Because of the large variety of situations to be met and social mechanisms through which the work may need to be carried out, this section gives the Secretary of Agriculture discretion as to methods of procedure sufficiently broad to make possible the effective handling of all types of problems. No definite percentage of cost to be borne by the various parties of interest is fixed in the proposed act because of great variations in Federal and non-Federal interest and benefit in different areas. In one area the Federal interest might be 90 percent and the local interest 10 percent; in another area the reverse might be the case. In a similar manner, in one area it might be wise to work through a conservancy district; in another a State; and in a third through an erosion cooperative association.

Subsection 4 of section 1 authorizes acquisition of lands, or rights, or interests therein, by purchase, gift, condemnation, or otherwise whenever necessary for the purposes of the act. This authority is considered essential so that the proposed program may be carried out effectively and expeditiously, since it will be necessary from time to time to acquire lands, usually small tracts, for experimental purposes, field headquarters, and engineering structures such as dams. It may also prove necessary from time to time to acquire rights or easements controlling the use to which land may be put. For example, a critical area feeding enormous amounts of silt to a Federal reservoir or contributing drifted sand to neighboring valuable agricultural lands might need to be retired from cultivation and planted to grass or trees. In such a case, the desirable procedure might involve leaving the land in private ownership accompanied by a grant to the Government of an easement prohibiting the use of the land for other than specified purposes. Easements might be granted in return for cash payments or for assistance in controlling erosion. The committee has been informed that no extensive program of land acquisition is contemplated under this act.

Subsection (a) of section 2 authorizes surveys, investigations, research, and preventive measures on land owned or controlled by the United States or any of its agencies.

Subsection (b) of section 2 authorizes the same type of work on any lands not owned or controlled by the United States or any of its agencies, upon obtaining proper consent or any necessary rights or interests in such lands.

Section 3 authorizes certain conditions to the extending of benefits under the act to lands not owned or controlled by the United States or any of its agencies.

Subsection 1 of section 3 authorizes, as one of the conditions under section 3, the requirement of the enactment and enforcement of local laws imposing suitable restrictions upon the use of land being protected from erosion at Federal expense. This authority is necessary because under certain circumstances, as, for example, where work is being done on a cost-sharing basis in cooperation with a conservancy district, Federal aid should not be extended except under suitable guaranty that the land benefited will be properly used, and that the erosion-control measures which might be installed will be maintained, otherwise Federal funds might be wasted and the work not be permanent.

Subsection 2 of section 3 authorizes, as one of the conditions under section 3, the requirement of agreements or covenants controlling the permanent use of land protected from erosion at Federal expense.

These agreements or covenants would be entered into voluntarily by the owner of the land and would serve as a guaranty of protection for the investment which the United States might make in erosioncontrol work.

Subsection 3 of section 3 authorizes as one of the conditions under section 3, the requirement of contributions in money, services, materials, or otherwise. This provision is necessary in order that the Federal Government may not need to bear the entire cost of erosion work on lands not owned or controlled by the United States. Subsection 1 of section 4 authorizes cooperation with other Government agencies.

Subsection 2 of section 4 places officers and employees who will administer the act under Civil Service, except that employees of the Soil Erosion Service need not go under Civil Service for a period of 4 months from the date of the act. This section also provides for the joint employment and compensation of experts and technicians connected with research and educational institutions on a basis to be determined by the Civil Service Commission. With respect to Civil Service requirements, it would be difficult to justify the placing of employees who will administer this act in a category different from that of other regular Government employees. Joint employment and compensation of experts and technicians is desirable in connection with the operation of experiment stations and the making of surveys and studies. Such joint employment is prohibited unless authorized by Congress. The authorization will result in considerable savings to the Government in the form of costs shared by nongovernmental institutions, and would make available to the Soil Erosion Service men of great ability, wide knowledge, and experience in the field of erosion control.

Subsection 3 of section 4 authorizes necessary expenditures for personal services, rent, books, printing and binding, and the purchase and operation of passenger vehicles. It also authorizes the performance of such acts and the establishment of such regulations as may be found necessary to carry out the provisions of the act, and prescribes a fine not to exceed $100 for the violation of any such regulations.

Section 5 directs the establishment of an agency to exercise the powers conferred by the act and authorizes the utilization of the Soil Erosion Service and the personnel thereof, together with all unexpended funds heretofore allotted to that organization. These funds are made available until June 30, 1937, and the Secretary of Agriculture is directed to assume all obligations incurred by the Soil Erosion Service prior to transfer to the Department of Agriculture.

Funds provided in House Joint Resolution 117 are made available for expenditure under the act, and the Secretary of Agriculture is authorized to transfer to the agency created under the act such functions, funds, personnel, and property of other agencies in the Department of Agriculture as may be necessary to provide a unified and coordinated program. The committee amendments to this subsection clarify the language but do not change the effect or meaning of the act. Section 6 authorizes the appropriation of such sums as Congress may from time to time deem necessary for the purposes of this act. appropriations under the authorization are contemplated at this session of Congress.

O

No

REFUND OF TAXES ERRONEOUSLY COLLECTED FROM CERTAIN BUILDING AND LOAN ASSOCIATIONS

MARCH 29, 1935.-Committed to the Committee of the Whole House and ordered to be printed

Mr. KENNEDY of Maryland, from the Committee on Claims, submitted the following

REPORT

[To accompany S. 279]

The Committee on Claims, to whom was referred the bill (S. 279) to extend the time for the refunding of certain taxes erroneously collected from certain building and loan associations, having considered the same, report thereon with the recommendation that it do pass. This bill has been approved by the Senate and its purpose, and facts concerning it, are fully set forth in the report of the Senate Committee on Claims.

[S. Rept. No. 572, 73d Cong., 2d sess.]

The Committee on Claims, to whom was referred the bill (S. 2816) to extend the time for the refunding of certain taxes erroneously collected from certain building and loan associations, having considered the same, report favorably thereon with the recommendation that the bill do pass without amendment.

The bill provides that claims for the refunding of any taxes erroneously or illegally assessed or collected from any building and loan association, or savings, and loan association, under the provisions of section 231, paragraph 4, of the Revenue Acts of 1918 to 1926, both inclusive, may be presented to the Commissioner of Internal Revenue not later than 6 months after the passage of this act, and the Commissioner of Internal Revenue is authorized and directed to receive, consider, and determine, in accordance with law but without regard to any statute of limitations, such claims as may have been presented heretofore and not allowed and such claims as may be presented within the period above named, when and where and only when it be found and determined that such taxes were collected upon the erroneous interpretation of the law passed upon and condemned by the United States Supreme Court in the decision rendered in the case of the United States v. Cambridge Loan & Building Co., reported in 278 United States Supreme Court Reports, page 55: Provided, That no interest shall be allowed on any of these claims.

There are approximately 30 building and loan associations affected by this bill located in the States of California, Delaware, Idaho, Indiana, Kansas, New York, Ohio, Pennsylvania, Utah, and Virginia. The amount involved will not exceed $80,000.

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.

On November 19, 1928, in the case of United States v. Cambridge Loan & Building Co., reported in 278 U.S. 55, the Supreme Court held that if an association is organized and operating in accordance with the laws of the State under which it is chartered and substantially all of its business is confined to making loans to members, that is the kind of association that Congress meant to exempt. Under this decision these associations were held to be exempt corporations for the year 1928 and all previous and subsequent years.

Under the income-tax law if a building and loan association is exempt from income tax, it is automatically exempt from capital-stock taxes. However, refunds of the capital-stock taxes were refused on the ground that payment under protest should not be treated as a claim for refund and the statute of limitations had intervened between the payment of the taxes and the decision in the Cambridge case, the identical situation when Congress in 1917 refunded similar taxes to building and loan associations.

So, the sole question in this case is the statute of limitations and it is submitted that the same relief should be granted in 1934 that was granted in 1917 under similar conditions.

The following correspondence is appended hereto and made a part of this report:

TREASURY DEPARTMENT, INTERNAL REVENUE SERVICE, Wichita, Kans., May 6, 1929. Topeka, Kans.

The CAPITOL BUILDING & LOAN ASSOCIATION,

GENTLEMEN: Enclosed find copy of letter from the Commissioner's office dated May 1, 1929, in which it is held that your association is entitled to exemption under section 103 (4) of the Revenue Act of 1928 and corresponding sections of prior revenue acts.

You are advised that your association will not be liable for the filing of returns for 1928 and prior years, and returns will not be required for subsequent years so long as there is no change in the organization, its purposes, and method of doing business.

So much of the amount received from your association by an individual in any one year for the year 1924 and subsequent years as dividends or interest as does not exceed $300 is exempt from tax provided there is no change in the present method of operation.

Any changes in the form or organization or method of operation of your association as shown by the evidence submitted should be immediately reported to this office in order that the effect of such changes upon your present exempt status may be determined.

Respectfully.

H. H. MOTTER, Collector,
By HARRY KEENE,

Chief of the Income Tax Division.

MAY 1, 1929.

Reference is made to the evidence submitted by the Capitol Building & Loan Association, 534 Kansas Avenue, Topeka, Kans., for use in connection with a reconsideration of Bureau ruling of July 21, 1926, holding that the association is taxable as a bank.

The status of the association has been reconsidered in the light of the decision of the Supreme Court of the United States of November 19, 1928, in the case of The United States v. The Cambridge Loan & Building Co. and article 515 of regulations 45, 62, 65, and 69, and also article 525 of regulations 74. It appears that the association was incorporated under the laws of Kansas in 1893 as a building and loan association and is recognized as such by that State. It also appears that the subscribers for shares of the association are members within the meaning of the amended regulations referred to above and that substantially all the business of the association has been confined to making loans to members. There is nothing in the evidence submitted which would lead to a conclusion other than that the association has complied in every respect with the laws of Kansas under which it was incorporated and has operated.

In view of the foregoing it is held that the association is entitled to exemption under section 103 (4) of the Revenue Act of 1928 and the corresponding sections