Senator COUZENS. No. I would like to ask, Mr. Hartson, if it is within the rules, that that information could be given?

Mr. HARTSON. I think, Senator, that all of the cases in connection with which the Secretary's name has been mentioned will be submitted very gladly to the committee.

Senator COUZENS. Will you find out if it is agreeable?

Mr. HARTSON. I will find that out and verify that; but I am quite sure that that is going to be done in the case of all the Secretary's companies, the complete files are going to be submitted to the committee. I feel very sure that that will be done. I will find out and notify you to-morrow.

Senator JONES of New Mexico. Have you the statute here containing the provision referring to secrecy of these proceedings?

Mr. HARTSON. Yes; I have, sir.

Senator JONES of New Mexico. I wish you would just bring that into the record.

Mr. HARTSON. I am reading now from section 3167 of the Revised Statutes:

It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer, or employee of the United States, to divulge, or to make known in any manner whatever, not provided by law to any person the operations, style of work, or apparatus, of any manufacturer, or producer visited by him in the discharge of his official duties, or the amount, or source of income, profits, losses, expenditures, or any particular thereof set forth or disclosed in any income return, or to permit any income return, or copies thereof, or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law any income return, or any part thereof, or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine of not exceeding $1,000, or by imprisonment not exceeding one year, or both, at the discretion of the court. If the offender be an officer or employee of the United States he shall be dismissed from office or discharged from employment.

Senator KING. Have there been any qualifications?

Mr. HARTSON. None except section 257 of the 1921 act, which has to do with publication of the income returns. That is the one about which the regulations have recently been amended under executive order which reads:

That returns upon which the tax has been determined by the commissioner shall constitute public records, but they shall be open to inspection only upon order of the President, and under the rules and regulations prescribed by the Secretary and approved by the President.

The regulations have been recently amended to permit the lawful production of income returns to either the Senate or the House upon a proper resolution.

Senator JONES of New Mexico. On order of the President, if I remember; did not that include both committees of either House of Congress?

Mr. HARTSON. Senator, I am relying on information. I think the provision was to a committee when the resolution of the House directed it to be produced to the committee.

Senator COUZENS. I think that is correct; that is the way I read it. Senator KING. Then, we will have to secure a resolution from the Senate with respect to returns in your case or a synopsis of them.

1

Senator CouZENS. Not unless

Mr. HARTSON (interposing). It is my opinion, Senator, that if the taxpayer has no objection—it is only the taxpayer who is the one that can complain.

Senator KING. May waive it?

Mr. HARTSON. He may waive it.

Senator KING. I do not want to get you into trouble.

Senator JONES of New Mexico. There is nothing in the statute that I know of, although I have not read the section myself for a long time-but is there anything in there which would prohibit us from asking for the information as to how much was involved in this particular return in the assessment, what was the question at issue at the time? That is not disclosing the tax return, but it is disclosing the question in controversy.

Mr. HARTSON. Well, the statute is broad enough to include-the language "or any part thereof "-now, if you are referring to the Standard Steel Car Co. return I think it would be unnecessary for the committee to ask for it. That is what I think and I would be prepared to tell you to-morrow after I have a chance to make sure. Senator JONES of New Mexico. I am particularly interested in this

case.

Mr. HARTSON. Yes; I understand.

Senator JONES of New Mexico. And I am trying to get at what we might do as a general rule.

Is there language in the statute which you think prohibits us from calling for the testimony and data regarding the questions in controversy?

Mr. HARTSON. I will eliminate this beginning here, except to say it shall be unlawful for any officer or employee of the United States to divulge or make known in any manner whatever not provided by law to any person- Well, I don't want to eliminate any material portion of it, but the operation, style of work, apparatus of any manufacturer or producer visited by him in the discharge of his official duty, or the amount, or source, of income, profits, losses, expenditures, or any particular thereof-any particular relating to the amount, source of the profits, losses, or expenditures of the taxpayer.

It appears to me to be sufficiently broad to prohibit us from divulging the information contained in these returns to this committee unless we produce the return either voluntarily with a waiver by the taxpayer or upon a proper resolution by the Senate.

Senator CouZENS. Is there a Mr. Barber here?

Senator KING. Before you proceed, I want to ask Mr. Hartson one question: Mr. Hartson, I have some information, and it is quite important as bearing on the question that is now before the full Committee of Finance, of which Senator Jones, Senator Watson, Senator Ernst, and myself, are members, bearing upon the question of depletion of amortization of credits, and deduction for depreciation, etc. The information is to the effect that millions of credits in the aggregate have been allowed, perhaps improperly and I do not say corruptly, but through the overreaching of the owners of the properties, or an improper interpretation of the law as a result of which in many mining properties, many real estate properties, particularly the oil properties, allowances have been made for depletion

and amortization, and obsolescence, and so on, that have resulted in a loss to the Government of millions of dollars. I am told that in many of these real estate projects in New York and big cities where real estate values have been going up, you have been allowing credits every year, ten per cent or more, by way of reduction in values, and you have not taken into account at all that the capital gains have been enormous; you have treated the capital gains as being in statu quo and you have allowed depletion and deterioration, as a result of which the taxpayers have escaped paying a fair tax, notwithstanding the fact that their property has gone up in value and that the law has been so construed that they have at the end of 10 years with your allowances which you have made, the whole capital wiped out, and you could then continued for 10 years more allowing your depletion and credit charges and that that construction has been placed on the law by the officials of the department.

Now, I would like to know-and I do not know how we are going to get the information-the modus operandi employed by the bureau in allowing these claims, depletion charges, and obsolescence charges, and depreciation charges which are unquestionably true, if you can believe human testimony. How can we get the facts as to just what you have done and just what the effect has been of these enormous credits?

Mr. HARTSON. The Senator's question is a general one, but I think it can be explained very briefly. The proceeding that is gone through in determining these valuations, so far as mines are concerned it could only be done in particular cases. I think that is the proper way to do.

Senator KING. We will have to check up cases, it seems to me, and examine specific cases, hundreds, if not thousands of them, to see just what you have been doing there, because I am not satisfied with the methods that have been followed, and I think that the Government has been deprived of a vast amount of revenue to which it is entitled.

Senator CouZENS. I would like to draw the Senator's attention to the fact that at one of our earlier meetings it was agreed that they would bring the Gulf oil case down to us as an example of one particular case; that we would study that case and then we would be in a position to determine from there on how much further we wanted to go. That would give us a pretty good example, I think, as to the method of figuring depletion in oil wells any way.

Mr. HARTSON. Yes, sir.

Senator KING. There have been injustices perpetrated, I am told, to the disadvantage of the Government in the determination of values in these oil properties that are often subtracted from the value after the gusher has been determined. Many of these oil cases, I have been told, have paid very little income taxes notwithstanding the enormous value of the properties because of the methods which have been employed in their valuation. I am not saying that the methods are wrong under the statute, but if the result has been an injustice to the Government we want some information by which we can correct the law and make provision in the law which we are now undertaking to cover those very holes which have been resorted to to escape legitimate and proper taxation.

Mr. HARTSON. The Senator is a lawyer and he knows how difficult it is to prove value.

Senator KING. Yes.

Mr. HARTSON. Testimony may properly be introduced in court where it is relevant and under certain rules of procedure to determine values. Those same rules are sought to be followed in, the bureau. No two people ever agreed about values. Two bureau engineers go out and disagree on values; and the taxpayer employs his engineers and they disagree with the bureau representatives on values. The law does not supply us with any formula, or arithmetical test by which by multiplying by two you get a correct answer. All those questions that the Senator has referred to, amortization, depletion, depreciation, all of those, are subject to opinion evidence to a large

extent.

Senator KING. Take for instance anthracite.

Mr. HARTSON. It is most difficult; it is a responsibility that is placed on the bureau under the present law and it has been shouldered; mistakes may have been made, but it is a thing that is not susceptible of definite proof at all, and that is the difficulty, and that is why I think this committee is quite properly ascertaining for Congress to determine if it might not be possible for the law to be amended to make the job easier for the bureau than it has been.

Senator KING. That is what I am concerned in-to get corrective legislation.

My attention has been called to the fact that many of these anthracite coal mines are allowed depletion from year to year, notwithstanding the fact that the value of the mines, because of the rise in the price of coal and other circumstances, has increased from year to year. A coal mine that 10 years ago was valued at, say, $1,000,000, notwithstanding considerable coal has been taken out, to-day may be worth $2,000,000, and yet under existing practices depletion, amortization, and depreciation are allowed which cut the taxes down until an unfair tax is paid, unfair to the Government, by the owner. Those things need correction. You may have been administering and properly administering the law as you interpreted it, and that interpretation may be right, but if the interpretation has. resulted in losses to the Government which it ought not to sustain, then we expect you gentlemen from your experience to advise us in regard to them and tell us how the law could be corrected so as to avoid a continuation of those wrongs.

Mr. HARTSON. I can bring our chief engineer here.

Senator COUZENS. I would like to call Mr. Barber. I would like to have this witness sworn, Mr. Chairman.

Mr. HARTSON. Mr. Chairman, would it not be proper to have all witnesses sworn?

The CHAIRMAN. Perfectly; yes. [Addressing Mr. Barber:] Hold up your hand.

TESTIMONY OF GUIL BARBER, WASHINGTON, D. C.

(Mr. Barber being called as a witness was duly sworn by the chairman and testified as follows:)

Senator COUZENS. What are your initials, Mr. Barber?

Mr. BARBER. I have no initial; G-u-i-l-just the one name.

Senator COUZENS. Where do you live?

Mr. BARBER. I live at the Chastleton Apartments, sir.
Senator COUZENS. How long have you lived in Washington?

Mr. BARBER. I have been in Washington since the 4th day of September, 1918.

Senator COUZENS. Where did you come from when you came to Washington?

Mr. BARBER. Tennessee-Menifee County, Tenn.; Irwin, Tenn. Senator COUZENS. What was your business when you were in 'Tennessee?

Mr. BARBER. At the time I came here I had been engaged in the automobile business for a couple of years. Prior to that I had been in the banking and real-estate business, that is practically since I was discharged from the Army in 1919.

Senator COUZENS. Will you tell us what your occupation has been since you have been in Washington?

Mr. BARBER. LI first came to make application to enter the Army and took a temporary position with the Ordnance Department and I did not get my commission except in the Reserve Corps and, of course, they did not need me in the Ordnance Department, and I went to the Veterans' Bureau for a month or so. Then I went to the Bureau of Internal Revenue on the 20th day of March, 1919; remained with them until the 10th day of January, 1921.

Senator COUZENS. Tell us what position you occupied in the bureau. Mr. BARBER. I was in the Income Tax Unit in what is known as the special assessment section.

Senator COUZENS. You occupied that position all the time you were there?

Mr. BARBER. Well, all the time I was in-I was first in the capital stock tax division. I was there I think it was in May 1920, when I got a transfer from the capital stock to the Income Tax Unit. I was made section unit auditor in capital stock tax. From there I was made assistant to the head of the audit section. Then the head of the audit section resigned and I continued to fill that until I was transferred to the income tax unit.

Senator COUZENS. Were these transfers made at your own request?

Mr. BARBER. Yes, sir.

Senator COUZENS. They were all made at your request?

Mr. BARBER. Yes, sir.

Senator COUZENS. Why did you request to be transferred from one department to another?

Mr. BARBER. Well, I thought there were greater possibilities of more salary in the Income Tax Unit than there were in capital stock.

Senator COUZENS. Did you resign from the department?

Mr. BARBER. I did.

Senator COUZENS. Then what did you do after you resigned from the department?

Mr. BARBER. I entered into a business known as the tax business, securing refunds for erroneously assessed taxpayers, principally corporations.

Senator KING. As well as abatements?

Mr. BARBER. Oh, yes; annulments and credits, all those things.