Since August 5, 1861, Congress has passed 20 revenue acts and building and loan associations have been one of the classes of corporations that have been exempted by all 20.

No attempt was made by the Commissioner of Internal Revenue to tax any building and loan association from 1861 (the date of the first revenue act) until after the passage of the Revenue Act of August 5, 1909, when exemption was denied to a number of them and some were required to pay the tax. Test suits were brought in the Federal courts; and their decisions completely reversed the rulings of the Commissioner. As a result, refunds had to be made to these associations. As the state of limitations on refunds had run against many associations, Congress passed a private bill, approved February 26, 1917 (Senate bill 5672 by Mr. Broussard), making provisions for a refund of these taxes which had been illegally collected.

In Senate Committee Report No. 384, Sixty-fourth Congress, first session, reporting Senate bill 5672, the following statement was made:

"In view of the decisions by the United States courts made as late as May 11, 1914, and in view of the act exempting domestic building associations, the Čommissioner of Internal Revenue concluded that the exaction of the tax was improper and made a refund of so much of the tax as was not barred under the Revised Statutes.

"At the time of the adjudication of the questions involved by the courts, the statute had run against the recovery of a portion of the tax, and therefore the only hope for relief is by a special act of Congress.

"The Committee on Claims has frequently favorably reported bills of this nature, when the only question involved was the 2-year statute of limitations, which statute had run when the legal questions were finally passed upon by the courts.

"(See Private Act No. 130, approved Feb 13, 1909, for the relief of the Columbus Gas & Fuel Co., and Private Act No. 136, approved Feb. 13, 1909, for the relief of the Philadelphia Co., also see bill for the relief of the Chicago, Milwaukee & St. Paul Railway Co., H.R. 13, May 26, 1913, waiving the statute of limitations, which bill passed the House of Representatives on June 12, 1914, and subsequently became a law.)

'A large number of bills were favorably reported by the committee to refund legacy taxes illegally collected during the Sixty-second Congress, when the only question involved was the statute of limitations."

The relief sought by the present bill presents the identical situation in which Congress granted relief by the passage of the above bill in 1917.

On March 30, 1928, Congress passed Public Law No. 229, Seventieth Congress (H.R. 7224) an act to extend the time for refund of certain legacy taxes erroneously collected.

During this Congress your committee has favorably reported bills for the refund of taxes illegally collected when the only question involved was the statute of limitations. See bills for the relief of the Fidelity Trust Co. of Baltimore, Md., and others; estate of Benjamin Braznell; Lebanon Equity Exchange of Lebanon, Nebr.; Farmers Grain Co. of Omaha, Nebr.; and Fairmont Creamery Co. of Omaha, Nebr. Three of these bills have become law.

The Treasury Department takes the position that because there is some change from year to year in the membership of a building and loan association, the proposed bill would not relieve those who were members at the time the association paid the tax. There is scarcely a building and loan association in this country that is not required by law to maintain a reserve fund, sometimes called "contingent fund", consising of a certain percentage of its outstanding stock, or in some cases its outstanding loans. That fund is maintained for the purpose of paying losses and contingent unexpected expenses. That fund belongs to the association as a unit and never is distributable among members except upon dissolution of the association. It is maintained not for the benefit of the existing members during any one year, but for the benefit of the association and its membership at any time. The same situation existed when Congress passed the relief measure in 1917.

The tax was paid by these corporations and not out of their yearly earnings but out of their contingent funds and the bill provides for a refund to the corporations. There never was a time in the history of the corporations when this refund for taxes that were illegally collected would be more beneficial to the corporations, helping them to liquefy their frozen assets and pay to withdrawing members the money so much needed by them at this time.

ago are no longer in a position to benefit from the refund proposed to be made to the association at this time. Therefore, the proposed refund, if allowed, will constitute a bonus to a majority of the present members and will benefit few of those members who in reality paid the tax.

Orderly administration of its affairs compels the Treasury Department to take the position that the bar of the statute of limitations should in no case be removed. If the merits of each case are to be considered in determining whether a claim for refund barred by the statute of limitations should be paid, it is believed that Congress would be deluged with requests for such consideration, many more meritorious than the present one. It is therefore the opinion of the Treasury Department that sound public policy demands that every request for the refund of taxes after the expiration of the period, prescribed by law, within which such taxes may be recovered, should be denied.

For the reasons stated, the Treasury Department is opposed to the enactment of S. 1523. Very truly yours,

W. H. WOODIN, Secretary of the Treasury.

H. Repts., 74-1, vol. 2

O

AUTHORIZE THE ASSIGNMENT OF OFFICERS OF THE LINE OF THE NAVY FOR AERONAUTICAL ENGINEERING DUTY ONLY, AND FOR OTHER PURPOSES

APRIL 1, 1935.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. FERNANDEZ, from the Committee on Naval Affairs, submitted the

following

REPORT

[To accompany H. R. 6204]

The Committee on Naval Affairs, to whom was referred the bill (H. R. 6204) to authorize the assignment of officers of the line of the Navy for aeronautical engineering duty only, and for other purposes, having considered the same, report it to the House with the recommendation that it do pass.

The purpose of the bill is to authorize the Secretary of the Navy to designate, for the performance of aeronautical engineering duty only, officers of the line who volunteer and are qualified for this duty. It also authorizes the President, by and with the advice and consent of the Senate, to transfer and appoint officers of the Construction Corps of the Navy who are applicants and are qualified to the corresponding rank and grade in the line for the performance of aeronautical engineering duty only.

Heretofore it has been the practice to temporarily assign officers of the line of the Navy to perform aeronautical engineering duty for short periods of time and then to release them to perform their regular line duties. In this way the officers of the line assigned to this duty would be constantly changing. However, due to the rapid advancement in the art of aviation and to the expansion in this branch of the naval service, it is necessary for the efficiency of the service to have officers permanently assigned in the aeronautical branch to perform this character of engineering duty. The Committee on Naval Affairs, therefore, recommends the passage of this bill.

There will be no additional cost to the Government involved in the enactment of this proposed legislation.

The Navy Department favors the enactment of this bill as is indicated by the letter of the Secretary of the Navy to the Chairman of the Committee on Naval Affairs, and which is hereby made a part of this report.

NAVY DEPARTMENT, Washington, March 13, 1935. House of Representatives.

The CHAIRMAN COMMITTEE ON NAVAL AFFAIRS,

MY DEAR MR. CHAIRMAN: The bill (H. R. 6204) to authorize the assignment of officers of the line of the Navy for aeronautical engineering duty only, and for other purposes, was referred by your committee on March 11, 1935, for comment. The purpose of the bill is to authorize the Secretary of the Navy to designate, for the performance of aeronautical engineering duty only, officers of the line who are applicants. The bill also authorizes the President by and with_the advice and consent of the Senate, to transfer and appoint officers of the Construction Corps who are applicants to the corresponding rank and grade in the line for the performance of aeronautical engineering duty only. The bill gives these officers of the Construction Corps who are transferred the lineal position and precedence in the line which they would have held had they remained in the line or had their original appointments been in the line. Line officers who are designated and officers of the Construction Corps who are transferred to the line for aeronautical engineering duty only become additional numbers in grade.

Existing law authorizes the designation by the Secretary of the Navy of officers of the line for engineering duty only without references to aeronautical engineering. Because the technical requirements of aeronautics are so exacting and the advance of aeronautics is so rapid, it is highly desirable that qualified officers be designated for aeronautical engineering duty only, in order that the future employment of those officers may be along lines in which they have become especially trained.

It is noted that the first sentence on page 2 of H. R. 6204, lines 1 to 8, reads as follows:

"Each officer of the Construction Corps so transferred and appointed shall have the lineal position and precedence in the line which he would have held had he remained in the line or had his original appointment been in the line except that no officer shall have his existing relative rank, precedence, or seniority in the Construction Corps altered by such transfer."

The words "except that no officer shall have his existing relative rank, precedence, or seniority in the Construction Corps altered by such transfer" are apparently intended to provide that no officer of the Construction Corps who is transferred to the line will have his seniority with relation to any other officer of the Construction Corps who is also transferred to the line reversed. Specifically, there are three officers of the Construction Corps of the Naval Academy class of 1919 in the aeronautical organization who are now senior to three other naval constructors also in the aeronautical organization who were appointed from sources other than the Naval Academy. Under the general provision of the bill that officers who are transferred shall have the lineal position in the line which they would have held had they remained in the line or had their original appointments been in the line, the three officers of the Naval Academy class of 1919 would be transferred to positions in the line junior to those assigned the three other officers in the line. The words "except that no officer shall have his existing relative rank, precedence, or seniority in the Construction Corps altered by such transfer", lines 6 to 8, page 2, will not change that result.

It is believed that those six officers should retain their relative seniority with respect to each other if they are transferred to the line. The following amendment is therefore suggested:

In lines 6 to 8, page 2, strike out the words "no officer shall have his existing relative rank, precedence, or seniority in the Construction Corps altered by such transfer." and substitute in lieu thereof the words "if the lineal position and precedence in the line which would be given any officer of the Construction Corps so transferred and appointed is junior to the lineal position and precedence in the line given any other officer of the Construction Corps similarly transferred and appointed to whom he was senior in the Construction Corps on the date of the passage of this act, he shall be given a lineal position and precedence in the line immediately senior to that given such other officer."