to convert its property into cash with which to pay dividends. It is reasonable to assume, also, that an amount of cash on hand not in excess of its current obligations is "retained for employment" and is "reasonably required" in the business.1 The rate of tax is ten (10) per cent. upon the amount remaining undistributed six months after the end of the calendar or fiscal year of the net income of corporations earned during the year as appears by their income tax returns, after deducting income taxes paid within the year. In the event that the Department should find that any part of the amount retained out of surplus is not required for employment in the business or is not reasonably required therein, a tax of fifteen (15) per cent. would be imposed and collected. The double tax upon dividends received by corporations, under the Act of September 8, 1916, is still effective. The War Revenue Bill proposed by the Senate (not Dividends. accepted by the House) contained an amendment of the Act of 1916 correcting this defect, but, in the Bill drawn by the Joint Conference Committee of the Senate and the House, which ultimately passed, the amendment was omitted. By provision of the War Income Tax Law, enacted October 3, 1917, dividends received by corporations are not taxable thereon. Hence, in a consideration of the combined income and war income taxes, dividends received by corporations are subject to the normal tax of 2 per cent. and free from the war income tax of 4 per cent. It will follow, therefore, that the net income of corporations subject to the tax of 2 per cent. will be credited with the amount of dividends received from corporations taxed upon their net income in ascertaining the amount upon which the 4 per cent. tax will be assessed. XII. RETURNS OF CORPORATIONS All corporations, domestic and foreign, are required to make returns on Form 1031, Revised, except insurance Form of companies, whose returns are made on Form 1030, Return. Revised. 1 Earnings used for the purchase of preferred stock or bonds for cancellation are "retained for employment" in the business and not taxable as undistributed surplus. Return of The return of a domestic corporation shall be made to the Collector of the district in which is located its principal office, or where its books of account and other data are kept, from which the return is prepared. In the case of a foreign corporation, the return should be filed with the collector of the district in which is located its Return of principal place of business in the United States, Foreign Согрогаor if it has no principal place of business, office or tion. agency within the United States, then with the Collector of Internal Revenue at Baltimore, Maryland. All returns shall be filed with the Collector on or before the Ist day of March of each year unless the fiscal year of the corDue Date poration has been designated in the manner preof Return. scribed, in which case the return must be filed within sixty days after the close of such designated fiscal year. Falls on When the due date of filing a return, March 1st, or where an extension has been obtained, the last day of such extended When Last time, falls on Sunday or a legal holiday, the last Filing Day due date will be the day next following such Sunday or legal holiday. In case the return is transmitted by mail it should be posted in ample time to reach the Collector's office "under ordinary handling of the mails, on or before the date on which the return is thus made due in the office of the Collector." Sunday or "The return shall be sworn to by the President, Vice-presiExecution dent or other principal officer, and by the Treasurer of Returns. or Assistant Treasurer." Corporations making returns on the basis of the calendar year will be notified of the amount of their assessments on When Tax or before the first day of June of each year and Payable. the amount of said assessment shall be paid on or before the fifteenth day of June. To any sum or sums due and unpaid after ten days' notice and demand thereof by the Collector, there shall be added interest at the rate of 1 per cent. per month upon said tax from the time the same became due, and a further penalty of 5 per cent. on the amount of Delayed the tax unpaid. Year of A corporation whose fiscal year is not the calendar year, may make its return on the basis of its fiscal year Returns by complying with prescribed requirements. The for Fiscal designated fiscal year must end on the last day Corporaof some month. The corporation shall give notice tion. to the Collector of the district in which its principal office is located, at any time not less than 30 days prior to DesignatMarch 1st of the year in which its return would ing Fiscal be filed if made upon the basis of the calendar Year. year. Although not required under the law, it is advisable to obtain the consent of the Collector before proceeding to file returns for any period other than the calendar year. Illustration: The fiscal year of a corporation ends on June 30th. It has made its returns, say, for the year 1916 based on the calendar year (January 1st to December 31st, 1916). In order (December 1st, 1917) to obtain permission to make its return on the basis of its fiscal year (June 30th) it must serve notice on the Collector not later than 30 days prior to March 1st, 1918 (on or before January 29th, 1918). Its return for six months ended June 30th, 1917, must be filed on or before March 1st, 1918, and the return for year ending June 30th, 1918, must be filed within sixty days thereafter (on or before August 29th, 1918). From that time on its annual returns will be made for each year ending June 30th, which return must be filed within 60 days, i. e., on or before August 29th. A corporation that has designated its own fiscal year shall pay a tax on the proportion of the total net income returned for the fiscal year ending prior to December 31, Apportion1917, which the period between January 1, 1917, ing Income and the end of such fiscal year bears to the whole for 1917. of such fiscal year; that is to say, a corporation, the fiscal year of which ends on November 30, 1917, shall pay a tax (under the old law) on 1/12 of its net income of said fiscal year (for the month of December, 1916) and on 11/12 of said income (for period from January 1 to November 30, 1917), under the new and old laws. The tax under the designated fiscal year becomes due and payable 105 days after the last due date upon which it is Fiscal Year required to file the return, which, in the illustration When Tax cited, would be December 12th of the same year Payable. that the return is made. Section 3176 of the revised statute provides that: "If the failure to file a return or list is due to sickness or absence, the Extension collector may allow such further time, not exceeding of Time to thirty days, for making and filing the return or list as he deems proper." Application for such extension should be made to the Collector on or before the first day of March. File Section 14 (c) provides, further, "That the Commissioner of Internal Revenue shall have authority, in the case of either corporations or individuals, to grant a reasonable extension of time in meritorious cases, as he may deem proper." In case of failure to file a return within the time prescribed by law or by the Collector, the Commissioner of Internal ReveFailure to nue shall add 50 per cent. of the amount of the File Return tax. When a return is voluntarily, and without Penalty. notice from the Collector, filed after the due time, and it is shown that the failure to file the return was due to a reasonable cause and not to wilful neglect, no such addition shall be made to the tax. Return In case a false or fraudulent return is wilfully made, the Commissioner of Internal Revenue shall add to the tax 100 per False or cent. of its amount. Section 3176 of the revised Fraudulent statutes further provides that "The amount so Penalty. added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax." Section 18 of the Income Tax Law further states that "Any individual or any officer of any corporation, joint-stock company or association or insurance company required by law to make, render, sign or verify any return who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this title to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, in the discretion of the court, with the costs of prosecution." Make Section 14 (c) contains the provision that "If any of the corporations, joint-stock companies or associations, or insurance companies aforesaid shall refuse or neglect to Refusal or make a return at the time or times hereinbefore Neglect to specified in each year, or shall render a false or Return fraudulent return, such corporation, joint-stock Penalty. company or association, or insurance company shall be liable to a penalty of not exceeding $10,000.” sioner of In cases of refusal or neglect to make return, and in cases of erroneous, false or fraudulent returns, the Commissioner of Internal Revenue shall, upon the discovery Return by thereof, at any time within three years after such Commisreturn is due, make a return upon information ob- Internal tained as provided for by existing law. The as- Revenue. sessment, based upon a return so made, shall become due and payable immediately upon notification of the amount thereof. "When a second assessment is made in case of any list, statement, or return, which in the opinion of the Second collector or deputy collector was false or fraudu- Assesslent, or contained any understatement or under- ment. valuation, no tax collected under such assessment shall be recovered by any suit unless it is proved that the said list, statement, or return was not false nor fraudulent Recovery and did not contain any understatement or un- of Amount dervaluation; but this section shall not apply to Paid. statements or returns made or to be made in good faith under the laws of the United States regarding annual depreciation of oil or gas wells and mines." (Section 3225, Revised Statutes.) The contents of returns of net income constitute a public record, open to inspection "only upon the order Publicity of the President under rules and regulations pre- of Returns. scribed by the Secretary of the Treasury and approved by the President." A corporation which has not been completely organized, |