civilian economy instead of wasting it. For though wars may not be won by financial triumphs, they can be lost by financial blunders. The successful financing of the war is, therefore, vital for victory. It is our job, and we must do it. It is our problem, and it is up to us to solve it. As I told the Senate Finance Committee in July, I am convinced that the American people are ready for sacrifices greater than we imagine. I know also that American bankers as individuals and as a group are ready to put forth any effort that may be needed. Our - 8 - war effort is calling upon the skill and the resources and the leadership of the American banker as never^ before. It demands of him a leadership and a sacri fice above and beyond his own private interests. At < the same time, its success is essential to his survival. In another crisis that brought anxious moments and dark days to us a quarter of a centurv ago, Woodrow Wilson said, "America is not pything if it consists of each of us. It is something only if it consists of all of us; and it can consist of all of us only as our spirits are banded together in a common enterprise: the enterprise of liberty and justice and right." These were the words of a great American at another time when the fibre of our nation was being tested. They are a watchword for every American today.