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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-
-
•
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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.
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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
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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
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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
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te Aprii %$ 2942. tetaMi Ite inlitd s%m%m
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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
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te ih» « t e m i te $J© millitm
m à w tàm r «hieh te* StetaUAaaiteft M
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tei t e e «Ktetete far * pirite te «ut ywor teytte t e
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te Ite 1S41 Jgpimtel I» in
Ite tetelttcntl pa2àef te tei fteuna^r te glting f t H Untateti
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&£/* £ »
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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 5ȣ>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#
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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 *
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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
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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
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>-*
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2 2 ?
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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
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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
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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.
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11
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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
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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.
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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
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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
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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
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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.
@FedFRASER