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Subpart A.--Tax Conventions
United States-France Income Tax State shall not be taxable in such concept of a permanent establishment, Convention
other State if: (1) the recipient is reference may be made to the defini
present in such other State for a peri- tion of permanent establishment, which 1968-2 C.B. 691 (Also Part I, Section 882; 1.882-1.) od or periods not exceeding in the is found in Article 4 of the ConvenFrench convention; concert tour
aggregate 183 days in the fiscal year tion, in order to define the term
concerned, and (2) the recipient does "fixed base." in U.S.; fixed base. A citizen and
not maintain a fixed base in the other resident of France who entered into
Article 4(5) of the Convention State for a period or periods exceeda contract with an unrelated do
which discusses the term "permanent ing in the aggregate 183 days in such mestic corporation to represent him
establishment” provides that a resiin connection with his U.S. concert year.
dent of a Contracting State shall not
The term "fixed base" is not deappearances does not maintain a
be deemed to have a permanent estabfixed base in the U.S. as that term
fined by the Convention. The report lishment in the other Contracting is used in Article 14 of the U.S.
of the Senate Foreign Relations Com- State merely because such resident France Income Tax Convention.
mittee on the Convention states that carries on business in that other State
the "fixed base" concept is not found through a broker, general commission Rev. Rul. 75-131 in other United States tax conventions
agent, or any other agent of an indebut rather is derived from Advice has been requested whether,
the pendent status, where such persons
O.E.C.D. (Organization For Economunder the circumstances described be
are acting in the ordinary course of ic Cooperation and Development) their business. low, the taxpayer maintains a "fixed base" in the United States as that model convention. See S. Exec. Rep.
Accordingly, it is held that the No. 5, (Tax Conventions with Brazil, term is used in Article 14(2)(b) of
activities of X do not establish a fixed the United States-France Income Tax France, and the Philippines) 90th
base of A in the United States as that Convention (the Convention) 1968-2 Cong., 2d. Sess., 35 (1968), 1968-2
term is used in Article 14 of the C.B. 691. C.B. 881, 893.
A commentary on Article 14, of the A, an artist and a citizen and resi
O.E.C.D. model convention concerndent of France, contracted with X, an
ing the taxation of independent perunrelated domestic corporation, to be
United States-Japan Income Tax sonal services states as follows:
Convention his representative in connection with his concert appearance in the United The provisions of Article 14 are similar 1973-1 C.B. 630
to those customarily adopted for income States for the years 1971 through
from industrial or commercial activities. Japan; National Institutes of 1974. X represents many performers Nevertheless it was thought that the con- Health fellowship. A U.S. nonresifor their United States tours. A's 1974
cept of permanent establishment should be
dent alien Japanese scientist granttour required him to be in the United
vities. The term "fixed base", which is to ed a fellowship to perform research States for a total of 36 days. During be found in various Conventions, has there- at the National Institutes of Health,
fore been used. It has not been thought 1974 X's office was the only address appropriate to try to define it, but it
which do not maintain a regular in the United States to which inquiries would cover, for instance, a physician's faculty or established curriculum, regarding A's concerts could be made. consulting room or the office of an architect or a lawyer. A person performing pro
have no organized student body, Under the terms of the existing fessional services would probably not as a and do not have student education contract X has the duty to further A's rule have premises of this kind in any other as their primary purpose, is not
State than that of his residence. But if career through the promotion of his
there is in another State a centre of activity exempt from U.S. income tax by United States tour and the exclusive of a fixed or permanent character, then reason of Article 19 of the U.S.power to execute contracts for A's that State should be entitled to tax the Japan Income Tax Convention.
person's activities. See Draft Double Taxaservices. X receives a percentage of A's tion Convention on Income and Capital,
Rev. Rul. 75-10 earnings for performing these func- Report of the O.E.C.D. Fiscal Committee
130, (1963). tions.
Advice has been requested whether, Article 14(2) of the Convention Therefore, since in the convention under the circumstances described beprovides, in part, that income derived the provisions of Article 14 are similar low, the National Institutes of Health by a resident of a Contracting State to the Article involving industrial and (NIH) qualifies as an "accredited in respect of independent activities commercial activities and since the educational institution" under Article performed in the other Contracting latter Article involves the use of the 19 of the United States-Japan Income Tax Convention, 1973-1 C.B. 630, Article 19 of the Convention pro- 151(e) (4) of the Code and section (entered into force on July 9, 1972). vides that an individual, who is a resi- 1.151-3(c) of the regulations define
A Japanese scientist, a nonresident dent of a Contracting State at the the term "educational institution” to alien individual of the United States, beginning of his visit to the other mean a school maintaining a regular is appointed to a fellowship at NIH Contracting State, or who was, imme- faculty and established curriculum, to perform research at NIH pursuant diately before receiving the invitations and having an organized body of stuto the authority of 42 CFR part 61 referred to below, exempt from tax in dents in attendance. It includes prisubpart B (1973) of the Public Health the other Contracting State under mary and secondary schools, colleges, Regulations. Section 61.31 of these paragraph (1)(a) of Article 20 of the universities, normal schools, technical regulations provides for the establish- Convention, and who at the invitation schools, mechanical schools, and simment of service fellowships in the
of the Government of that other Con- ilar institutions, but does not include Public Health Service, the designation tracting State or of a university or other noneducational institutions, on-the-job of persons to receive such fellowships, accredited educational institution sit- training, correspondence schools, night and the appointment of service fellows uated in the other Contracting State, schools, and so forth. Rev. Rul. 68-604, under authority of 42 U.S.C. section is temporarily present in that other 1968-2 C.B. 63, holds that to qualify 209(g) (1969). Section 61.30(a) of Contracting State for the primary pur- as an educational institution, as dethese regulations provides that a serv- pose of teaching or engaging in re- fined in section 151(e) (4), the priice fellow is an employee of the Public search, or both, at a university or other
mary purpose of an institution or Health Service.
accredited educational institution shall division thereof must be educating NIH, an agency of the United States be exempt from tax by that other students. Department of Health, Education, Contracting State on his income from
Since neither NIH nor the Center and Welfare, is a focal point for Fed- personal services for teaching or re- maintains a regular faculty or estaberal biomedical research and support search at such university or educa- lished curriculum, has an organized of research. NIH conducts biomedical tional institution, for a period not ex- body of students, or has a primary research in its own laboratories, pro- ceeding two years from the date of his
purpose of educating students, neither vides grants to nonprofit organizations arrival or the date he completed the
arrival or the date he completed the NIH nor the Center is an "educaand institutions for research and for study, training, or research in that
tional institution” as defined in section medical education, provides grants for
other Contracting State with respect 151(e) (4) of the Code and section the training of research investigators,
to which the exemption in paragraph 1.151-3(c) of the regulations. and supports biomedical communica- (1)(a) of Article 20 applied.
Accordingly, neither NIH nor the tions through programs and activities The term "accredited educational
Center is an “accredited educational of the National Library of Medicine. institution” is not defined in the Con
institution” within the meaning of the Although NIH trains researchers in vention. However, Article 2(2) of the
term as used in Article 19 of the its own facilities, the primary purpose Convention provides that any term
United States-Japan Income Tax of NIH is to conduct and promote used in this convention and not other
wise defined shall, unless the context The division of NIH that offers the otherwise requires, have the meaning service fellowships is the Fogarty In- which it has under the tax laws of that United States-Netherlands Income ternational Center (Center). The Contracting State. Although the term Tax Convention Center invites distinguished, talented, "accredited educational institution" is
T.D. 5778, 1950-1 C.B. 92 and United and promising scientists at all career not defined in the Internal Revenue States-Netherlands Supplementary Income levels to NIH for an interchange of Code of 1954 or the regulations there- Tax Convention, 1967-2 C.B. 472. scientific information and training. under, the term "educational institu- Rev. Rul. 75-118 The purpose of the fellowship pro- tion” is defined. Thus, the term "edugrams is to broaden the utility of the cational institution” is interpreted as
Advice has been requested whether, physical facilities and intellectual en- this term is defined in section 151 under the circumstances described bevironment of NIH as a natural re- (e)(4) of the Code and section low, a dividend paid by a United search source and to strengthen the 1.151-3(c) of the Income Tax Regula- States subsidiary corporation to its mutually productive scientific centers tions. See Rev. Rul. 70-196, 1970-1 Netherlands parent corporation is throughout the world and NIH. C.B. 359, which interprets the term subject to the reduced rate of tax of
Neither NIH nor the Center offers "educational institution" in Article XI 5 percent provided by Article VII(1) structured courses or training pro- of the United States-Japan Income (b) of the Income Tax Convention grams, maintains a regular faculty or Tax Convention of 1954 as that term between the United States and the curriculum, has an organized body of is defined in section 151(e) (4) and Netherlands (the "Convention"), T.D. students, gives course credit, or awards section 1.151-3(c). Also see Rev. Rul. 5778, 1950-1 C.B. 92, and United degrees.
74-484, 1974-2 C.B. 342. Section States-Netherlands Supplementary Income Tax Convention, 1967-2 C.B. Netherlands corporation has in the general course and method by which 472. United States.
its functions are channeled and deterS2 is a domestic corporation all of
Accordingly, the dividend paid in mined, including the nature and rewhose stock is owned by Si, a cor
1973 by S2 to Si falls within the quirements of all formal and informal poration organized under the laws of scope of Article VII(1) (b) of the procedures available; (C) rules of the Netherlands. P, a Netherlands
Convention and is subject to the re- procedure, descriptions of forms availcorporation, owns all of the stock of duced rate of tax of 5 percent.
able or the places at which forms may S1.
be obtained, and instructions as to the
scope and contents of all papers, reS1 was organized in 1947 and is a United States—Netherlands
ports, or examinations; (D) substanholding company holding the stock Income Tax Convention
tive rules of general applicability of three United States corporations in
T.D. 5778, 1950-1 C.B. 92, 505.112: Divi- adopted as authorized by law, and cluding S2 and numerous foreign cor
dends and Interest Paid by a Netherlands statements of general policy or interporations. Si does not have a perma- Corporation.
pretations of general applicability nent establishment in the United
Whether dividends and interest paid by formulated and adopted by the States. Si acquired the stock of S2 in a Netherlands Antilles corporation that is a limited partner in a United States limited
agency; and (E) every amendment, 1965 as a partial liquidation distribu
partnership are exempt from United States revision, or repeal of the foregoing. tion from a Canadian subsidiary of P. taxation under Article XII of the Conven- Except to the extent that a person This liquidation was effected upon a tion. See Rev. Rul. 75-23, page 290.
has actual and timely notice of the belief that Canada might amend its
terms thereof; no person shall in any income tax law in a way that the Subpart B.—Legislation and manner be required to resort to, or Canadian corporation would be taxed Related Committee Reports
be adversely affected by any matter on dividends received from 52 and
required to be published in the Federal taxed on capital gain arising from a Public Law 89-487
Register and not so published. For later disposition of the S2 stock. 89th Congress, S. 1160
purposes of this subsection, matter Si has complete dominion and conJuly 4, 1966
which is reasonably available to the trol over dividends which it receives
class of persons affected thereby shall from S2 and is under no obligation to An Act to amend section 3 of the be deemed published in the Federal transfer such dividends to P.
Administrative Procedure Act, chap- Register when incorporated by referS2 had gross income from manufac
ter 324, of the Act of June 11, 1946 ence therein with the approval of the
(60 Stat. 238), to clarify and protect Director of the Federal Register. turing in 1973 and in each year since
the right of the public to information, its incorporation. However, such gross
“(b) AGENCY OPINIONS AND and for other purposes. income has included neither interest
ORDERS.—Every agency shall, in acnor dividend income. S2 paid a divi
Be it enacted by the Senate and
cordance with published rules, make dend to S1 on December 1, 1973.
House of Representatives of the
available for public inspection and Article VII of the Convention pro
assembled, That section 3, chapter 324, cluding concurring and dissenting vides, in part, that dividends paid by
of the Act of June 11, 1946 (60 Stat. a United States corporation to a
opinions) and all orders made in the 238), is amended to read as follows: Netherlands corporation shall be sub
adjudication of cases, (B) those state
“Sec. 3. Every agency shall make ject to tax by the United States at a available to the public the following
ments of policy and interpretations rate not exceeding 5 percent if (1)
which have been adopted by the information: during the part of the taxable year
agency and are not published in the preceding payment of the dividend “(a) PUBLICATION IN THE FEDERAL
Federal Register, and (C) administra. and during the whole of the prior REGISTER.—Every agency shall sepa
tive staff manuals and instructions to taxable year the Netherlands corpora- rately state and currently publish in
staff that affect any member of the tion owned at least 25 percent of the
the Federal Register for the guidance public, unless such materials are voting stock of the United States cor- of the public (A) descriptions of its promptly published and copies offered poration; (2) not more than 25 per- central and field organization and the
for sale. To the extent required to cent of the gross income of the United established places at which, the officers
prevent a clearly unwarranted invasion States corporation for such year confrom whom, and the methods whereby,
of personal privacy, an agency may sisted of interest and dividends; and the public may secure information,
delete identifying details when it makes (3) the shares of stock with respect to
make submittals or requests, or ob- available or publishes an opinion, which the dividends are paid are tain decisions; (B) statements of the
statement of policy, interpretation, or not effectively connected with any
staff manual or instruction: Provided,
* Senate Report No. 813, page 392, House Report No. permanent establishment that the 1497 is not published.
That in every case the justification for
[Bracketed numerals indicate official report page numbers.]
CLARIFYING AND PROTECTING THE RIGHT
OF THE PUBLIC TO INFORMATION, AND FOR
OTHER PURPOSES October 4 (legislative day,
October 1), 1965. Mr. LONG of Missouri, from the Committee on the Judiciary, submitted the following report to accompany S. 1160.1
The Committee on the Judiciary, to which was referred the bill (S. 1160) to clarify and protect the right of the public to information, and for other purposes, having considered the same, reports favorably thereon, with amendments and recommends that the bill as amended do pass.
writing. Every agency also shall main. Every agency having more than one tain and make available for public member shall keep a record of the inspection and copying a current index final votes of each member in every providing identifying information for agency proceeding and such record the public as to any matter which is shall be available for public inspection. issued, adopted, or promulgated after
"(e) EXEMPTIONS.—The provisions the effective date of this Act and which
of this section shall not be applicable is required by this subsection to be made available or published. No final
to matters that are (1) specifically order, opinion, statement of policy, required by Executive order to be kept
secret in the interest of the national interpretation, or staff manual or instruction that affects any member of
defense or foreign policy; (2) related the public may be relied upon, used or
solely to the internal personnel rules cited as precedent by all agency against
and practices of any agency; (3) any private party unless it has been specifically exempted from disclosure indexed and either made available
by statute; (4) trade secrets and com
mercial or financial information obor published as provided by this sub
tained from any person and privileged section or unless that private party
or confidential; (5) inter-agency or shall have actual and timely notice of the terms thereof.
intra-agency memorandums or letters "(c)” AGENCY RECORDS.-Except
which would not be available by law with respect to the records made avail.
to a private party in litigation with the able pursuant to subsections (a) and
agency; (6) personnel and medical
files and similar files the disclosure of (b), every agency shall, upon request for identifiable records made in ac
which would constitute a clearly uncordance with published rules stating
warranted invasion of personal privthe time, place, fees to the extent
acy; (7) investigatory files compiled authorized by statute and procedure
for law enforcement purposes except
to the extent available by law to a to be followed, make such records promptly available to any person.
private party; (8) contained in or
related to examination, operating, or Upon complaint, the district court of the United States in the district in
condition reports prepared by, on be
half of, or for the use of any agency which the complainant resides, or has his principal place of business, or in
responsible for the regulation or super
vision of financial institutions; and which the agency records are situated shall have jurisdiction to enjoin the
(9) geological and geophysical infor
mation and data (including maps) agency from the withholding of agency records and to order the production concerning wells. of any agency records improperly with- “(f) LIMITATION OF EXEMPTIONS. held from the complainant. In such Nothing in this section authorizes cases the court shall determine the withholding of information or limiting matter de novo and the burden shall the availability of records to the public be upon the agency to sustain its except as specifically stated in this action. In the event of noncompliance section, nor shall this section be with the court's order, the district authority to withhold information court may punish the responsible from Congress. officers for contempt. Except as to
"(g) PRIVATE Party.-As used in those causes which the court deems of
this section, 'private party' means any greater importance, proceedings be
party other than an agency. fore the district court as authorized by this subsection shall take precedence (h) EFFECTIVE DATE.This on the docket over all other causes and amendment shall become effective one shall be assigned for hearing and trial year following the date of the enactat the earliest practicable date and ment of this Act." expedited in every way.
Approved July 4, 1966.
Amendment No. 1: On page 3, line 8, before "staff manuals" insert "administrative."
Amendment No. 2: On page 4, line 4, strike "Every" and insert in lieu thereof “Except with respect to the records made available pursuant to subsections (a) and (b), every."
Amendment No. 3: On page 4, line 4, after the comma insert "upon request for identifiable records made."
Amendment No. 4: On page 4, line 5, before "and" insert "fees to the extent authorized by statute."
Amendment No. 5: On page 4, line 6, strike "all its” and insert in lieu thereof "such.”
Amendment No. 6: On page 4, lines 11 and 12, strike "and information": and on line 13, strike "or information."
Amendment No. 7: On page 5. line 10, strike "the public” and insert in lieu thereof "any person."
Amendment No. 8: On page 5, lines 11 and 12, strike "dealing solely with matters of law or policy” and insert nical amendment to delete the term ance of having an information policy in lieu thereof "which would not be "information” which is included of full disclosure. available by law to a private party in within the term “agency records” to Although the theory of an informed litigation with the agency." the extent that it is in the form of a
1 Pub. L. 89.487, page 391.
electorate is vital to the proper opera Amendment No. 9: On page 5, record.
tion of a democracy, there is nowhere line 17, strike the word "and"; and
Amendment No. 7: It was pointed in our present law a statute which on page 5, line 20, strike the period
out in statements to the committee affirmatively provides for that inforand insert in lieu thereof "; and (9)
that agencies may obtain information mation. Many witnesses have testified geological and geophysical informa
of a highly personal and individual that the present public information tion and data (including maps) con- nature. To better convey this idea the section of the Administrative Procecerning wells.” substitute language is provided.
dure Act has been used more as an PURPOSE OF AMENDMENTS Amendment No. 8: The purpose of
excuse for withholding than as a dis
closure statute. clause (5) is to protect from disclosure Amendment No. 1: The limitation only those agency memorandums and
Section 3 of the Administrative of the staff manuals and instructions letters which would not be subject to
Procedure Act, that section which this affecting the public which must be discovery by a private party in litiga
bill would amend, is full of loopholes made available to the public to those tion with the agency. This would in
which allow agencies to deny legitiwhich pertain to administrative matclude the working papers of the agency
mate information to the public. Inters rather than to law enforcement
attorney and documents which would numerable times it appears that inmatters protects the traditional concome within the attorney-client privi
formation is withheld only to cover fidential nature of instructions to Government personnel prosecuting lege if applied to private parties.
up embarrasing mistakes or irregulari
ties and the withholding justified by violations of law in court, while per
Amendment No. 9: The purpose
such phrases in section 3 of the Admitting a public examination of the of clause (9) is to protect from dis
ministrative Procedure Act as—"rebasis for administrative action. closure certain information which is
quiring secrecy in the public interest," Amendment No. 2: This is a techhighly valuable to several important
or "required for good cause to be held nical amendment to emphasize that industries and which should be kept
confidential.” the agency records made available by
confidential when it is contained in subsections (a) and (b) are not covGovernment records.
It is the purpose of the present bill
to eliminate such phrases, to establish ered by subsection (c) which deals
PURPOSE OF BILL
a general philosophy of full agency with other agency records.
disclosure unless information is exAmendment No. 3: The purpose
In introducing S. 1666, the prede
cessor of the present bill, of this amendment is to require that
empted under clearly delineated statu
Senator Long quited the words of Madison, who
tory language and to provide a court requests of inspection of agency records
procedure by which citzens and the identify the particular records re
was chairman of the committee which
press may obtain information wrongquested. It is contemplated by the
fully withheld. It is important and Constitution: committee that the standards of
necessary that the present void be identification applicable to the dis- Knowledge will forever govern filled. It is essential that agency percovery of records in court proceedings ignorance, and a people who mean to
sonnel, and the courts as well be would be appropriate guidelines with be their own governors, must arm given definitive guidelines in setting respect to the identification of agency
themselves  with the power knowl- information policies. Standards such records, especially as the courts would edge gives. A popular government as "for good cause” are certainly not have jurisdiction to determine any without popular information or the sufficient. allegations of improper withholding. means of acquiring it, is but a prologue
At the same time that a broad Amendment No. 4: It is contemto a farce or a tragedy or perhaps both.
philosophy of “freedom of informaplated that, where authorized by
Today the very vastness of our Gov- tion” is enacted into law, it is necessary statute, an agency will require reason- ernment and its myriad of agencies to protect certain equally important able fees to be paid in appropriate makes it difficult for the electorate to
makes it difficult for the electorate to rights of privacy with respect to certain cases.
obtain that “popular information” of information in Government files, such Amendment No. 5: This is a tech- which Madison spoke. But it is only as medical and personnel records. It nical amendment to require that the when one further considers the hun- is also necessary for the very operaonly records which must be made dreds of departments, branches, and tion of our Government to allow it to available are those for which a re- agencies which are not directly re- keep confidential certain material, quest has been made.
sponsible to the people, that one be- such as the investigatory files of the Amendment No. 6: This is a tech- gins to understand the great import- Federal Bureau of Investigation.