immediately available by the majority of honest and careful taxpayers, and to promote the maintenance of adequate records, this section would impose a 5 percent additional tax on gross income, the nature and source of which is not divulged upon inquiry. At present failures to keep records, when punished, can only be punished by criminal sanctions. This type of enforcement is proper in certain flagrant cases. However, it has proved of little value in many cases where the nature and gravity of the offense is neither serious nor clear enough to justify criminal proceedings. This section deals with the problem in a more effective way by providing a civil money sanction.

In order to protect the taxpayer from an arbitrary assessment of this additional tax and to reduce the difficulties of proof, the section requires the Secretary to submit to the taxpayer a written request by registered mail putting him on notice as to what information is to be made available. It further provides a period of at least 90 days for the taxpayer to comply with the request. Section 106. Authority to examine records

This proposal would grant the Commissioner additional authority to examine books and records. Section 3614 (a) of the Internal Revenue Code authorizes the Commissioner to examine records only after the end of the taxable year involved.

In many instances under the present system, investigations of gamblers, racketeers, and other taxpayers who deal primarily in currency transactions disclose that the records have been "lost," "accidentally destroyed," or "misplaced." In other instances the taxpayer alleges lack of knowledge of the requirement to preserve records after the return has been filed. The criminal penalty for failure to keep records or supply information required by law or regulations is provided by section 145 (a) and requires a willful failure. It is often impossible to establish the requisite willfulness in the face of a variety of explanations which may readily be fabricated.

If no books or records are available, or if the records are insufficient to show the amount of gross income and the deductions, credits, or other details required to be shown on a return, the proposed amendment to section 3614 (a) would permit the taxpayer to be warned at the time of the preliminary examination. This will prevent well-intentioned taxpayers from getting into trouble. Failure to keep adequate records in the face of such a warning would then often provide the evidence of willfullness necessary to convict under section 145 (a). Section 107. Persons assisting in preparation of returns

The return form used for income-tax returns now requires the name and address of the person preparing the return. There is considerable noncompliance with this requirement but no sanction which the Bureau can impose. The person preparing returns who will not voluntarily sign the return is the very one who presents an enforcement problem. The disclosure requirements would be written into the law by this section and a sanction for noncompliance provided. Section 108. Collection of delinquent taxes of employees

This section would authorize the withholding of compensation from Federal officers and employees liable for payment of Federal income taxes. It would also provide for a similar procedure to facilitate the collection of delinquent taxes from the salaries and wages of employees in private businesses.

At the present time, a surprising number of Federal officers and employees owe delinquent taxes to the Government. In almost every case, the employee has no property out of which collection can be made, and the sole source of his income is his Federal compensation. The Treasury Department is unable to withhold from Federal employees for back taxes. The proposal would require the agency employing the delinquent officer or employee to withhold 10 percent of the employee's compensation up to a rate of $10,000 per annum and 25 percent of the amount in excess of such rate would be withheld and paid over to the Treasury until the tax is paid or become legally unenforceable.

In the case of employees other than Federal employees, the difficulty of collection is also very great. While section 3692 of the Code authorizes a levy upon the unpaid salary of the employee, the remedy is unsatisfactory, since it does not attach to future earnings. Accordingly, it is considered desirable to provide for a continuing 10 percent levy which would attach to wages to become payable. Section 109. Authority to distrain

This provision amends section 3690 to provide that where the collection of any tax is believed to be jeopardized by delay, the Department is authorized to make

notice and demand for payment and distrain immediately if the taxes are not paid.

The Commissioner, at present has such authority with respect to excise and miscellaneous taxes.

In the collection of income, estate, and gift taxes, notice and demand for payment must be made at least 10 days before action is taken against the taxpayers' property. This 10-day waiting period, during which the taxpayer has notice of the asserted claim, provides an opportunity for secreting, disposition, or removal of some property. The lack of authority to make immediate distraint in jeopardy cases may prove especially serious where the taxpayer is preparing to leave the country or where the goods include personal property which may be sold or concealed.

Section 110. Extension of period of limitations for certain offenses

Under section 3748 (a) of the Code, prosecution of criminal tax cases invelving a wilfull attempt to evade or defeat a tax and offenses relating to defrauding the Government or assisting in the preparation of false documents may be begun at any time within 6 years after the offense. However, with respect to other criminal offenses under the Code, such as willful failure to file a return, the period of limitations is only 3 years.

The short period of time constitutes a serious obstacle to the effective enforcement of the revenue laws against gamblers and racketeers who operate by cash transactions and cover up their financial affairs, as well as other taxpayers who willfully fail to file tax returns.

It is therefore suggested that section 3748 (a) be amended to make the 6-year statute of limitations applicable to the offenses described above which appear in section 145 (a).

Section 111. Penalty for misrepresentation in revenue matters

By adding section 3793 to the Internal Revenue Code this section, taken in conjunction with section 110, would extend the statute of limitations in any tax case where any person willfully falsifies, conceals or covers up by any trick, scheme or device or material fact, or makes any false, fictitious, or fraudulent statement or entry. The method by which this is done is to bring the identical wording of section 1001 of the Criminal Code into the Internal Revenue Code insofar as it applies to tax matters.

TITLE II

Section 201. Exemption from requirement of declaration of estimated tax

This section would eliminate the requirement to file a declaration of estimated tax where the estimated tax amounts to less than $10.

Elimination of the requirement of a declaration where the amount involved is less than $10 would relieve the Bureau of the burden and expense of handling a large number of declarations which, if nontaxable, serve no useful purpose. It would also eliminate the necessity to submit quarterly bills for very small amounts of tax. In view of the minimal amounts involved, the proposed amendment would not violate the principle of "pay as you go." These taxpayers who preferred to do so could continue to make declarations and pay the tax quarterly.

Section 202. Abatement of jeopardy assessment when jeopardy does not exist The Internal Revenue Code provides for the immediate assessment of a deficiency of income, estate, and gift tax whenever the Commissioner believes that the collection of the tax will be jeopardized by the delay involved in the ordinary procedures which postpone assessment until the disputed issues have been settled. The "jeopardy assessment" is ordinarily a drastic remedy and is invoked only when it appears that the taxpayer may be insolvent, preparing to leave the United States, or disposing of his properties.

It must often be made on short notice and on the basis of facts indicating that collection may be in jeopardy. Though subsequent investigation may disclose that the taxpayer's circumstances were such that the jeopardy assessment was unwarranted, there is no authority in the code to remove a jeopardy assessment. The purpose of this section is to authorize the Commissioner to abate the jeopardy assessment if it appears, upon further investigation that there is no risk which justifies the tieing up of the taxpayer's assets.

This section would permit the Commissioner and the taxpayer to litigate the issues in the ordinary manner.

Section 203. Addition to tax for failure to file return

This section provides that the penalty for willful and negligent failure to file a return shall be computed only on the basis of net tax payable by the taxpayer. In computing this addition to the tax, credit would be allowed for any portion of the tax which has actually been withheld at source, which has been paid by the taxpayer as estimated tax, or which has been paid to a depositary in accordance with income tax regulations.

Since 1943 the collector's offices, acting on the instructions from the Bureau have for reasons of equity, followed the practice of computing the penalty on the basis of the net amount of tax only, allowing the taxpayer credit for prepayments of tax. The amendment would confirm this practice and remove any doubt for the future.

Section 204. Advance payment of tax

This section would provide that all payments of tax made prior to date shall, in computing interest, be considered as paid on the last date for payment provided by law.

A similar rule now applies as to all payments except those which are paid by the taxpayer after the final date for payment of estimated tax and prior to the due date for the taxable year. In the case of calendar-year taxpayers this would include payments made between the dates of January 15 and March 15.

As a consequence, taxpayers failing to make prompt remittance of their estimated tax payments may receive more favorable treatment in the allowance of interest than those who pay their estimated taxes on time or whose income is subject to withholding. The computation of interest from the actual date of payment also, of course, imposes a greater administrative burden than where the presumptive date of payment is used.

Section 205. Payment by check and money order

This proposal would amend section 3656 of the Internal Revenue Code to: (1) Permit use of uncertified checks in payment of stamp taxes, (2) permit the receipt of checks drawn on any bank or trust company organized under the laws of any territory or possession of the United States in payment for taxes or stamps, and (3) permit money orders issued by Savings and Loan Associations organized under the laws of the United States, a Territory or possession to be received in payment for taxes or stamps.

Under present law, collectors may lawfully receive certified, cashiers' or bank treasurers' checks and specified types of money orders, in payment for stamp taxes and uncertified checks as well in payment of taxes other than stamp taxes. The present requirement as to payment for stamp taxes causes additional work for the Bureau of Internal Revenue and inconvenience and vexation to taxpayers. Stamps to be used in payment of taxes are usually sold to financially responsible persons and organizations; therefore, permitting use of uncertified checks would not adversely affect the revenues.

The second part of the proposal would protect collectors (or directors) of internal revenue in accepting checks drawn on any bank or trust company under the laws of any territory or possession of the United States to the same extent as checks drawn on national and State banks and trust companies. At the present time, the collector receives checks in the former class on his own responsibility as a bonded official.

Section 206. Inclusion of interest as part of overpayment when overpayment is credited against interest on tax due

Section 3770 (a) (4) authorizes the Commissioner to apply an overpayment of tax against any other tax liability of the taxpayer.

The proposed amendment would extend this section to authorize the application of any interest on the overpayment against unpaid tax liability. While in some instances collectors processing small refund claims have applied both the overpayment and interest thereon against unpaid taxes, doubt has been expressed as to whether this procedure is justified under the present language of section 3770 (a) (4).

From an administrative standpoint, it is clearly desirable that the interest be treated in the same manner as the overpayment. Application of the interest against unpaid liability will not only improve revenue collection, but will eliminate the expense and delay involved in separate processing of the interest and the overpayment. Accordingly, the amendment provides that interest on an

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overpayment, as well as penalties or additions to tax, shall be credited against unpaid liability in the same manner as the overpayment.

Section 207. Time limit on suits for refund

Under present law a suit on a claim for refund of a tax must be instituted within 2 years from the date of mailing by registered mail of a notice of disallowance of the claim in whole or in part. If formal notice of disallowance is not made by registered mail, the statute of limitations on a suit for refund on the claim remains open indefinitely.

The proposed amendment to section 3770 (a) (2) provides that a waiver by the taxpayer of the notice by registered mail of the disallowance of the claim for refund shall be effective to commence the running of the 2-year period of limitations during which suit may be brought on the claim for refund. The amendment would be of material assistance administratively, in reducing the number of cases forwarded to Washington, speeding up action on cases, and saving clerical time and expenses. It would not prejudice the rights of taxpayers, since suit on the claim for refund could be maintained within 2 years from the execution of a waiver of the notice of disallowance.

Section 3770 (a) (2) is further amended to allow the taxpayer to sue for a refund without regard to the 6-month waiting period when the taxes sought to be recouped are paid pursuant to a written notice of deficiency (90-day letter) sent to the taxpayer by the Bureau. At present, taxpayers must wait 6 months from the time the claim for refund is submitted to the Bureau before bringing suit. This is proper in the ordinary case in order to allow the Bureau to consider the claim. This provision assumes the Treasury has considered the issues involved and decided them adversely to the taxpayer or it would not have issued the 90-day letter. This being so, it is unlikely that the Bureau will allow the claim and the 6-month waiting period represents a needless delay. A waiting period is especially bothersome to taxpayers since the calendars of the District Courts are very crowded.

Section 208. Extension of time in the case of Saturday, Sunday, or legal holiday This amendment is designed to provide a uniform rule, applicable both to taxpayers and the Commissioner, that whenever the last day for performing any act under the code falls on a Saturday, Sunday, or legal holiday in the District of Columbia, the act will not be considered late if performed on the next succeeding day which is not a Saturday, Sunday, or such legal holiday. At the present time the Internal Revenue Code contains such a provision only with reference to the filing of a petition in the Tax Court. The regulations issued under the income, estate, and gift taxes provide that a return may be filed or payment of tax made on the succeeding business day where the due date falls on a Sunday or legal holiday, and similar regulations are applicable to several of the miscellaneous taxes. However, the Tax Court has held, for example, in considering whether a claim for refund is timely and in considering the validity of an assessment list signed by the Commissioner, that where the time expires on a Sunday or holiday, the time allowed is not extended to the next secular or business day in the absence of an express statutory provision to the effect or a manifest legislative intent.

In order to provide certainty and uniformity in this area, a statutory amendment is believed desirable. The prepared amendment merely treats as timely an act performed on the next succeeding business day, but does not change the due dates prescribed in the code. Accordingly, no change would be made in authorizations for extensions of time in computation of interest on nonpayment of tax, or in any other items which are determined with reference to the due date.

Section 209. Clarification of powers of the joint committee

When the Bureau reorganization plan was being considered, the question was raised as to the effect the plan would have on the joint committee's subpena power. While the opinions of the General Counsel of the Treasury and Attorney General are unequivocal, this provision makes it doubly sure that the reorganization did not detract from any of the joint committee's powers.

Section 301. Influence peddling

TITLE III

This section makes it a crime for anyone who holds himself out as a "fixer," "influence peddler," or as one who otherwise receives special consideration in revenue matters to solicit fees from anyone to handle a case by use of such

special means. It also penalizes any who knowingly hire such persons to influence a case. This type of person is of serious concern to honest Government administrators and legitimate tax practitioners alike. Such persons are a menace even when they do not have the special status they claim because they improperly destroy the faith of the taxpayer in his revenue administration.

The difficulty of drafting satisfactory language is very great. Criminal sanctions should apply only to clearly defined crimes. Clarifying changes in the present draft may be necessary to make application of the section reasonably certain. If acceptable alternative solutions are available, they should be carefully considered.

Section 302. Unauthorized practice before the Department of the Treasury This provision would establish criminal sanctions for unauthorized practices before the Treasury Department.

Title 5 of the United States Code, section 261, authorizes the Secretary to prescribe rules and regulations governing the practice of agents, attorneys or other representatives of claimants before the Department. Under these regulations an applicant must demonstrate good character and reputation as well as professional qualifications before a license is issued authorizing him to practice before the Department in tax controversies. The license is subject to revocation at any time for failure to conform to the required standards.

The provisions of section 261, title 5, however, are applicable only in the determination as to whether or not a person is to be recognized by the Department as a representative of the taxpayer. No criminal penalties or other sanctions are imposed at the present time for acting as agent or attorney for a taxpayer without being authorized to practice before the Deparment or after such authorization has been revoked.

In general, employees of the Department are instructed not to discuss any case with an agent, attorney or representative of a taxpayer unless a certificate of the individual's authorization to practice before the Department is presented. Circumstances have nevertheless been shown by the subcommittee hearings in which unlicensed and unauthorized individuals have appeared in cases contrary to the regulations prescribed by the Secretary.

The provisions, by recognizing that certain representation is not required to be licensed under present law such, as preparing returns, appearing at audits, appearing with or as an employee of the taxpayer, etc., makes it clear that persons such as public accountants who give much valuable tax assistance will not be required to be licensed to perform duties for which they are not now required to be licensed.

This section presents many of the same difficulties of language that arise in section 301. For that reason it should have the same careful study and review that section 301 requires.

Section 303. Actions for recovery of internal revenue taxes-Jury trial

This proposal would extend the jurisdiction of district courts to any civil action against the United States for the recovery of any internal revenue tax, with provision for a jury trial in such case.

The right to jury trial in suits for refund of taxes was the subject of considerable discussion during consideration of the President's Reorganization Plan No. 1 of 1952, relating to the Bureau of Internal Revenue. As a result of adoption of the reorganization plan, it is the opinion of the General Counsel of the Treasury Department and the Attorney General that suits for refund heretofore brought against the collector may be brought against the Director of Internal Revenue in the future. This provision insures that the reorganization plan has not inadvertently detracted from taxpayer's rights in suits by refund. Section 304. Compensation to Members of Congress, officers, and others in matters

affecting the Government

This section does little more than clarify the original intent of Congress in enacting section 281 by barring Members of Congress and other Federal officials from all representation of persons before agencies and departments of the Federal Government for compensation. Section 281 as it stands does not bar representation of clients in judicial proceedings. This has led some to attempt to construe the statute to allow such officials to undertake representation of persons before departments where the matter involved, if not settled, may end in the courts. While such a construction has never been upheld in the courts, this amendment would make it clear that any representation before a department or