LETTER TO THE CHAIRMAN FROM JAMES W. MORRIS, ASSISTANT ATTORNEY GENERAL Hon. R. L. DOUGHTON, DEPARTMENT OF JUSTICE, Chairman, Joint Committee on Internal Revenue Taxation, MY DEAR CONGRESSMAN DOUGHTON: I am in receipt of your letter of January 15, 1938, requesting the views of this office relative to the proposed codification of internal-revenue laws and the enactment of such codification into law. In your letter you quote the statement contained in the report of the subcommittee of the Committee on Ways and Means of January 14, 1938, dealing with this proposal. The Tax Division of the Department of Justice, in the performance of its function of handling revenue litigation, has been impressed with the need of a codification of the revenue laws which will be recognized as the law rather than as being merely prima facie evidence thereof. We believe that much confusion exists by reason of the number of revenue acts, containing in many instances the same basic provisions, to which reference must be made in the handling of cases arising under the various acts. This confusion constitutes a burden for courts and counsel alike. Also, several of these statutory provisions were amended by Executive order. Since the changes thus made have not appeared on the face of the statutes, it has been necessary to refer to the Executive order to ascertain the nature and extent of these changes. I am glad to see that this situation has been taken care of. It will also be helpful and lessen confusion. It is the opinion of this office that the enactment of a codification of the revenue statutes will be a definite step toward clarity, certainty, and simplicity. Such a codification will bring the substantive and procedural provisions together and will be most helpful. In doing this work I feel that the staff of the joint committee has made a valuable contribution to the tax law which will be a substantial aid to this division in the handling of litigation involving Federal Revenue. Very truly yours, JAMES W. MORRIS, Assistant Attorney General. IX HISTORICAL NOTE The first internal-revenue-tax law was enacted on March 3, 1791, and imposed a tax on distilled spirits and stills. This was followed by legislation imposing taxes upon carriages, retail dealers in wines and foreign spirituous liquors, snuff, refined sugar, property sold at auction, legal instruments, real estate, and slaves. All of these taxes and the offices created for their enforcement were abolished in 1802. During this first era of taxation the internal-revenue receipts amounted to only $6,758,764.26. Comparing this with the receipts for the fiscal year 1937, amounting to $4,653,195,315, it will be noted that the Internal Revenue Service collects at the present time nearly twice as much from internal-revenue taxes in one day as the original organization collected in 10 years. Due to the necessities occasioned by the War of 1812, internalrevenue taxes were again imposed in 1813. These taxes were levied on refined sugar, carriages, distillers, sales at auction, distilled spirits, manufactured articles, household furniture, watches, gold, silver, plated ware, jewelry, real estate, and slaves. An officer known as the Commissioner of Revenues was in charge of the administration of such taxes. All these taxes were repealed by the act of December 23, 1817, and the office of Commissioner of Revenues was discontinued effective upon the completion of the collection of the outstanding taxes. The collections during the 5-year period from 1813 to 1818 amounted to $25,833,449.43. For a period of 43 years, namely, 1818 to 1861, no internal-revenue taxes were imposed. On July 6, 1861, an act was passed imposing a tax on incomes and real property. No income tax was ever collected under this act, and all of the tax collected on real property was returned to the States under authority of the act of March 2, 1891. The act of July 1, 1862, is largely the basis of our present system of taxation. It contained the first law under which any income tax was collected, and it created the office of Commissioner of Internal Revenue. It taxed practically everything which Congress thought was susceptible of yielding revenue. The three sources of revenue which remained for a long time the backbone of the internal-revenue system, namely, spirits, tobacco, and beer, received particular attention from the lawmakers. The internal-revenue laws were first codified in the Revised Statutes of 1873, title XXXV, which was made absolute law. A perfected edition of the Revised Statutes was prepared in 1878, but is only prima facie, not absolute, law. The internal-revenue laws were again codified in title 26 of the United States Code, which was enacted as prima facie law in 1924. Scrutiny of the Code was invited in its preface for the purpose of correcting errors, eliminating obsolete matter, and restatement. In 1930 the Joint Committee on Internal Revenue Taxation published a complete substitute for title 26 of the United States Code, containing all the law of a permanent character, relating exclusively to internal revenue, in force on December 1, 1930. This was not a mere duplication of the old title, for in addition to correcting errors and eliminating obsolete matter, certain omitted provisions were added and the title completely rearranged in a manner considered logical and useful. In 1933 a new edition was published containing the internalrevenue laws in force on July 1, 1932. This last edition was substituted for title 26 of the United States Code, and in its present form is prima facie law. The staff of the Joint Committee on Internal Revenue Taxation, with the cooperation and assistance of the Treasury Department, has brought the internal-revenue code up to date. CODIFICATION OF INTERNAL REVENUE LAWS INTRODUCTION This code, except as otherwise provided therein, contains all the law of a general and permanent character relating exclusively to internal revenue in force on January 1, 1938. In addition, it contains the internal-revenue law relating to temporary taxes, the liability for which arises on or after January 1, 1938. The following should be noted in connection with the general character of the code. First. It makes no changes in existing law. Second. It makes liberal use of catchwords, headlines, different types, indentations, and other typographical improvements. Third. By a system of cross references, it correlates not only its own provisions but also provisions of the United States Code not relating exclusively to internal revenue. Fourth. To obviate confusion with the law itself, the cross-references are in type different from that containing the law. Fifth. It is arranged with a view of giving prominence to matters which concern the ordinary transactions of the ordinary classes of taxpayers. The preparation of this code began with the collection and examination of all original statutes relating to internal revenue, without reference to the United States Code. This procedure allowed an independent check to be made subsequently against that code. The next step was the elimination of obsolete matter and those temporary provisions relating to taxes the liability for which accrued prior to January 1, 1938. The most striking examples of the temporary laws which are omitted are the income-tax provisions of the Revenue Act of 1934 and prior revenue acts. While these provisions remain in force for the purpose of administering the cases pending for the earlier years, they do not affect the current tax situation. After the elimination of the obsolete and temporary provisions from the whole body of internal-revenue law, the remaining provisions were checked against the United States Code. The care in the preparation of the United States Code and in the present codification gives assurance of the accuracy of the final product. Moreover, every provision has been carefully reviewed and checked by the Bureau of Internal Revenue and conferences have been held on all doubtful issues. There are many laws of a general character which, though relating to internal revenue, apply also to other subjects. To codify such laws under internal revenue, however, would disrupt the entire title structure of the United States Code and render complete codification. of Federal law impossible. In only a few instances has any provision been taken from any title of the United States Code other than the internal-revenue title. The great value of the United States Code is thus preserved. Moreover, detailed cross-references compensate for any deficiency due to such a procedure by acquainting the reader both with the general subject of the provision referred to and its location in the United States Code, The final step was to arrange the code in a logical and convenient manner. There are seven subtitles. Subtitle A contains those taxes |