53 Stat. 471, 462. 26 U. S. C. §§ 3801, 3761. chapter would effect an increase or decrease in the amount of the income taxes previously determined for such taxable year or years, and "(C) on the date of such determination of the tax under this subchapter correction of the effect of the inconsistent treatment in any one or more of the prior taxable years is prevented (except for the provisions of section 3801) by the operation of any law or rule of law (other than section 3761, relating to compromises), then the correction shall be made by an adjustment under this section. If in a subsequent determination of the tax under this subchapter for such taxable year such inconsistent treatment is not adopted, then the correction shall not be made in connection with such subsequent determination. "(2) Such adjustment shall be made only if there is adopted in the determination a position maintained by the Commissioner (in case the net effect of the adjustment would be a decrease in the income taxes previously determined for such year or years) or by the taxpayer with respect to whom the determination is made (in case the net effect of the adjustment would be an increase in the income taxes previously determined for such year or years) which position is inconsistent with the treatment accorded such item in the prior taxable year or years which was not correct under the law applicable to such year. "(c) METHOD AND EFFECT OF ADJUSTMENT.-(1) The adjustment authorized by subsection (b), in the amount ascertained as provided in subsection (d), if a net increase shall be added to, and if a net decrease shall be subtracted from, the tax otherwise computed under this subchapter for the taxable year with respect to which such inconsistent position is adopted. "(2) If more than one adjustment under this section is made because more than one inconsistent position is adopted with respect to one taxable year under this subchapter, the separate adjustments, each an amount ascertained as provided in subsection (d), shall be aggregated, and the aggregate net increase or decrease shall be added to or subtracted from the tax otherwise computed under this subchapter for the taxable year with respect to which such inconsistent positions are adopted. "(3) If all the adjustments under this section, made on account of the adoption of an inconsistent position or positions with respect to one taxable year under this subchapter, result in an aggregate net increase, the tax imposed by this subchapter shall in no case be less than the amount of such aggregate net increase. "(d) ASCERTAINMENT OF AMOUNT OF ADJUSTMENT.-In computing the amount of an adjustment under this section there shall first be ascertained the amount of the income taxes previously determined for each of the prior taxable years for which correction is prevented. The amount of each such tax previously determined for each such taxable year shall be (1) the tax shown by the taxpayer, or by the predecessor, upon the return for such prior taxable year, increased by the amounts previously assessed (or collected without assessment) as deficiencies, and decreased by the amounts previously abated, credited, refunded, or otherwise repaid in respect of such tax; or (2) if no amount was shown as the tax by such taxpayer or such predecessor upon the return, or if no return was made by such taxpayer or such predecessor, then the amounts previously assessed (or collected without assessment) as deficiencies, but such amounts previously assessed, or collected without assessment, shall be decreased by the amounts previously abated, credited, refunded, or otherwise repaid in respect of such tax. There shall then be ascertained the increase or decrease in each such tax previously determined for each such year which results solely from the treatment of the item consistently with the treatment accorded such item in the determination of the tax liability under this subchapter. To the increase or decrease so ascertained for each such tax for each such year there shall be added interest thereon computed as if the increase or decrease constituted a deficiency or an overpayment, as the case may be, for such prior taxable year. There shall be ascertained the difference between the aggregate of such increases, plus the interest attributable to each, and the aggregate of such decreases, plus the interest attributable to each, and the net increase or decrease so ascertained shall be the amount of the adjustment under this section with respect to the inconsistent treatment of such item." SEC. 12. ADMISSIBLE ASSETS OF DEALERS IN SECURITIES. (a) Section 720 (a) (1) (A) of the Internal Revenue Code is amended to read as follows: "(A) Stock in corporations except stock in a foreign personal-holding company, and except stock which is not a capital asset; and" 54 Stat. 985. 26 U. S. C. § 720 (a) (1) (A). 54 Stat. 976. 26 U. S. C. § 711 (a) (b) Section 711 (a) (2) (A) is amended by inserting after "companies" a period and the following: "This subparagraph shall not (2)(A). apply to dividends on stock which is not a capital asset". SEC. 13. ALLOWANCE OF EXCESS PROFITS CREDIT. Section 712 of the Internal Revenue Code is amended to read as follows: "SEC. 712. EXCESS PROFITS CREDIT-ALLOWANCE. "(a) DOMESTIC CORPORATIONS.-In the case of a domestic corporation which was in existence before January 1, 1940, the excess profits credit for any taxable year shall be an amount computed under section 713 or section 714, whichever amount results in the lesser tax under this subchapter for the taxable year for which the tax 714 under this subchapter is being computed. In the case of all other domestic corporations the excess profits credit for any taxable year shall be an amount computed under section 714. (For allowance of excess profits credit in case of certain reorganizations of corporations, see section 741.) "(b) FOREIGN CORPORATIONS.-In the case of a foreign corporation engaged in trade or business within the United States or having an office or place of business therein, the first taxable year of which under this subchapter begins on any date in 1940, which was in existence on the day forty-eight months prior to such date and which at any time during each of the taxable years in such forty-eight months was engaged in trade or business within the United States or had an office or place of business therein, the excess profits credit for any taxable year shall be an amount computed under section 713 or section 714, whichever amount results in the lesser tax under this subchapter for the taxable year for which the tax under this subchapter is being computed. In the case of all other foreign corporations the excess profits credit for any taxable year shall be an amount computed under section 714. "(c) EFFECT OF DISCLAIMER OF CREDIT.-If the taxpayer states in its return for the taxable year under this subchapter that it disclaims the use of the credit computed under section 713 or the use of the 54 Stat. 979. 54 Stat. 980, 981. Ante, p. 19. Post, p. 30. 54 Stat. 992. 54 Stat. 980, 981. 26 U. S. C. §§ 713, 714. Ante, p. 19. 54 Stat. 992. Supra. 54 Stat. 980. 26 U. S. C. § 713. Ante, p. 19. 54 Stat. 989. 26 U.S. C. § 729 (b). Ante, p. 29, supra. 54 Stat. 980, 981. 26 U. S. C. §§ 713, 714. Ante, p. 19. credit computed under section 714, the credit so disclaimed shall not, for the purposes of the internal revenue laws, be applicable to the computation of the tax under this subchapter for such taxable year." SEC. 14. EXCESS PROFITS CREDIT OF ACQUIRING CORPORATIONS. Section 741 of the Internal Revenue Code is amended to read as follows: "SEC. 741. ALLOWANCE OF EXCESS PROFITS CREDIT. “(a) ALLOWANCE.—In the case of a taxpayer which is an acquiring corporation which was in existence on the date of the beginning of its base period, the excess profits credit for any taxable year shall be an amount computed under section 713 or section 714, whichever amount results in the lesser tax under this subchapter for the taxable year for which the tax under this subchapter is being computed. "(b) EFFECT OF DISCLAIMER OF CREDIT.-If the taxpayer states in its return for the taxable year under this subchapter that it disclaims the use of the credit computed under section 713 or the use of the credit computed under section 714, the credit so disclaimed shall not, for the purposes of the internal revenue laws, be applicable to the computation of the tax under this subchapter for such taxable year." SEC. 15. AVERAGE BASE PERIOD NET INCOME OF ACQUIRING COR- So much of section 742 of the Internal Revenue Code as follows the section heading and precedes the beginning of subsection (a) is amended to read as follows: "In the case of a taxpayer which is an acquiring corporation the excess profits credit of which is allowed under section 741, its average base period net income (for the purpose of the credit computed under section 713) if the taxpayer was actually in existence before January 1, 1940, shall, at the election of the taxpayer made in its return for the taxable year, be computed as follows, and if the taxpayer was not actually in existence before such date, shall be computed as follows, in lieu of the method provided in section 713:". SEC. 16. COMPUTATION OF CREDITS ON RETURNS. Section 729 (b) of the Internal Revenue Code is amended by striking out "(b) RETURNS.-" and inserting in lieu thereof the following: "(b) RETURNS. "(1) COMPUTATION OF EXCESS PROFITS CREDITS.-In the case of a taxpayer which under section 712 or section 741 is entitled to have the excess profits credit computed under section 713 or section 714, whichever results in the lesser tax under this subchapter, the return under this subchapter for any taxable year shall contain computations of two tentative taxes, one with the credit computed under section 713 and one with the credit computed under section 714; and the return shall contain all information which the Commissioner, by regulations prescribed by him with the approval of the Secretary, may prescribe as necessary for such computations. If the taxpayer states in such return that it disclaims the use of one of such credits in the computation of the tax under this subchapter for the taxable year, the computation and information based on such credit may be omitted from the return. "(2) NO RETURN REQUIRED.—". SEC. 17. EFFECTIVE DATE. The amendments made by this Act shall be effective as of the date of enactment of the Excess Profits Tax Act of 1940. Approved, March 7, 1941. [CHAPTER 11] AN ACT 54 Stat. 975, 1018. 752. March 11, 1941 [H. R. 1776] [Public Law 11] Further to promote the defense of the United States, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as "An Act to Promote the Defense of the United United States. States" SEC. 2. As used in this Act (a) The term "defense article" means— (1) Any weapon, munition, aircraft, vessel, or boat; (2) Any machinery, facility, tool, material, or supply necessary for the manufacture, production, processing, repair, servicing, or operation of any article described in this subsection; (3) Any component material or part of or equipment for any article described in this subsection; (4) Any agricultural, industrial or other commodity or article for defense. Such term "defense article" includes any article described in this subsection: Manufactured or procured pursuant to section 3, or to which the United States or any foreign government has or hereafter acquires title, possession, or control. (b) The term "defense information" means any plan, specification, design, prototype, or information pertaining to any defense article. SEC. 3. (a) Notwithstanding the provisions of any other law, the President may, from time to time, when he deems it in the interest of national defense, authorize the Secretary of War, the Secretary of the Navy, or the head of any other department or agency of the Government An Act to Promote the Defense of the Post, p. 236. "Defense article." "Defense informa tion." Powers of the President. Manufacture, etc., of defense articles for govern ments. (1) To manufacture in arsenals, factories, and shipyards under their jurisdiction, or otherwise procure, to the extent to designated which funds are made available therefor, or contracts are authorized from time to time by the Congress, or both, any defense article for the government of any country whose defense the President deems vital to the defense of the United States. Disposal. Limitation on value. Post, p. 813. (2) To sell, transfer title to, exchange, lease, lend, or otherwise dispose of, to any such government any defense article, but no defense article not manufactured or procured under paragraph (1) shall in any way be disposed of under this paragraph, except after consultation with the Chief of Staff of the Army or the Chief of Naval Operations of the Navy, or both. The value of defense articles disposed of in any way under authority of this paragraph, and procured from funds heretofore appropriated, shall not exceed $1,300,000,000. The value of such defense articles shall be determined by the head of the department or agency concerned or such other department, agency or officer as shall be designated in the manner provided in the rules and regulations issued hereunder. Defense articles procured from funds hereafter appropriated to any department or agency of the Government, propriations. Defense articles procured from future ap etc. Testing, repairing, Defense informa. tion. Release of article for export. Terms and conditions. Limitation on exercise of powers ferred. con Convoying of ves sels. Combat areas, re striction. 54 Stat. 7. 22 U. S. C. § 443. Post, p. 764. Contract requirements. Notice and record of articles exported. other than from funds authorized to be appropriated under this Act, shall not be disposed of in any way under authority of this paragraph except to the extent hereafter authorized by the Congress in the Acts appropriating such funds or otherwise. (3) To test, inspect, prove, repair, outfit, recondition, or otherwise to place in good working order, to the extent to which funds are made available there for, or contracts are authorized from time to time by the Congress, or both, any defense article for any such government, or to procure any or all such services by private contract. (4) To communicate to any such government any defense information, pertaining to any defense article furnished to such government under paragraph (2) of this subsection. (5) To release for export any defense article disposed of in any way under this subsection to any such government. (b) The terms and conditions upon which any such foreign government receives any aid authorized under subsection (a) shall be those which the President deems satisfactory, and the benefit to the United States may be payment or repayment in kind or property, or any other direct or indirect benefit which the President deems satisfactory. (c) After June 30, 1943, or after the passage of a concurrent resolution by the two Houses before June 30, 1943, which declares that the powers conferred by or pursuant to subsection (a) are no longer necessary to promote the defense of the United States, neither the President nor the head of any department or agency shall exercise any of the powers conferred by or pursuant to subsection (a); except that until July 1, 1946, any of such powers may be exercised to the extent necessary to carry out a contract or agreement with such a foreign government made before July 1, 1943, or before the passage of such concurrent resolution, whichever is the earlier. (d) Nothing in this Act shall be construed to authorize or to permit the authorization of convoying vessels by naval vessels of the United States. (e) Nothing in this Act shall be construed to authorize or to permit the authorization of the entry of any American vessel into a combat area in violation of section 3 of the Neutrality Act of 1939. SEC. 4. All contracts or agreements made for the disposition of any defense article or defense information pursuant to section 3 shall contain a clause by which the foreign government undertakes that it will not, without the consent of the President, transfer title to or possession of such defense article or defense information by gift, sale, or otherwise, or permit its use by anyone not an officer, employee, or agent of such foreign government. SEC. 5. (a) The Secretary of War, the Secretary of the Navy, or the head of any other department or agency of the Government involved shall, when any such defense article or defense information is exported, immediately inform the department or agency designated by the President to administer section 6 of the Act of July 2, 1940 50 U. S. C., app. (54 Stat. 714), of the quantities, character, value, terms of disposition, and destination of the article and information so exported. § 701. Report of opera. tions. (b) The President from time to time, but not less frequently than once every ninety days, shall transmit to the Congress a report of operations under this Act except such information as he deems incompatible with the public interest to disclose. Reports provided for under this subsection shall be transmitted to the Secretary of the Senate or the Clerk of the House of Representatives, as the case may be, if the Senate or the House of Representatives, as the case may be, is not in session. |