assessment regs. 1917

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TREASURY DEPARTMENTUNITED STATES INTERNAL REVENUE

i. REGULATIONS No. I,, R'EVISED NOVEMBER I. 1917!i. 'I., it.f REGULATIONS ljI!

CONCERNING I!ASSESSMENTS IIII,. I'I)

I ' i:I Jf I'I I! ' ,,.i 1917 .f. '

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~ ~ ) . . :>. 2.-:, .. . ~ If OF 1 1 1 1 ~ -'ItI W ~ T O N ! GOVERNMENT PRIN11NG OFFlCEI 1918


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PREFACE.

The ear l iest instructions in th e Revised Statutes of the U nite dStates relat ing to assessments are tho se requiring the canvas s of th edi stricts for objects of taxat ion.Chap ter 1 of th e following regulations is the refore devote d toge neral instruct ions concerning obtaining data for assessments. T helaws au thor izing and requirin'g collectors to take cer tain measuresto aScertain w hat taxes are due, in the absence of returns f rom tax payers, or in case of false or f raudu lent returns, have been longenough in existence to have been construed by the courts as to nearly every possible case lilcely to arise, and the leading jud icial and de par tmental decisions nre here given in connection with the statutein each case. As nn examination of these decisions will show theco llector the extent of his powers in these m atters, and will indicat eto hi m the proper course to be tnken in each part icular classof cases,and may even preventhim frqm losing a case in the courts by reasonof having sought the remedy under the wr ong statute , the at tent ionof collectors is par t icular ly called to th is part ofthe regulations.Chap te r 2 (taxes payable by s tamps) and chapter 3 ( taxes pot payable by stam ps, includ ing penal ties of 50 and 100 pe r cent, and th eta x to be assessed on brandy gauged for the fortificatio n of wine) a redevoted to statem ents of th e different articles and occupations liableto tax under internal-revenue laws, and to the condition s and li mi tations under which the several taxes a re assessed.In th is portion of the regulation s the taxes have been ar r anged ingroups, as taxes payable by stamps, taxes not payable by stamps,etc., and inst ruc tions appl icable to a class have first been given, followed under suitable headings by those relat ing to the members of aclass. The treatm en t of sp ecial taxes is a case i n point. In eachcase the statutory definition isusually first given, and then the rul ingsof the depar tment , the opinions of the Attorneys General, and thedec isions of th e courts, which have been published from tim e to tim e,are briefly stated.

I t is suggested in this connection that each collector provide himself with an i n ~ e r l e a v e d copy of these regulations, and when newtaxes are imposed or existing taxes are repealed, and as furtherdecisions, etc., affecting the several 'classes of taxes are publ ishedfro m t ime to t ime in T reasu r y Decisions, or are issued as "mimeo-

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6 REGULATIONS OONOEBNING ASSESSMENTS,the force of statutes; and the acts of the commissioner are presumedto be the acts of the Secretary. In re Huttman (70 Fed. Rep., 699).

.A. regulation made in pursuance of- an act of Congress has theforce of law. United States v. Eliason (16 Pet., 291); 8( parte Reed(100 U. S., 13); United States v. Barrows et al. (10 Int. Rev. Rec.,86); Harvey v. United States (3 Ct. Clms., 38); Stotesbury v. UnitedStates (23 Ct. Clms., 292; 22 Op. At ty. Gen., 570).

THE COMMISSIONER OF INTERNAL REVENUE TO MAKEASSESSMENTS.The duty of assessing. all taxes and penalties imposed by TitleXXXV, Internal Revenue, of the Revised Statutes, or accruing. under any former or subsequent internal-revenue act, where suchtaxes are not payable by stamp, or where they have not been dulypaid by stamp at the time and in the manner provided by law, isimposed upon the Commissioner of Internal Revenue by section3182, as follows:SEc. 3182. The Commissioner of Interm\l Revenue is herebyauthorized and required to make the inquiries, determinations, andassessments of all taxes and penalties imposed by this Title, or accruing under any former internal-revenue act where such taxes havenot been duly paid by stamp at the time and in the manner providedby law, and shall certify a list of such assessments when made to theproper collectors respectively, who shall proceed to collect and account for the taxes and I?enalties so certified. Whenever it is ascertained that any list which has been or shall be delivered to anycollector, is imperfect or incomplete in consequence of the omission ofthe name of any person liable to tax, or in consequence of any omission, or understatement, or undervaluation, or false or fraudulentstatement contained in any return made by any person liable to tax.the Commissioner of Internal Revenue may at any time within fifteenmonths from the time of the delivery of the list to the collector as

aforesaid, enter on any monthly or special list the name of suchperson so omitted, together w ~ t h the amount of tax for which he mayhave been or shall become hable, and also the name of any suchperson in respect to whose return, as aforesaid, there has been orshall be any omission, undervaluation, understatement, or false orfraudulent statement, together with the amount for which suchperson may be liable, above the amount for which he may ho.ve beenor shall be assessed upon o.ny return made as aforesaid; and he shallcertify and return such list to the collector as required by law. Andall provisions of law for the ascertainment of liability to any tax,or the assessment or collection thereof, shall be held to apply, so far11s may be necessary, to the proceedings herein authorized andd i r e ~ t e d . . Rea8sessmerit within 15 months.-Dandelet v. Smith (18 Wall.,642); Barker v. White (19 Int. Rev. Rec., 117; 11 Blatch., 445);Daniels " Tarbox (9 Blatch., 176); Bergdoll v. Pollock (95 U. S.,337).

REGULATIONS OONOERNINO ASSESSMENTS. 7The authority to make assessments of taxes due is limited to the 15months next succeeding the delivery to the collector of. the list uponwhich the assessment should have been made, but from which it wasomitted, except m cases where it is otherwise provided. See Chap

ter IV, taxes unassessable by reason of the operation of the statutesof limitation.Power of the Commissioner to as.sess taa:es.-The list is prima facieevidence that the tax is legal. When suit is instituted against thecollector to recover taxes the burden is upon the plaintiff to establish, by proof, that the assessment is erroneous, and he must showby a preponderance of evidence that the tax is not due. T. D. 662,May 22, 1903; Brown v. Harkins, Collector (Cir. Ct., U. S., West.Dist. N.C.); U.S. Fidelity & Guaranty Co. v. U.S. (201 Fed. Rep.,91; T. D. 1824).Other sections of the Revised Statutes and subsequent acts of Congress imposing upon the Commissioner the duty of assessing certainspecified taxes and penalties are hereinafter cited in connection withthe instructions concerning such taxes and penalties.

The fact that a tax is not collectible because the party liable tothe t!!x has no means is not sufficient, in itself, to warrant omissionof assessment, nor is the fact that a party has removed to foreignterritory sufficient reason for the omission of the assessment in viewof sections 3182 and 3218, Revised Statutes. (See T. D. 1553, Oct. 25,1909.)The law does not conterpplate that assessments be made against"bootleggers" or itinerant peddlers, as such persons have no fixedplace of business. As the offense is a crim inal ra the r than a civilone;warrants should be sworn out and the offender taken before aproper judicial officer for hearing if the evidence obtained is sufficient. for prosecution. Thi s class of violator's should be vigorouslyprosecuted. Internal-revenue officers will not permit such offenses togo unpunished.Pursuant io the authority conferred by sections 321 and 3447 ofthe Revised Statutes, above quoted, the following regulations relating to the assessment of internal-revenue taxes are hereby prescribed:


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CHAPTER I.GENERAL INSTRUCTIONS AS TO OBTAINING DATA FORASS ESSMENTS. Pap .

I. CanvBI!II of di atricte for objecte of ta xation.. . . . . . . . . . . . . . . . . .. . . . . . . . . . 9II . Returna of perao!lR l iable to tax. . . . . . . . . . . . . . . . . . . . . . . . 10

III. W hen r e tur na maybe made by deputy collec tora for taxpayera....... 12IV . In case of absence, deputy collec tor to serve notice requir in g return . . 12V. Oollectora' summona of peraona to appear , produc e books, and to tes-

tify respecting objecte subject to tax an d the returns thereof.... ...... 14VI. When collectora or deputy collectora may make returlll!.. .. . .. . . . .... 17

VII. Officera m ay enter premises where taxable ar ticles are produced or s t o r ed . .. . . . . . . . . . . . . . . . . . . . . . .. .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 17

VIII . Collectora may examine premises to see that all law s and regulationarelating to the collection of internal- revenue tax es are faithfullyexecuted and com piled with. . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . ... 17

IX. Taxable prop4>rty ow-- ! by no nreaidente........... . . . . 18X. LisII or returna-whto. . aken and ho w denominated........... . 18

I. CANVASS OF DISTRICTS FO R OBJECTS OF TAXATION.Section8172, Re vised Statutes, as amended, provides that -Every collector shall, from time to time, cause his deputies to pro ceed through every part of his district and inquire af ter an d concerning all persons therein who arelinble to pay any in ternal-revenu e tax,and all ~ e r s o n s owning or having the care and managemen t of an yobjects habltl to pay any tax, and to make a list of such persons anden umerate said objects.T he l is t referred to above shouldbe made on Form 24, and should

contain nothing but taxes which should be reported for assessment.T he report of t he deputy , on Form 24, shouldbe made so as to reachthe collector on or before the fifth da y of the month next succeedingtheone for 1\hich the report is made. This re turn on Form 24 shouldnot be confounded by the deputy with his re turn of collections onF orm 102. (Seep. 14, whereon th is section is repeated with referenc eto special taxes.)

Co llectors and a l l other internal-revenue officers and agents are directed to secure, at the time any delinquent taxpayer is m ~ d e r consideration, complete evidence in writing , proper}y sworn to, which willclearly establish the fact ofthe liability to tax, whatever that ma y be.

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12 REGULATIONS OONOERNING ASSESSMENTS.III. WHEN RETURNS MAY BE MADE BY DEPUTY COLLECTORSFOR TAXPAYERS.

Said section 3173, Revised Statutes, as amended, further providesThat if any person liable to pay any duty or tax, or owning, possessing, or having the care or management of proper ty, goods, wares,and merchandise, articles or objects liable to pay any duty, tax, orlicense, shall fail to make and exhibit a list or return required by

law, but shall consent to disclose the particulars of any and all theproperty, goods, wares, and merchandise, articles and objects liableto pay any duty or tax, or any business or occupation liable to payany tax as aforesaid, then, and in that case, it shall be the duty ofthe collector or deputy collector to make such list or return, which,being distinctly read, consented to, and s i ~ n e d and verified by oathby the person so owning, possessing, or havmg the care and management as aforesaid, may be received as the list of 8llch person.The provision of the law above quoted, which authorizes the collector or deputy collector to make a retu1on fo r a person liable to aspecial tax who declares to the collector or deputy the character ofhis business, refers to the retu1'n on the prescribed form, which mustbe filled up and delivered by the collector or deputy to the specialtax payer for the latter's signature and oath.IV. IN CASE OF ABSENCE, DEPUTY COLLECTOR TO SERVENOTICE REQUIRING RETURN.

Said section 3173 further provides-That in case no annual Jist or return has been rendered by .guchperson to the collector or deputY: ~ o l l e c t o r required by law, an?th1:1 person shall be absent from his or her residence or place of busi-ness at the time the collector or a deputy collector shall call for theannual list or return, it: shall be the duty of such collector or deputycollector to leave at such place of residence or business, with someone of suitable nge and discretion, if such be present, otherwise todeposit in the nearest post office, a note or memorandum addressedto such person, r e q u i ~ n g him or her t? render to s u ~ h ~ o l l e c t o l ' ordeputy collect'or the hst or return reqUired by law, withm ten daysfrom the date of such note or memorandum, verified by oath.In the case of special taxes this note will be on Form 5.In carrying into effect the provisions of the internal-revenue laws(sees. 3173 and 3176, Rev. Stat., ns amended, and sec. 53, act of October 1, 1890, amending sec. 3237, Rev. Stat.) relating t'o the swornreturn that is required of every person, firm, or corporation engagedin any business for whi


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16 REGULATIONS CONCERNING ASSESSMENTS.his district relating to their business and connected with the subjectsof taxation, and he is not bound to infonn the owners of his purposein making such examination.Where a summons for the production of books and papers has beenissued by a collector of internal revenue, and such summons hasbeen duly served and not complied with, a United States districtjudge may, upon application and proof of these facts, issue a writ ofattachment.The law (sec. 3163a, Compilation of 1911 aforesaid) is not unconstitutional in giving collectors the right to examine such books andpapers as show the operations of banks, etc., with the public, andare connected with the internal revenue of the United States. (Seethe decision by Judge Hill in the case of Stanwood v. Green, vol. 11,Int. Rev. Rec., p. 134.)Under section 3175, Revised Statutes, a judge or commissioner haspower to issue an attachment as for a contempt agains t a person summoned by a collector for a refusal or neglect by such person to obeythe summons, to give testimony, or answer interrogatories. I t hasbeen held, also, that the judge may, instead of an attachment, issuea rule to show ca.use why an attachment should not issue. The application of the collector in these cases is a proceeding in a civil cause,and may be amended. I t has been decided that, 'II!Tider the proviaiomof law refwoduced fl8 section 9173, Revised Statutes, the collector isnot authorized to require the production of the books of a corporation in which the taxpayer is a shareholder, such books, in the meaning of that provision, not being books relating to the trade or business of the shareholder. (See decision by Judge Lowell, p. 133,vol. 11, Record; Lee v. Chadwick, Fed. Cas. No. 2570.)The protection to a person that he shall not be compelled to be awitness against himself applies only to criminal cases, and does notextend to a witness called under summons to appear before a collectorto give testimony and produce books relating to returns and assessments, as this latter is a civil proceeding. The examination of booksunder such summons is not an infringement of the fourth amendment to the Constitution, providing against unreasonable searches, asthis clause is applicable to criminal cases only. The person summoned having appeared and brought with him the books and papersrequired can not lawfully refuse to exhibit the same to the collectoror to testify concerning them. (See decision by Judge Hillyer, p.182, vol. 11, Record, in re StrouSe.)Section 3173 of the Revised Statutes clothes collect


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TUDB OR BUSINESS TO BE REGISTERED BY PERSONS LIABLB TO TAX ON BLANDPRESCRIBED BY TBB COIIIUSBIONER OF INTERNAL REVENUB.

Every person engaged in any trade or business on which a specialtax is imposed by law is required to register with the collectorof the distr ict his name or style, place of residence, trade or business,and the place where such trade or business is carried on. In case ofa firm or ' company, the names of the several pel-sons constitutingthe same, and their places of residence, should be so registered.(Sec. 3238).

The returns of special-tax payers must be made under oath. (26Int. Rev. Rec., 89; ibid., 69.)The only lawful returns are those made on the forms prescribedby the Commissioner of Internal Revenue and approved by theSecretary of the Treasury. (Sec. 8178, R. S., as amended.)The provision ofthe law (sec. 8173, Rev. Stat ., as amended) whichauthorizes the collector or deputy collector to make a return for aperson liable to special tax who declares to the collector or deputythe character of his business refers to the return on the prescribedform, which must be filled up and delivered by the collector or deputy

to the special-tax payer for the latter's signature and oath.A person intending to engage in a business or occupation forwhich a special tax is required to be paid must himself sign andswear to the return on the prescribed form. (T. D. 1416, Sept. 9,1908.) In-case of a firm or company the names of all the membersthereof must be disclosed (T .. D. 1397, July 15, 1908; T. D. 49,Feb. 27, 1900), but any responsible member thereof may make thereturn under his oath.In case of a corporation the return must give the names of the

officers of the corporation and the capacity in whith they are authorized to act. The retu rn may be made by the. officer authorized tosign such returns. (T. D. 1165, May 9, 1907.)WRBN RETURNS SHOULD BB FILBD.

Every person or firm liable to special tax must, during the monthin 'which his liability begins, file, and thereafter while thus liable,not later than the 31st day of July of each year, again file with thecollector or .deputy collector a sworn return on Form 11 or otherforms prescribed by the Commissioner of Internal Revenue andapproved by the Secretary of the Treasury, and pay to such officerthe amount of the tax, when he will be furnished with a special-taxstamp, which must be at all times conspicuously displayed in his ortheir place of business.See, also, section 3237 as amended, which provides as follows:

And it shall be the duty of special-tax payers to rendertheir returns to the deputy collector at such times within the calen-

dar month in which the special-tax liability commenced as shallenable him to receive such returns, duly signed and verified, not later-than the last day of the month, except in cases of sicknessor absence,as provided for in section three thousand one hundred and seventysix of the Revised Statutes. ,Fo r failure to render to the collectors the proper returns withinthe prescribed time see rulings and decisions under Para"raph VII,Chapter III, page 142, relative to 60 per cent and 100 per centpenalties.

8TAIIP8 FOR 8PBCIAL TAXBB.

All special taxes imposed by law, including the tax on stills orworms, must be paid by the stamps denoting the tax. (Sec. 3238.)Special- tax stamps mny be issued to persons carrying on the business of retail dealers in liquors, retail dealers in malt liquors, uponpassenger railroad trains or upon steamboats or other vessels engagedin the business of carrying passengers. (Sec. 3283a.)Special-tax stamps will be transmitted by ordinary mail unless theperson or firm ordering the same desire that they be transmitted byregistered mail, in which case 8 cents additional should accompanythe application.

The firm name is the only name that is necessal"J in a special-tax .stamp issued to a partnership. (T. D. 1008, June 2, 1906.)When special-tax stamps have been lost or destroyed or where the~ a r n e have been taken possession of by State authorities, certificatesof payment of the special tax are to be issued by collectors in lieuthereof. (See T. D. 1305, Feb. 8, 1908.)Every person engaged in any business or employment who is therebymade. liable to a special tax, must place and keep conspicuously inhis establishment or place of business all stamps denoting the payment of said special tax. (Sec. 8239; T. D. 1826, Jan. 7, 1913.) Is-&uance of special-tax stamps to liquor dealers in prohibition territory.No authority to refuse to issue the stamp, which is not a license butmerely a receipt for the tax, and the only one which can be given.Spectial-tax stamps are merely receipts for the tax, and carryno privileges except immunity from prosecution for nonpaymentthereof. (T. D. 1484, Apr . 21, 1909.) Such stamp when issued tosteamboats or other vessels carrying passengers or to railroad passenger tra ins does not authorize sales in prohibition terr itory. (SeeT. D. 1477, Apr. 3, 1909.)Collectors or their deputies are forbidden to issue receipts for .moneys received in payment of taxes which are payable by stamps.(Sec. 3183 R. S Cir. 595, and T. D. 297, Mar. 11, 1901.)


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184"W ln p.Doaa:

Tuon di8tilled lpirit l to beeoUeetedl- wh below pro of B..Uof taudonin CMi offermented Uquon ..

WID:Tax on. . ... .. .. . . .. . V"mtllenDOt liableto llp4ICia1 t u for lelliDtr, of th eir OWD pcn rth,at place where m ade,ete . . . . . . . . . WOJm (dilltille rf.) :Bpeeial taxOD

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11828 105

NO. 1

Treasury Regula tions No. 1 rel ate to theduti es of coll ecto rs and doput ies un -der the Act otDec.ember 24 1872 . Ap-pr ove d April 21. 1873 .They were not publ ished as a Treasury de-ci sion.See also Regulations No. 2 and No. 12.

assessment regs. 1917

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