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delineated circumstances; the latest permanent enactment is the 1950 revision of the Anti-Deficiency Act. I had occasion to make brief reference to that Act in this general context on the House floor on October 3, 1967, and for convenient reference, enclose a copy of page H12863 of the Temporary Record for that date.

As I said on that occasion, however, nothing in the Act gave the President the item veto. The item veto, which I believe has been unsuccessfully advocated in virtually every session for nearly a hundred years, would in my judgment give the President intolerable and utterly unacceptable authority over the Congress.

But long before the 1950 revision, the anti-deficiency statute implicitly gave the Executive some limited power to impound funds. Certainly, it was common practice to reserve or impound funds appropriated under the earlier statute both to guard against overrunning the upper limit of a fixed appropriation amount, to effect savings arising out of changed requirements, or to make some provision for administrative contingencies.

In just recent years Congress has, as you know, extended more specific statttory powers or directives to the President to impound funds in "not less than stated lump-sum aggregates, leaving to him the decision as to the specific funds to be so withheld. It did so in 1967 in H. J. Res. 888 with respect to the fiscal 1968 budget, and last year in the cutback provisions of the Revenue and Ependiture Control Act with respect to the fiscal 1969 budget. While as a general proposition of principle I have preferred that the Congress meets its respong. bilities by making specific decisions up, and down the line on the budget, none theless these were instances where a majority adopted the somewhat different approach of delegating to the President a portion of the job of allocating line item cutbacks to specific appropriations after Congress had fixed upon those specifics.

Under the general system that has obtained over the years there have been to be sure, some more or less celebrated instances of Executive impounding of appropriations that caused considerable controversy between the Legislative and Executive branches as to the powers_statutory and constitutional-of the President in this regard. But probably for every seriously controversial case there have been hundreds that never caused a ripple of dissent. I do not have a complete list of outstanding instances, but I readily recall the 1949 action of President Truman in impounding part of the funds appropriated for a 70 group Air Force; and the refusal of the Disenhower Administration in 1956 to allocate all the funds appropriated to maintain the strength of the Marine Corps. Back in 1942, there was an interesting exchange of letters between President Roosevelt and Senator Russell on the impounding question when the President ordered some school lunch funds withheld from expenditure (see reference in Senate hearings on First Supplemental National Defense Ap propriations, 1944, 78th Cong., 1st Sess.).

I believe it is fundamentally desirable that the Executive have limited powers of impoundment in the interests of good management and constructive econoLT in public expenditures. The present statute seems to me to be serving the parpose reasonably well in all the circumstances. It is up to the Congress to bom watchful that the Executive does not overstep the bounds of reasonableness, and to deal appropriately with the individual instances as they arise where it feel this has occurred. Occasionally, a "final” resolution may have to be sought by making an issue in the political campaigns.

I trust that these brief observations may prove helpful in your deliberations.
With all good wishes.



[From the Congressional Record, Oct. 3, 1967] Mr. MAHON. The Bow amendment would assign to the President complete authority as to where to make reductions in spending and shifts in spending and, therefore, of course I could not vote for the Bow amendment.

I think the Congress ought to discharge its responsibility, as dificult us it may be at times.


Mr. Speaker, last week, and again today, there has been some debate about the matter of appropriated funds being withheld by the President from expenditure. This is at all times an important question and we should keep before us the law on the matter. Thus I think it would be useful to reprint at this point from my remarks at page H12560, of the RECORD of last Wednesday when we first debated the October continuing resolution:


"A further matter which may be troublesome and which should be considered is that of the right of the President to withhold the spending of funds which have been made available by the Congress.

“As a general proposition, there has been and there is in my opinion the attitude on the part of the Members of Congress, on both sides of the aisle, that when Congress appropriates money for Federal programs of one kind or another, it is the responsibility and duty of the Executive, generally speaking, to carry out the will of the Congress and proceed with the programs and expenditures which have been approved by the Congress.

“However, the gentleman from Ohio has stated that the President has complete authority to withhold funds which are appropriated and made available to the various agencies of the Government.

"And he cites the fact that the President has in many instances and all Presidents have in some instances—failed to expend, for the programs appropriated for, funds made available by the Congress.

“Now, wherein does the President have the authority not to expend funds for the programs which Congress authorizes and appropriates for? I would like to turn to an act which was approved by the Congress in 1950. It is the antideficiency law, and it gives the President some authority to withhold expenditures, but it does not give the President the item veto. We have always taken the position that no President has the right to exercise the item veto, this would give the President authority over the Congress which would be intolerable, and utterly unacceptable. So what did the Congress do under the leadership of the late John Taber, former chairman of the committee, and others? The committee and the Congress improved the antideficiency bill by tightening it up; by putting some teeth in it; by generally improying it. I will read from the antideficiency law the following-31 U.S.C. 665 :

'In apportioning any appropriations, reserves may be established to provide for contingencies, or to effect savings whenever savings are made possible by or through changes in requirements,

"In other words, the law says that the President can withhold expenditures and effect savings—and we certainly do not oppose savings—whenever sayings are made possible by or through changes in requirements. And there are at times changes in requirements

'greater efficiency of operation.'
“If he can make savings by a greater efficiency of operations-

for other developments subsequent to the date on which such appropriation was made available.

“Now, that is the law, but that does not give the President item veto or indiscriminate authority to withhold the expenditure of funds for programs which have been authorized and funded by the Congress.

“The trouble with the so-called Bow amendment which was offered earlier is that it provides complete and total authority for the President to eliminate any and all programs regardless of the provision in the antideficiency law which * * * "

MARCH 19, 1971. Hon. SAM J. ERVIN, Jr., Chairman, Subcommittee on Separation of Powers, Committee on the Judiciary, U.S. Senate, Washington, D.C.

DEAR SENATOR ERVIN: Your subcommittee is currently studying the problem of apparently illegal executive actions regarding the appropriation power of the Congress. I would like to draw your attention to a multi-billion dollar executive usurpation of the power of the purse. Just this week the Treasury Department has proposed to spend billions of dollars annually in a tax expenditure program never authorized by the Congress. The executive is not

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merely impounding funds the Congress has appropriated; it is also making expenditures the Congress has not even authorized. The latter practice is the subject of this letter.

Once again, powerful private interests have undertaken a raid on the U.S. Treasury. This time, however, Treasury advocacy of private interests has resulted in a proposal which constitutes an unlawful and serious encroachment on the Congressional appropriations power.

On March 13, 1971, the Treasury published proposed regulations to make a multi-billion dollar tax expenditure in the form of a depreciation write-off subsidy. This subsidy will cost $3 billion in Fiscal 1972 alone, and much more in later years. $3 billion is over $45 per taxpayer each year.

The Congress has instructed the Treasury, in Section 107 of the 1954 Internal Revenue Code, to allow a depreciation deduction which is a "reasonable allowance" for exhaustion, wear and tear, and obsolescence of business machinery and equipment.

The new Treasury proposals violate this mandate. In the name of stimolating a badly managed economy, the Treasury seeks to use the depreciation write-off as a massive subsidy to favored businesses. I enclose for your consideration a thoughtful analysis of the unlawfulness of the Treasury action. The author, Mr. Robert J. Domrese of the Harvard Law School, is an editor of the Harvard Law Review, His study merits the close attention of a Congress which, “through a process of subtle attrition ... appears to be surrendering its traditional wellspring of strength, the power of the purse." 1

As Mr. Domrese points out, the Treasury's proposal represents a radical departure from the Congressionally mandated system of depreciation allowances. Rather, it is a capital cost recovery system never authorized in the tax laws. Indeed, the President's own Task Force on Business Taxation has warned the Treasury that such a departure from the law required Congressional rather than executive action.” Mr. Domrese supports this conclusion with an extensive historical survey of our tax laws. The legislative history of those laws leares no doubt that a policy change of this magnitude is a matter for elected representatives in Congress to decide rather than to be decided by executive fiat.

The executive action in this case not only violates the fundamental principle of separation of powers; it is also fantastically expensive. The cost per taxpayer per year will rise from over $45 in fiscal 1972 to over $70 in fiscal 1976. As Mr. Domrese points out, this latter figure is twice the budgeted amount for the entire Environmental Protection Agency for next year, and over 30 times as much as is budgeted for our overburdened Federal judicial system.

The adoption of this massive tax expenditure by an executive department violates the fundamental principle of the separation of powers under our Constitution. The Framers of the Constitution had good reason to reserve the power of the purse in the Congress rather than the executive branch. The Congress is the branch of government which was conceived as the most responsive to popular needs.

By contrast, bureaucratic policymakers in the executive branch are sheltered from healthy public scrutiny. In the tax policy area, the insulation of Treasury officials from public evaluation and judgment is even more pronounced because of the complex nature of most tax questions.

In order to protect the public from unlimited bureaucratic discretion, the Congress passed the Administrative Procedure Act which, among other important provisions, provides that an agency shall give notice before promulgating rules, and "shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments ..."

i Senator Frank Church, "Impoundment of Appropriated Funds: The Decline of Congressional Control Over Executive Discretion," 22 Stanford L. Rev. 1240, 1241 (1970).

? "Since the shift from depreciation to cost recovery unrelated to the useful life concept does require amendment of the present law, we urge that all the matters covered in the recommendations which are related to such a shift be incorporated in the statute." Report of the President's Task Force on Business Taxation, p. 29 (September 1970). The Task Force recommended a 40% shortening of the guideline lives rather than the 20% proposed by the Treasury.

35 U.S.C. 553 (b). The legislative history of the Administrative Procedure Act shows the intent of Congress that “The effect of this provision will be to enable parties to express themselves in some informal manner prior to the issuance of rules and regulations, so that they will have been consulted before being faced with the accomplished fact of a regulation which they may not have anticipated or with reference to which they have not been consulted.” Statement of Francis E. Walter, Chairman of the concerned subcommittee of the House Judiciary Committee reporting the bill to the Floor, Cong. Rec. 79th Cong., 2nd Sess., May 26, 1946.

See also report of the Senate Judiciary Committee, S. Rep. No. 752, 79th Cong.. 1st Sess., (1945) especially pp. 13–15.

In this case, however, the Treasury has attempted to reduce public participation to a sham. At a press conference on January 11, 1971, the multi-billion dollar change in depreciation policy was presented as an accomplished fact. It was only after my attorneys brought suit to enjoin this hastily unlawful action that the Treasury conceded the tentative nature of the proposed changes. The Treasury announced that public hearings would be held and full account would be taken of public views.

Once the likelihood of a lawsuit was diminished, Treasury officials indicated that the public would not be permitted more than pro forma participation in the rulemaking process. Assistant Secretary Edwin S. Cohen explained to the New York Timesi tax correspondent that the possibility of any basic changes in the planned regulations was "remote.” He added: "We don't anticipate changing our mind. As a very practical matter, a businessman can rely on this going into effect, in its broad outline." .

Similar signs of an inflexible bureaucratic attitude came on March 12, 1971, when anonymous Treasury officials reiterated their reluctance to be affected in their basic decision."

In short, the executive branch has determined to make a multi-billion dollar tax expenditure. This decision was made in collaboration with numerous representatives of favored businesses, but with no participation of our elected representatives and with as little public participation as the Treasury could possibly manage.

Senator Ervin, the proposed Treasury action is an unlawful and immense encroachment on the Congressional power of the purse. I would appreciate your Subcommittee's consideration of this multi-billion dollar example of executive branch violations of both statutory and constitutional restraints. Only an active Congress stands between the American people and further such excesses of executive power. Sincerely,



HARVARD LAW SCHOOL, Cambridge, Mass., March 18, 1971.


Section 107 of the Internal Revenue Code of 1954 provides that a taxpayer may deduct from his income a "reasonable allowance" for the exhaustion, wear and tear, and obsolescence of his capital assets. On March 13, 1971, the Treasury formally proposed a new regulation that would embody sweeping changes in the administration of this section. Although the Treasury has introduced comprehensive revisions in the administration of this provision in the past, the most notable change being in 1962, these reforms have always remained within the broad contours of the depreciation sections. The new changes proposed by the Treasury should not be mistaken for a similar reform in the administration of the depreciation provisions. The innovation is much more drastic than any undertaken in the past, and marks a basic change in the philosophy of tax depreciation,

The Treasury's proposed Asset Depreciation Range (ADR) system cannot accurately be characterized as depreciation reform. It is a conceptually distinct system of capital cost recovery unrelated to depreciation accounting as it has traditionally been known to businessmen and accountants, as it has been understood by the courts, by Congress, by the Treasury (in the past), and, indeed, as it is commonly understood by the layman.

The ADR system abandons the effort to spread depreciation allowances over an asset's useful life, fails to account for an asset's salvage value in estimating annual deductions, and makes no pretense of making an accurate calculation of a "reasonable allowance" which would approximate actual exhaustion, wear and tear, and obsolescence, as the Internal Revenue Code requires.

The Treasury's proposed introduction of capital cost recovery by administrative action is not authorized by the Internal Revenue Code. It would confer benefits on taxpayers in a manner fundamentally inconsistent with accepted notions of tax equity and would be costly in terms of revenues lost.

"Hearing Assured on Depreciation". New York Times. January 26. 1971. d. 16. A copy of the complete article is enclosed for your consideration.

"Treasury Widens Depreciation Plan to Cover Utilities''. Wall Street Journal, March 15. 1971. p. 3. A copy of the complete article is enclosed for your consideration.

Most importantly, it would initiate a change in fundamental policy which, though couched in terms of an exercise of administrative discretion, is essentially "legislative" in character. Both prudence and tradition-indeed, the Constitution itself-require that such decisions be made in the Congress, not in the executive branch.

By the Treasury's own estimates, the ADR system will result in subsidies to businesses of nearly $3 billion next year, and nearly $5 billion by 1976. This figure is comparable to the amount President Nixon proposes to distribute to the states under his general revenue sharing proposals, twice as much as the amount suggested for the Environmental Protection Agency in fiscal 1972, and 30 times the 1972 budget for our overburdened Federal judiciary. This tas largesse roughly corresponds to a 10% to 12% cut in total revenues from corporate income taxes, or a drop of five or six percentage points in corporate income tax rates. Yet the ADR system is introduced one year after Congress, in passing the Tax Reform Act, refused to reduce corporate income tax rates by two percentage points.

The proposed system is designed to create a new incentive to investment in the capital goods industry. Yet it follows one year after Congress, in the Tax Reform Act, repealed the investment credit-a tax incentive intended to accomplish exactly the same purpose and involving a similar annual subsidy to business-on the grounds that capital spending had become excessive and inflationary, and that special tax incentives were no longer needed.

That the Treasury has moved into the broad policy-making realm normally reserved to congressional prerogatives is made clear by the fact that the President's Task Force on Business Taxation, whose recommendations for depreciation reform are essentially similar to the structure of the ADR system, unanimously agreed that its proposals would require legislative change. Indeed. the policy changes adopted in the proposed regulation are so fundamentally inconsistent with accepted notions of depreciation accounting that the authority of the Treasury to take such a sweeping step without additional congressional action could only be inferred from a statute that contained the most explicit grants of discretion and authority to the Treasury to take such action. No such authority exists anywhere in the Internal Revenue Code.

The adoption of the ADR system by administrative action clearly exceeds the authority conferred on the Treasury in the Internal Revenue Code.

The Treasury has issued its proposed regulation under section 167(b) of the Internal Revenue Code, 26 U.S.C. 8167 (hereafter cited as the "Code"), which empowers it to make rules governing the calculation of depreciation allowances under the accelerated methods introduced in that section in 1954, and under section 7895, which authorizes it to make "all needful rules and regulations necessary for the enforcement” of the Code. The discretion conferred by both of these sections is limited by the provisions themselves. In addition, sections 446, 451 and 461 of the Code-giving the Treasury the responsibility for promulgating rules and regulations governing accounting methods to insure that a taxpayer's return will “clearly reflect income"—are at variance with the proposed regulation, which will distort the income accounting for all but a small portion of taxpayers electing the system. From this fabric of limited discretionary authority-in light of the fact that depreciation has traditionally been conceived as a part of the calculation of taxable income it is difficult to infer a general power in the Treasury to define "allowances" for depreciation in a way that will produce revenue losses grossly out of proportion to the administrative gains, distort taxpayer returns, and sanction methods of capital cost recovery at variance with long-accepted notions of depreciation accounting.

Section 167 (a) provides that every taxpayer be allowed a "reasonable allowance" for the exhaustion, wear and tear, and obsolescence of property used in a trade or business or for the production of income. This provision has been in force, in more or less comparable form, since 1913, yet it was not until 1954 that Congress explicitly granted the Treasury even limited authority to promulgate rules and regulations under the section. (Until that time the Treasury had promulgated interpretative regulations barely embellishing the language of the statute.) That specific grant of rulemaking authority, contained in section 167 (b) with the new accelerated methods of depreciation, granted to the Treasury limited discretion to issue rules and regulations gov. erning depreciation calculated under those methods, and explicitly added the caveat that no part of the new provision should be construed to alter the mean

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