Of major importance in connection with the proposed change in the law regarding the interest period on a refund is the delay in payment of the refund due to circumstances outside of bureau control. The delays consequent upon the exhaustion of the appropriation for refunding have been as follows:

We are concerned in this report with the relation between the date of payment and the date to which interest shall run. Equitable treatment of the taxpayer demands that the dates be separated only by the time necessary to allow for the Government bookkeeping and accounting. Interest burdens incident to exhaustion of the refunding appropriation should be borne by the Government rather than the taxpayer. No provision is recommended to force the Government to expedite the payment of a refund by the imposition of an increased rate of interest or compound interest in the event of a delay in refunding, although the taxpayer is subject to such additional burden when he is delinquent.

The adoption of the above recommendation regarding the interest period on a refund made by the commissioner would raise the question as to the advisability of amending section 1117 of the Revenue Act of 1926, providing for interest on judgments. Considerations of the same general nature obtain for adopting a provision allowing interest to within 30 days of payment rather than to the date of entry of a judgment.

Under the existing revenue laws the provisions imposing liability for interest upon the Government in the case of overpayments and on taxpayers in case of underpayments are numerous and are to be found in several different places in the act. It is believed that the convenience of all who use the act would be promoted by collecting these provisions at one place. It is customary to audit the returns for several years at the same time, and in considering the result of such an audit the taxpayer and the representative of the Government must check the interest computations on underpayments and overpayments for several different years. This would be facilitated if all the interest provisions were together in the statute.

There are some difficulties in connection with the determination of interest in cases of affiliated corporations, trusts, and beneficiaries and marital communities. In some of these cases, particularly that of affiliated corporations, the interest periods may operate, particularly with respect to the 1918 and earlier acts, so that the Government pays interest over a term of several years on a refund to the parent when it is able to collect interest only since the passage of the 1926 Act on amounts found to be due from a subsidiary. This results from practical considerations, and possibly even from constitutional considerations, which determined the policies of the last three revenue acts with respect to interest on deficiencies. It is not believed wise at the present time to undertake the making of further

changes in the provisions for interest on deficiencies under these early laws, nor is it believed to be sound economically or legally to treat corporations with stockholders in common or parent corporations and subsidiaries as one unit for the purpose of computing interest on deficiencies. Study of the subject should be continued, however, to develop if possible means for making the determination and computation of interest in certain cases more equitable to taxpayers and to the Government and less difficult from an administrative standpoint. CONGESTION AND DELAY IN THE SETTLEMENT OF TAX CASES

Congestion of cases within the bureau at the present time is not so serious a problem as it has been in past years. The accumulation of cases on the docket of the Board of Tax Appeals, however, has been steadily growing and requires thoughtful consideration. The board can not control the volume of cases coming to it. It can only control the rate at which cases are disposed of, and even this is possible only within comparatively restricted limits. The problem of congestion, therefore, past and future, is not primarily a board problem. It is a problem of the bureau and the general counsel's office. Attention is invited to the data presented in the survey of administration prepared by the Treasury for the committee and printed as Volume III herein.

RECOMMENDATION

1. There should be a special body in the Bureau of Internal Revenue charged with the closing out of cases and with curtailing appeals to the Board of Tax Appeals. Legislation is recommended if necessary to the existence of such a body.

DISCUSSION AND RECOMMENDATIONS

Congestion of cases before the bureau. The number of cases pending October 7, 1927, before the Income Tax Unit and the field officers of the bureau is shown in detail below:

Much progress has been made during the past two years in the way of bringing the bureau's work to a current basis. The closing out of the few remaining cases for 1923 and prior years is a slow process, due in some measure to the taxpayer's right to file a claim for refund within three years after the payment of an additional tax. It is important that the cases for these early periods be definitely closed out as rapidly as possible. It seems clear that, except for the relatively few cases for earlier years, the problem of con

gestion has been shifted from the bureau to the Board of Tax Appeals and the general counsel's office.

Congestion of cases before the Board of Tax Appeals. A major problem as above stated is the accumulation of undecided appeals before the Board of Tax Appeals and the flow of incoming petitions to that body. Attention is invited to the following chart, which shows the appeals docketed, the total number disposed of, and the reported decisions, by months, from July, 1924, to September 1997.

EXPLANATION OF CHART ON PAGE 78

The continuous line indicates appeals docketed; the line composed of dots and dashes indicates total cases disposed of; and the line consisting of broken dashes indicates the reported decisions.

The following table shows the condition of the board's work as of June 30, 1927:

Certain outstanding facts may be noted. In the 35 months between August 1, 1924, and June 30, 1927, the board disposed of deficiencies at the average monthly rate of three and one-half millions of dollars. The monthly average of cases was 323 and the average tax proposed in each case was $11,440. The chart shows that of the appeals disposed of, only about one-third required written findings of fact or opinion. Two-thirds were disposed of by dismissals, stipulations, or otherwise. This indicates the very limited possibilities of relief by speeding up the rate of formal decisions. Relief must be looked for, primarily, in curtailing the flow of cases to the board. On June 30, 1927, there were pending undecided 18.313 appeals, which is 62 per cent of the appeals filed during the life of the board. More than $542,000,000 were involved in pending cases, which is more than 80 per cent of the total amount involved in all appeals docketed from August, 1924, to June, 1927.

Responsibility of the Bureau of Internal Revenue. It is impossible to discuss the problems of the board apart from the work of the Bureau of Internal Revenue. Attention is invited to a survey of administration prepared for the committee by the Treasury Department and published herewith as Volume III. The department has submitted in this survey a frank analysis and statement of its problems. There can be no doubt of the fact, set forth in the survey, that personnel difficulties and other problems within the bureau have resulted in transferring to the board many cases which call for administrative rather than judicial determination.

Jeopardy assessments and jeopardy cases.-The great increase in cases coming to the board each spring, as shown in the chart, commands attention. During that time of the year the period of limitation on assessments by the commissioner expires in a great many cases. The statute of limitations ceases to run during the pendency of the appeal. Many of the appeals filed during the spring months are cases in which the statute of limitations rather than any determination on the merits has been the reason for sending the cases to the board. The commissioner is not at fault in all cases for not having disposed of them sooner. Sometimes a case is held by the bureau as an accommodation to the taxpayer. When the statute is about to run, the commissioner's alternatives are to secure waivers or to send the case to the Board of Tax Appeals. It is no longer possible, as a general matter, to file claims in abatement of assessments and hence the commissioner can not assess the tax and complete his consideration of the case on the claim in abatement. The situation results in sending to the board a mass of undigested or partially digested tax cases. An obvious remedy is for the commissioner to make provision whereby all cases of this kind automatically become eligible for continued consideration within the bureau after the appeal is filed. The board might establish a special calendar of "jeopardy" cases, so called, so that they could be identified as cases which, prima facie, have not received adequate administrative con

sideration.

Reference is made elsewhere in this report to a "special advisory committee" recently established in the Treasury. The special advisory committee should be able to perform valuable service in disposing of "jeopardy" appeals. If it does not do so, a special

body capable of handling the situation should be created in the bureau. The responsibility of the bureau for assisting the board in the matter of "jeopardy " appeals is clear.

Tendency to force taxpayers to the board.-There is a tendency on the part of some bureau employees to construe board decisions narrowly and to force taxpayers to take unnecessary appeals. There is little evidence of a disposition to settle cases according to the standards by which private litigants settle theirs. The duty of this administrative body to administer the law without sacrificing substantial justice to technical considerations is sometimes lost sight of. It is the opinion of experienced practitioners that one who is looking for the disputable points can find them in almost any tax case. The creation of the Board of Tax Appeals was not intended in any way to relieve the bureau of its responsibilities to reach correct administrative settlements. The bureau should shoulder this responsibility anew. The board should be resorted to only when question of substantial importance can not be disposed of otherwise.

General counsel's office. The general counsel's office acts as the legal adviser to the bureau and members of the general counsel's office represent the bureau in litigation before the board. It is commonly said that the trial lawyers of the general counsel's office fail to cooperate with the board and with the taxpayer in the manner customary in civil litigation. It is stated that members of the general counsel's office unduly press technical points during the course of the trial; that they force taxpayers to comply with technical rules of evidence not ordinarily applied in litigation and that they are unwilling to stipulate as to incidental matters commonly the subject of stipulation in courts.

There can be no doubt that to some extent the situation complained of exists. The result is to delay the trial of cases and to consume the time of the board needlessly, as well as to cause inconvenience and expense to taxpayers. A major underlying cause is to be found in personnel difficulties in the office. Each trial lawyer has charge of something like 450 board cases. He is assisted by a bureau employee delegated from the Income Tax Unit. The general counsel finds it difficult to obtain the services of men qualified by experience, training, and temperament to represent the Government as trial lawyers. As a result of these circumstances, the general counsel's office is literally swamped with work.

There is a system of review in the office which does not conduce to the making of stipulations. The trial lawyer in charge of the case is not relied upon to make the stipulation by himself. It is reviewed by another, and the reviewer is so pressed with work that he has insufficient time within which to consider the stipulation and the facts of the case. As a practical result, the stipulation may be rejected when it ought to be entered into.

The general counsel is the commissioner's lawyer in every appeal before the board. As such it is peculiarly his duty to assist the board and to cooperate with the opposing attorney in handling cases efficiently and expeditiously. This duty can not be performed by unbending insistence on trial technicalities or unreasonable refusals to stipulate.