secured by property collateral, tangible or intangible, the 2 subject of sale or hypothecation in the ordinary business of 3 such corporation, joint-stock company or association as a 4 dealer only in the property constituting such collateral, or in 5 loaning the funds thereby procured, the total interest paid by 6 such corporation, company, or association within the year on 7 any such indebtedness may be deducted as a part of its ex8 penses of doing business, but interest on such indebtedness 9 shall only be deductible on an amount of such indebtedness 10 not in excess of the actual value of such property collateral: 11 Provided further, That in the case of bonds or other indebtedness, which have been issued with a guaranty that the interest 13 payable thereon shall be free from taxation, no deduction for 14 the payment of the tax herein imposed, or any other tax paid 15 pursuant to such guaranty, shall be allowed; and in the 16 case of a bank, banking association, loan or trust company, 17 interest paid within the year on deposits or on moneys received 18 for investment and secured by interest-bearing certificates of 19 indebtedness issued by such bank, banking association, loan 20 or trust company;

12

21 "Fourth. Taxes paid within the year imposed by the 22 authority of the United States (except income and war 23 profits taxes), or of its Territories, or possessions, or any 24 foreign country, or by the authority of any State, county, 25 school district, or municipality, or other taxing subdivision

1 of any State, not including those assessed against local

2 benefits."

3

(2) Paragraphs third and fourth of subdivision (b) of sec

4 tion twelve of such Act of September eighth, nineteen hun

5 dred and sixteen, are hereby amended to read as follows:

6

7

"Third. The amount of interest paid within the year

on its indebtedness (except on indebtedness incurred for the 8 purchase of obligations or securities the interest upon which 9 is exempt from taxation as income under this title) to an 10 amount of such indebtedness not in excess of the proportion 11 of the sum of (a) the entire amount of the paid-up capital 12 stock outstanding at the close of the year, or, if no capital 13 stock, the entire amount of the capital employed in the busi14 ness at the close of the year, and (b) one-half of its interest15 bearing indebtedness then outstanding, which the gross 16 amount of its income for the year from business transacted 17 and capital invested within the United States bears to the 18 gross amount of its income derived from all sources within 19 and without the United States: Provided, That in the case 20 of bonds or other indebtedness which have been issued with a 21 guaranty that the interest payable thereon shall be free from 22 taxation, no deduction for the payment of the tax herein 23 imposed or any other tax paid pursuant to such guaranty 24 shall be allowed; and in case of a bank, banking association, 25 loan or trust company, or branch thereof, interest paid within

the year on deposits by or on moneys received for investment 2 from either citizens or residents of the United States and 3 secured by interest-bearing certificates of indebtedness issued 4 by such bank, banking association, loan or trust company, or 5 branch thereof;

6

"Fourth. Taxes paid within the year imposed by the au7 thority of the United States (except income and war profits 8 taxes), or of its Territories, or possessions, or by the authority 9 of any State, county, school district, or municipality, or other 10 taxing subdivision of any State, paid within the United 11 States, not including those assessed against local benefits." (3) Section twelve of such Act of September eighth, 13 nineteen hundred and sixteen, is hereby further amended by 14 adding a new subdivision as follows:

12

15

16

"CREDITS.

"(d) For the purpose of the tax imposed by subdivision 17 (a) of section ten, the income embraced in a return of a cor18 poration, joint-stock company or association, or insurance

company shall be credited with the amount received as divi20 dends upon the stock or from the net earnings of any other 21 corporation, joint-stock company or association, or insurance 22 company, which is taxable upon its net income as provided in 23 this title, less that proportion of such amount which the 24 amount received by the distributing corporation, joint-stock

1 company or association, or insurance company from similar

2

sources bears to the entire net income of such distributing cor

3 poration, joint-stock company or association, or or insurance

4 company."

5

SEC. 1208. (1) That subdivision (e) of section thirteen of 6 such Act of September eighth, nineteen hundred and sixteen,

7 is hereby amended to read as follows:

8

"(e) All the provisions of this title relating to the tax 9 authorized and required to be deducted and withheld and 10 paid to the officer of the United States Government authorized 11 to receive the same from the income of nonresident alien 12 individuals from sources within the United States shall be 13 made applicable to the tax imposed by subdivision (a) of 14 section ten upon incomes derived from interest upon bonds 15 and mortgages or deeds of trust or similar obligations of do16 mestic or other resident corporations, joint-stock companies 17 or associations, and insurance companies by nonresident alien 18 firms, copartnerships, companies, corporations, joint-stock 19 companies or associations, and insurance companies, not 20 engaged in business or trade within the United States and not having any office or place of business therein."

21

22

(2) Subdivision (f) of section thirteen of such Act of 23 September eighth, nineteen hundred and sixteen, is hereby 24 repealed.

1

SEC. 1209. That section eighteen of such Act of Septem

2 ber eighth, nineteen hundred and sixteen, is hereby amended

3 to read as follows:

4

"SEC. 18. That any person, corporation, partnership,

5 association, or insurance company, liable to make a return or

6 to supply information required under this title, who refuses

7

8

or neglects to make such return or to supply such information

at the time or times herein specified in each year, shall be 9 liable, except as otherwise specially provided in this title, to penalty of not less than $20 nor more than $1,000. Any

10

11 individual or any officer of any corporation, partnership, 12 association, or insurance company, required by law to make, 13 render, sign, or verify any return or to supply any informa14 tion, who makes any false or fraudulent return or statement 15 with intent to defeat or evade the assessment required by this 16 title to be made, shall be guilty of a misdemeanor, and shall 17 be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, in the discretion of the court, with the costs 19 of prosecution: Provided, That where any tax heretofore due 20 and payable has been duly paid by the taxpayer, it shall not be re-collected from any withholding agent required to re22 tain it at its source, nor shall any penalty be imposed or col23 lected in such cases from the taxpayer, or such withholding 24 agent whose duty it was to retain it, for failure to return or

18

21