Learning Center
Plans & pricing Sign in
Sign Out

1969 - Internal Revenue Service

VIEWS: 106 PAGES: 70


Q 2   P*
                               r:1   4!

 Secretary Kennedy (left)
 and Commissioner
 Th rower (right) at the                  Visitors viewing upper level ex-
 opening ceremony of the                  hibits and using audio equip-
Visitor's Gallery located in              merit that narrates significant
the Internal Revenue                      events in tax administration
Service Building,                         history.
Washington, D.C.

Viewofup randlower                         Visitors operating an'Alcohal
levels at t:Visltor's                      and Firearms exhibit.
      EW&Amom M ~[~@ Vn&@UgV                            Our overall refunding operations were also

ra    Internal Revenue Service
                                                        accelerated, thereby causing the rate of
                                                        interest paid on refunds to reach its lowest
                                                        point-less than one cent for each dollar
                                                            The Exempt Organization area received
                                                        close attention beginning with a reorganiza-
                   ff)@ &@gm                            tion designed to broaden examination cover-
                                                        age and achieve a more intensified enforce-
      Honorable David Kennedy,                           ment of the regulations. The Exempt Organi-
      Secretary of the Treasury,                        zation Master File was improved and
      Washington, D.C. 20220.                            plans were formulated to achieve stronger
                                                         control of the examination program through
      Dear Mr. Secretary:                                centralization in 13 districts of processing
                                                         of applications and audits of organizations.
           I welcome my first opportunity to describe    Also, the Firearms function of the Service
       the accomplishments of the Service by pre-        expanded considerably at the expense of
       senting to you the attached annual report         other enforcement programs to carry out
      .of the Internal Revenue Service for the fiscal    the licensing and registering provisions of
       year 1969.                                        the Gun Control Act of 1968.
           An increase of more than 3 million re-           As evidence of the increasing pace of
       turns filed (our basic workload unit) in 1969    change in the IRS, we continued the study
       compared to 1968 filings reflects a con.         of requirements for a "System of the 70's"
       tinuing and uncontrollable growth trend          for tax administration, and began a study
      that imposed additional work in practically        of the organization of the Service.
      all of the Service's major programs. While
                                                            In summary, I believe that the Service has
      this was taking place, the Service lost many
                                                         performed well under trying budgetary con-
      employees who could not be replaced be.            straints. Management, by moving quickly,
      cause of the Revenue and Expenditure Con-          zintained a reasonable balance among all
      trol Act of 1968. As a result, severe              m jor programs and held curtailments of
      retrenchment occurred in compliance pro.
                                                         operations to a minimum. Fortunately, the
      grams, and accomplishments declined in
                                                         budget picture for 1970 is brighter and'i
      areas where work volume increased.                  look forward to significant progress.
          Despite budgetary restrictions, the Serv-
      ice handled a large volume of work expe.                  Sincerely,
      ditiously. Gross collections totaled $187.9
      billion, an increase of $34.3 billion over last
     year, 29 million taxpayers received assist.                             W. rA400CA01-
     ance, compared to 27 million last year; and
     all except full paid returns were mathe.
     matically verified. A quick refunding pro.
     gram on overpayments of corporation
     estimated taxes was successfully initiated.        Randolph W. Thrower,
                                                        Commissioner of Internal Revenue.
mission                            contents -
of the                             Letter of Transmittal/IV

service                            Report on Operations
                                   Informing and Assisting
 The mission of the Service is     Taxpayers/3
 to encourage and achieve the      Data Processing Activities/10
 highest possible degree of        Enforcement Acivities/17
 voluntary compliancewith          Supervision of the Alcohol and
 the tax laws and regulations      Tobacco Industries/35
 and to maintain the highest       Legislative and Legal Activities/38
 degree of public confidence       International Activities/43
 in the integrity and efficiency   Planning Activities/49
 ofthe Service. This includes      Management Activities/54
 requirements of the lawto         Organization-Principal Officers
 the public, determining the       Organization of the Internal
 extent of compliance and          Revenue Service/68
 causes of noncompliance,          Internal Revenue Regions and
and doing all things needful       D
to a proper enforcement of           itict%6acling Rooms/70
                                     ervice    9
the law.                           Principal Officers/71
                                   Historical List of Commissioners/75
                                   Taxpayer Publications/78
                                   Tax Form Activity/80
                                   Court Decisions/81
                                   Statistical Tables/97
notes                            report on
 All yearly data are on a fis-   operations
 cal year basis, unless other-
 wise specified. For example,
 data headed "1969" pertain
to the fiscal year ended
June 30, 1969 and "July 1"                                     Highlights
 inventory items under this
 heading reflect inventories                                             Millions
as of July 1, 1968.
 in many tables and charts,                                                                    Percent
 figures have been rounded                                           1968            1969
 and may not add to the totals
 which are based on un.
 rounded figures.                Gross collections ............... $153,636.8   $187PI9.6         22.3
                                       Number ..................         51.9           49.6     -4A
 For sale by the Superin-              Amount................ I I $11,41M6          $1Z942.6      133
tendent of Documents, U.S.       Returns filed ..................      '107A           11V         33
Government Printing Office,      lieturns examined .............          Z9            Z5      - 12A
 Washington, D.C. 20402 -        Additional tax from enforcement. .  $3;M.9         $3,36U         3.5
 Price $1.50 (paper cover)       Delinquent taxas collected, Wl.     $1,52L9        $IA393        27A

                                   , R-I..d.
                                        The American system of self-assessment depends
                                     on an informed public. To further strengthen this
                                     system, the Service carries out a broad information
                                     program, making use of the various news media, to
                                     communicate tax laws to taxpayers and apprise them
                                     of their rights and obligations in computing, and
                                     reporting their tax liabilities. In addition, taxpayer
                                     assistance teams were available in each district
Informing                            office to answer questions and provide tax materials.
                                     Regulations, rulings, simplified tax guides, and
and Assisting                        forms were issued to increase public knowledge
                                     and understanding of tax laws and procedural
Taxpayers                            rcqwrcmcnts.

                                     Concern for Public's Right and Need
                                     to Know
                                         Access to information about the activities of Gov-
                                     ernment is, of course, a fundamental right of the
                                     citizen in a democracy. Carrying this concept a step
                                     further, the Service believes that the public also has
                                      a need to know. Consequently, the Service not only
                                      provides tax information to persons who ask for
                                     it, but reaches out to make information avail-
                                      able to individuals who are unaware of tax law

                                     Error Prevention Top Priority
                                         'nc basic thrust of the public information pro-
                                      gram is the prevention of errors on tax returns. In-
                                      terwoven into virtually every message is the reminder
                                      that errors can delay refunds, require time-consum-
                                      ing correspondence on the part of taxpayers, or
                                      necessitate further action by the Service. Messages
                                      go on to point out that, for the Government, errors
                                      entail increased costs of operation which, in the final
                                      analysis, lead to more expense to the public. Special
                                      emphasis is placed on the principal types of individ-
Greater Use Made of News Media.       ual and business errors: On individual returns-
                                      use of the wrong tax table, mathematical mistakes,
Public Attention Directed to New      missing documents such as W-2's, omitted or incor-
Legislation.                          rect social security number, failure to sign the re-
                                      turn; on business returns,--missing or incorrect busi-
Year-Round Service to Taxpayers.      ness code, omitted identification number, errors in
Program for Sampling Taxpayer         arithmetic. 11c Service has made a major effort to
Inquiries Effective.                  get taxpayers to use the "piggyback" label appearing
                                     on the tax forms they receive in the mail in or-der
Internal Revenue Bulletin Provides   to reduce the number of errors caused by omitted
Official Tax Guidance.               or erroneous social security numbers. The various

                                                          informational effort by the Service. Using innova-          Trained Taxpayer Service Representatives Give              Program for Sampling Taxpayer Inquiries Effective
means of communication used include television,
radio, news releases, magazine articles, speeches,        tions in release processing and interdivisional coor-       Major Assist in Improving Public Service Activities          The Service program for sampling taxpayer in-
slides, pamphlets, fact sheets, posters, displays, and    dination, the Service was able to issue three basic            The 1,350 specially selected and trained taxpayer       quiries continues to be an effective device for quickly
exhibits.                                                 nc)n releases on the day the act was signed.                service representatives played an important role in        identifying significant taxpayer problem areas which
                                                              Following up on this, the Service developed a           meeting this year's increased requests for taxpayer        are nationwide in scope. Once identified, efforts are
Media Use of Messajes Reaches New Levels                  special series of news releases dealing with the com-                                                                  then made to resolve these problems through mass
                                                                                                                      service. Of these 1,350 employers, 843 provide full-
  The Service reached new highs in media use of            putation of the tax surcharge as well as new proce-        time year-round service in 352 taxpayer service            media news release, e.g., newspaper, radio, and tele-
taxpayer information materials. Posters displayed on       dures on estimated tax declarations. Again the basic       locations. Additional service was provided on desig-       vision. In addition, the Service uses this information
some 50,000 mail trucks stressed the importance. of        aim was to reduce misunderstanding and the inci-           nated days by 57 visiting taxpayer service repre-          for two other purposes: first, in preparing TAX-
taxpayers using the "piggyback" label. Service per-        dences of error brought on by these new provisions         sentatives at 141 service locations not staffed with       NEWS releases to alert taxpayer service employees
sonnel fulfilled more than 7,000 speaking engage-          in the law.                                                full-time taxpayer service employees. During the in-       on important tax questions and, second, in prepar-
ments before practitioner and civic groups. A total                                                                   come tax filing period, when the public need for           ing training materials, public-use documents, tax-
                                                          Public Informed About New Gun Control Act
of 42,000 media inquiries answered and 950 inter-                                                                     help is the greatest, 450 temporary employees were          payer education releases, and the tax form package.
views held in national and field offices were recorded        As the administering agency for the Gun Control         used to provide taxpayer services. This combination
                                                                                                                                                                                 Taxpayers Served
during the fiscal year. Hundreds of news releases         Act of 1968, the Service provided timely information        of permanent, visiting, and temporary help has
and other issuances were directed by Service offices      necessary to bring about compliance with the new            avoided the costly expenditure of technical time pre-                                                    1968             on   hf-t
to some 1,750 daily and 8,000 weekly newspapers.          law. To meet the separate effective dates of the act-       viously found necessary to provide such services.
   A most effective means of providing helpful infor-     October 22 for import controls; November 2 for                                                                              Total taxpayon somod-.......... ...   26,581,624   as,sn,sas      7.7

mation to taxpayers continued to be the weekly            registration of certain firearms and devices (begin-        Taxpayer Inquiry Referral System Instituted                T.11o.. ..                               17 Mo. 9                         7
                                                                                                                                                                                 so.. - - __........................... I 1      83?     ln~,           77.7
11question-and-answer" column. The column, based           ning an amnesty period ending December 1); and                 In 1969, a. taxpayer inquiry referral system was
                                                                                                                                                                                            . I I

on the most frequently asked taxpayer questions,           December 16 for licensing requirements-the Serv-           formally adopted. This system permits taxpayers to
                                                           ice developed a coordinated National and field office
was used by 999 daily and 2,394 weekly newspapers
                                                           approach in its information program. Information
                                                                                                                      obtain complete service at any Internal Revenue            Tax Return Forms and Form Letters
during the filing season. Some of these papers con-                                                                   Service office location. If the location is not the tax-
tinued to carry the column after April 15, reflecting      was distributed to 200,000 licensed gun dealers who        payer's home office or, if for any reason, the infor-      Activity
the year-round interest and timeliness of this feature.    had to be informed of their obligations under the          mation needed is not available, the system permits              The principal contact most taxpayers have with
                                                           new law; 396,000 local and 46,000 State police in          an accumulation and forwarding of the necessary            the Service is through the filing of tax return forms
Increased Emphasis on Radio and Television                 some 10,000 agencies who required insight into their        data to the correct location. Upon receiving a re-         and the receipt of other forms and form letters issued
  Ube Service, through its regional, district, and         increased duties; 25 million hunters, 200,000 target       ferral inquiry at a distant location, special handling      as information requests or notifications. The Service,
localoffices, participated in approximately 6,100           shooters, 100,000 gun collectors; and the general          is provided and a solution is forthcoming within a         therefore, continued to make every effort to provide
locally developed television and radio programs and         public.                                                    short period of time. This system expedites infor-         the best forms and form letters for public use.
set up some 475 exhibi ts. More than 700 television            In addition to using the regular means of com-          mation requests and eliminates taxpayer incon-                 Much of the activity in the tax return forms area
and 5,500 radio stations carried Scrvice-produced
                       '                                    munication, the Service conducted press conferences,       venience in being referred to a distant taxpayer serv-     this year resulted from further implementation of
materials. Field personnel arranged for use of these        made available special question-and-answer col-            ice location. Already more than 70,000 taxpayer.           the provisions of the Revenue and Expenditure Con-
materials on local stations in their areas. For the tax     umns, and displayed public notices showing the             have availed themselves of this service.                   trol Act of 1968. A number of new and revised
filing season the Service made available television         weapons subject to the new law,                                                                                        forms also were required in the interest equalization
spot announcements and stider, a 27-minute color
                                                                                                                       Internal Consolidations Streamline Service to
                                                                                                                                                                                   tax area.
                                                           Year-Round Service to Taxpayers                             Public
 film presentation, and a number of radio spots and                                                                                                                                    Most individual estimated income tax return filers
program series. Ali of these concentrated on areas of
                                                           Reaches New Peaks                                               During 1969, actions were initiated to consolidate      were placed on a "voucher" system of filing in 1969.
most    frequent   taxpayer   misunderstanding     and                                                                  managerial and procedural functions to assure great-       Under this system, quarterly notices for estimated
uncertainty.                                                  For the fifth consecutive year, service to taxpayers      er uniformity and efficiency in administering tax-         tax installments due no longer were sent to tax-
   Many Service officials, ranging from the      Com-      seeking help reached new peaks as almost 29 million          payer service operations. By the end of 1970, a dis-
                                                           taxpayers either telephoned or visited Internal Reve-                                                                    payers; instead taxpayers submit each installment
missioner to supervisors and agents, participated in                                                                    trict office taxpayer service functions will have been
                                                           nue Service offices in 1969. This was over 2 million                                                                    payment when due along with a payment "vouclier"
 the Service's public information program by appear-                                                                    consolidated, thereby providing more uniform pro-
                                                            (7.7 percent) more than last year, of which some            gram direction and supervision from similar organi-         that was furnished with the estimated tax form
 ing on network and local radio and television discus-
                                                            1.3 million were gains in telephone inquiries and           zational structures. In addition, the consolidation         package. This innovation should prove beneficial to
 sion-type programs. Error rates were again made
                                                           0.7 million were gains in visitors to Service offices.       has also resulted in functions being identified and         the Service and taxpayers because of the grratcr
 available to field offices from the computers of the
                                                            Coincidentally, these increases in telephone inquiries       pulled together which, in effect, "tend the scope of       speed and accuracy in posting payments to the tax-
 regional service centers so that releases could be ir-
                                                            and visitors to Internal Revenue Service offices rep-       taxpayer service activities. For example, now the           payer's accounts.
 sued on the types of errors giving taxpayers the most
                                                            resented identical gains of 7.7 percent over last year.      vast majority of departing alien clearances are per-        Two short-form returns were developed for use
                                                            Also, the record numbers serviced marked new highs           formed as a part of the taxpayer service program.        of exempt organizations whose gross receipts for the
                                                                                                                         This means that most aliens departing from the           year and total assets at the end of the year do not
 Public Attention Directed to New Legislation               for each of these categories, over 18 million telephone
                                                            inquiries (64 percent of the total) and more than 10         United States can be fully cleared at the taxpayer       exceed $10,000. These forms reduce the reporting
   Passtagc of the Revenue and Expenditure Control
                                                             million visitors to Service offices.                        service location.                                        burden on these small organizations, while still pro-
 Act of 1968 required a swift and effective taxpayer

                                                                                                                                                                                                Informing and Assisting Taxpayers                      /       5
 4 / Annual    Report / Chapter One
 viding sufficient information for administrative and     the Quarterly Review of Technical Developments-              powers conferred on an executor or trustee under a                                    Announcements of acquiescence or nonacquies-
 audit purposes.                                         Income Tax and in the Annual Review of Tech-                  will or inter vivos trust instrument or by applicable                             cence in 63 adverse decisions of the Tax Court of
    A list of forms developed and eliminated appears      nical Developments-Employment, Estate, Gift,                 local law.                                                                        the United States were published. Among the 137
 on page 80.                                             Excise Taxes covering fiscal year developments.                  Administrative procedures of the Service that                                  announcements of general interest, 12 listed the
    Efforts to improve the quality, tone, and content     These publications (replacing what formerly was             affect the rights or duties of the public were an-                                 names of organizations that no longer qualify as or-
of public-use forms and form letters were greatly        called the Annual Technical Review Institute) are            nounced in 37 Revenue Procedures during the year.                                  ganizations, contributions to which arc deductible
 expanded. Centralized review in the National Office     supplemented by special issuances of other booklets           Revenue Procedure 68-44 sets forth the standards                                  under section 170 of the Code, one announced a tax
of all forms issued by field offices was instituted. A   identified by subject matter titles, such as Review          for publishing Revenue Rulings and Revenue Pro-                                     agreement with the State of Georgia,-and nine listed
review of all existing National Office forms was al-      of Technical Developments-Foreign Investors Tax             cedures in the Bulletin. Revenue Procedures 68-45                                  disaster areas in which losses qualify for the special
most completed and good progress was made in             Act of 1966.                                                 explains newly established procedures relating to                                   tax treatment provided by section 165 (h) of the
reviewing existing field office forms. Under the cen-        Reports on Current Tax Literature, issued every           master and prototype corporate pension, annuity,                                   Code.
tralized review of field forms, district directors and    2-weeks, is a two-page presentation of digests of           and profit-sharing plans. Revenue Procedures 69-1                                      The weekly Bulletin is readily available to all
regional commissioners generally must now obtain         articles published in professional journals or other         through 69-6 describe the general procedures for                                   Service personnel and, at a reasonable cost, to the
clearance from the National Office prior to issuing       tax literature containing legislative suggestions, criti-    issuing rulings and determination letters to tax-                                  public. Its contents are extensively disseminated
a new or revised form.                                   cism of Service position, or reports of abuses or tax        payers, furnishing technical advice to District Direc-                              (with appropriate citations) by the commercial tax
                                                         avoidance devices. These digests are presented for            tors of Internal Revenue, and processing requests                                 services and various professional journals. During
Taxpayers Rights and Duties Ex-                          information and appropriate action by Service offi-          for exemption or qualification under certain pro-                                   the year, it was redesigned in what no doubt is the
                                                         cials having responsibility regarding the matters            visions of the Code.                                                               most extensive format change in its 50-year history.
plained in Plain-Language Publica-                                                                                                                                                                        Consistent with the progressive design program of
                                                         discussed.                                                       The Revenue Rulings and Revenue Procedures
tions                                                        Tax Briefs is a pocket-size publication issued           published during 1969 in the various tax categories                                 the Service, the prior book format with full-page
   As part of the effort of the Service to provide        every 4-wecks so that revenue agents, office audi-          are shown in the table below.                                                      column width has been replaced by a new format
self-help guidance to taxpayers, many booklets and        tors, and tax technicians in field offices, as well as                                                                                          (combining a narrow column width with a new
                                                                                                                      Revenue Rulings and Revenue Procedures published                                   type face and other typographical techniques) that
pamphlets that explain the tax laws in nontechnical       technical personnel in the National Office, may
language are made available for widespread use. A         keep informed about the latest developments with                                              Type                                   Number
                                                                                                                                                                                                          is intended to provide a more contemporary visual
few of the larger and better-known publications are       a minimum expenditure of time. Thc brief digests                                                                                                impact.
                                                                                                                            T.tsf........................... ___......                             733
designed to meet the normal requirements of large         of new legislation, regulations, court decisions,                                                                                                   Material of a permanent nature is consolidated
                                                                                                                      Administutin................. ____............   ...............              31
                                                                                                                                                                                                    19   semiannually into Cumulative Bulletins, each of
groups of taxpayers. Among these publications are         Revenue Rulings, Revenue Procedures, and other              Alwhol, tobec., end fuselm, ... ........   .........
                                                                                                                      =y,mertts es.
                                                                                                                             vd                ___ ........ -------_----_-                          79    which contains an index and finding lists. As a
 Your Federal Income Tax, Tax Guide for Small             matters are accompanied by references to the re-                                                                                          24
                                                                                                                      Excise taxes. 'os-... --------- - --------------------- -- ------
Business, and Farmer's Tax Guide. Other publica-          search source niog likely to be available to field                                                                                        67   further research aid, an Index-Digest Supplement
tions relate to specific problem areas such as child      personnel.                                                         te- .......
                                                                                                                      Pension trusts ...............
                                                                                                                                                          ------- _..........
                                                                                                                                                                                                    57    has been published for each 4-year period since
                                                                                                                      Self-employment tax.. .........    .......... __ ... _ ... __. -----           5    1953. These quadrennial bound volumes contain
care, alimony payments, and income averaging.
   Most of these publications are revised annually to    Internal Revenue Bulletin Provides                                                                                                               digests arranged under topical headings along with
reflect new developments or to simplify the language     Official Guidance                                                More than 2,300 pre-1953 published rulings were
                                                                                                                                                                                                          finding lists to facilitate locating material under
and improve the organization of material from the                                                                     declared "obsolete" during the year and 143 others                                  particular sections of the Code and regulations.
                                                             The weekly Internal Revenue Bulletin continued                                                                                                   For the 4-year period 1965 through 1968 a new
standpoint of appearance and readability. Increased                                                                   were updated and supencried by republication un-
                                                         to serve as the Commissioner's means of providing                                                                                                format was adopted for the Index-Digest Supple-
actMty in this area has resulted in modernization of     technical and procedural guidance for all Serv-              der the  current statute and regulations. This is
format design and a thorough rearrangement of ma-                                                                     part of a continuing program for reviewing all of                                   ment 'System to increase its effectiveness as a research
                                                         ice employees as well as for taxpayers and tax prac-                                                                                             tool. The system will be made up of five basic vol-
terial in the 1969 edition of Your Federal Income                                                                      those      older       rulings          and   publicly        announcing
                                                         titioners. A substantial increase in the number of                                                                                              umes, or "services," with subject matter coverage as
Tax. A substantial reorganization of material for                                                                     whether they             still are       appropriate        statements of
                                                         Revenue Rulings published-from 602 to 696                                                                                                        follows: Income Tax; Estate and Gift Taxes; Em-
the 1970 edition of Tax Guide for Small Business                                                                      Service position.            The purpose is to eliminate un-
                                                         illustrates the emphasis throughout the year on the                                                                                             ploymcnt Taxes; Excise Taxes; and Alcohol,
was underway at the close of the fiscal year.            public announcement of technical interpretations             necessary research and to reduce the possibility of
   Obsolete publications are discontinued and new                                                                      improper reliance.                                                                 Tobacco, and Firearms. In addition to the topical
                                                         in order to encourage voluntary compliance and to                                                                                                digests for the 4-year period, the finding lists in each
items are added from time to time to adjust to                                                                            Among the other items published in the Bulletin
                                                         promote the uniform application of the tax laws                                                                                                  of the services include citations of all currently effec-
changing conditions. Further information about cur-                                                                    to enhance its use as a convenient reference publi-
                                                         to all similarly situated taxpayers.                                                                                                             tive Revenue Rulings and Revenue Procedures
 rent publications starts on page 78.                                                                                  cation     were 26 Public Laws                   relating to internal
                                                             One of the more significant rulings published dur-                                                                                           published during the period 1953 through 1964 ap-
                                                                                                                       revenue matters, 13 committee reports, six Execu-
                                                         ing the year is Revenue Ruling 69-4, which pro-
Technical Development and Guidance                                                                                     tive Orders, three Tax Conventions, 57                            Treasury        propriately integrated with those published during
                                                         vides detailed guides for integrating pension, an-                                                                                               the period 1965 through 1968.
                                                                                                                       Decisions containing new or amended regulations,
    Employees in the National Office and in the field    nuity, profit-sharing, and stock bonus plans with the
                                                                                                                       five court decisions, two amendments of the State-                                     Cumulative supplements will be issued for each of
who are concerned with the technical aspects of          old-age and survivors insurance benefits provided
                                                                                                                       ment of Procedural Rules, four Treasury Depart-                                    the basic volumes, quarterly for the Income Tax
 the tax laws benefit from various internal use pub-     under the Social Security Act. Revenue Ruling
 lications. Comprehensive discussions of significant     69-56 presents examples to show that the marital
                                                                                                                       ment Orders,            ten Delegation            Orders,       and      three    service and less frequently for the others. Periodically,
legislation, regulations, court decisions, and admin-    deduction for estate or gift tax purposes is not        notices of disbarment or suspension from practice                                 all currently effective material will be combined in
 istrativc rulings are presented as study material in    allowed or diminished by various administrative               before      the Service.                                                           a new basic volume.

6 / Annual Report / Chapter One                                                                                                                                                                                    Informing and Assisting Taxpayers / 7
Alcohol and Tobacco Industries, and Firearms               Requests for tax rulings and technical advice processed
Licensees Notified of Technical Changes
                                                                                                                                                                      Regulations Provide Interpretation                              Occasionally it is necessary or appropriate to omit
                                                                                                                                                                                                                                  publication of a notice of proposed rulentaking.
                                                                                                                                                     requests         of Internal Revenue Code
     The Service continued its program of issuing in-                                                                                                                                                                             Under certain conditions taxpayers may be required
 dustry circulars to aid the alcohol and tobacco                    Total ------- .....................             30,350            27,927              Z 5Z3           Regulations interpreting the tax laws, authorized       to make important decisions under a new law soon
 industries in keeping currently apprised of the re-       Accounting methods                                        11 13'
                                                                                                                       1:                                             by the Internal Revenue Code, provide written-              after its enactment. In such cases temporary regu-
                                                                          period.-.                                       02           1 0 2
                                                                                                                                      11: %      ------------
 quirements of internal revenue law, regulations,
                                                           A =atters-                       . ...... ----                  45              22                         guidelines for the application of Code provisions by        lations axe published without prior notice, followed
                                                           Administrative provusons....: ...............                  100              73           27
rulings, and procedures. Since passage of the Gun          Alcohol, tube.., ad fi,earm. taxes-                        5 552            4 423        1,129             Service personnel and the public in general.                by permanent regulations issued in the usual man-
                                                                                                                        ,655            , 655
                                                           1" lo,:~V ..d W1:iiii;I~iiii4 iials-----:,
                                                           ffp "          P`     -                                        583             546 ------ T                    Proposed tax regulations are normally issued            ner. In some cases it is permissible for regulations
Control Act of 1968, circulars have also been ad-          EngineeringItQuestions (dinnexi-bim, ft)-- - _
                                                           Estate and                                                     159              93           66
                                                                        ilt taxes,                                                        393          112            through the publication of the complete text in a           to be published without a notice of proposed ruile-
 dressed to firearms licensees.                            F.'rupt                                   -::J             r, I'S's         1, ago         265
                                                           Other excum taxes ......                                                                                   notice of proposed rulemaking in the Federal Regis-         making where a notice would be unnecessary or
     Thirty-one industry circulars were issued during      Other imoom. us en.tte",                                     US
                                                                                                                                                               312                                                                impractical or where the needs of the public are
                                                           Pension trusts...            ......... ......                                                              ter, By this means, it is intended to give due publicity
 the year. Of these, 10 discussed changes in law, and                                                                                                                                                                             better served without such notice.
 related proposed or actual amendments to regula-                                                                                                                     of the action proposed. Persons interested in the pro-
                                                                                                                                                                                                                                     Thirty-seven final regulations, one temporary reg-
tions; five announced the substance of Revenue Rul-        Determination Letters Issued on                                                                            posed text of the regulations are given an opportu-
                                                                                                                                                                                                                                  ulation, and 29 notices of proposed rulemaking, re-
ings and Revenue Procedures; three discussed the           Pension Plans                                                                                               nity to comment in writing and orally at a public
                                                                                                                                                                                                                                 lating to matters other than alcohol, tobacco, and
use of prescribed forms; three related to firearms                                                                                                                    hearing. After consideration of comments and recom-         firearms taxes, were published in the Federal Regis-
 matters; two discussed the timely filing of mailed           Most of the determination letters issued by Dis-                                                        mendations, accepted changes are made in the pro-           ter during the year. Thirteen public hearings at-
returns and documents; two discussed the experi-           trict Directors relate to the tax qualification of pen-                                                    posed text and a Treasury Decision containing the
                                                           sion, profit-sharing, annuity, and bond purchase                                                                                                                       tended by over 700 persons were held on proposed
mental use, of plastic bottles for packaging distilled                                                                                                                 final regulations is prepared, signed by the Commis-       regulations.
spirits, and the remaining six announced other mat-        plans under the provisions of section 401 (a) of the                                                       sioner, approved by the Secretary of the Treasury              Sixteen Treasury Decisions and eight notices of
 tells of current interest.                                Code and the exemption of related trusts or custodial                                                      or his delegate and published in the Federal Regis-         proposed rulemaking were issued relating to the
                                                           accounts under section 501 (a) of the Code.
                                                                                                                                                                      ter. These regulations have the force and effect of          administration of alcohol, tobacco, and firearms
                                                              During the year, 131,346 plans that include self-
National Office Issues Technical In-                       employed individuals were held qualified. Among the                                                         law.                                                        regulations.
terpretations to Taxpayers and Field                       210,659 participants in these plans were 150,927
Offices                                                    self-employed individuals. In addition, 25,493 em-
                                                           ployce-beriefit plans covering 946,148 employees
    It is the practice of the Service to answer written    were held qualified. Details regarding this activity
inquiries of individuals and organizations, whenever       are shown in the tables that follow.
appropriate in the interest of sound tax administra-
                                                           Determination letters issued on employee benefit plans
tion, as to their status for tax purposes and as to the
tax effects of their acts or transactions. A "ruling,"                                                                prord-          Pensiax           Stock
                                                                                      It..                            Plans
                                                                                                                     sharing         or simensity       bomm
which may be issued only by the National Office,                                                                                         tasq,          rate.
interprets and applies the tax laws to a specific set of         Jultuil
                                                           Determination letters issued with mapectto-
facts. (A ruling, therefore, is distinguishable from a                   vuLr.tiiin .1 Va.:
                                                                           tons eZo.........                          212 077            1 3 391                 25
"determination letter," which may be issued by a                       :,
                                                                                                                       68: 04
                                                                                                                                              268        l8'8651
District Director only if the question is specifically     C. Z Termination of his ...........
                                                             us closed without issuance of determine.
                                                                                                                           762               742               2

                                                            tion letter..... ........                                    1,039             1,446       ........
covered by statute, regulation, or precedent pub-                                              -------

lishcd ruling.)
                                                           Deterno nation letters Issued on benefit plans for self-
    Letter rulings are requested by taxpayers or their            'W
                                                           employed persons
authorized representatives. District Directors also
                                                                                                                    Profit-         Pension            Bind
request technical advice from the National Office in                               It..                            sharing
                                                                                                                    plan,                              I 1
connection with the examination or consideration of
a taxpayer's return or claim for refund or credit.         O.Ormirmt!... issued with I'es:dt-
                                                                                         ".0it       _
                                                                   1. Initial qualification, in p _rus:
During the year, 27,827 requests for letter rulings                                                                  67,599            GZ: 807                  950
                                                                                  Iturnbe, .1 participants,         111,617            97 905              1,137
 and 2,523 requests for technical advice were proc-            ,.,. Titnumaticna u! plan- ...
                                                                           h. Plan, disaw-ad......
                                                                                                                                            97      --- .......

 emed, classified by tax category and subject matter                 closed
                                                                                     issuance ot ~Wtr_
                                                                nation letter.--------1....... ......                  4,493 1          4,088 1                  58
 as shown in the following table.

8 / Annual Report / Chapter One                                                                                                                                                                                                            Informing and Assisting Taxpayers / 9
                                                                                                                     the deposit of taxes to the credit of the Treasurer of                                              only regains the pace but exceeds collections for
                                                                                                                     the United States.                                                                                   1967, previously the highest year in corporation in-
                                                                                                                         Substantial gains were noted in every major class                                               come tax receipts.
                                        Gross Collections Again Set a Record                                         of tax. The largest increase in 1969 occurred in in-                                                   Excise tax collections reached $15.5 billion, an
                                                                                                                      dividual income tax withheld at source (including                                                  increase of $1.2 billion over the previous year. This
                                           Gross collections rose to an all-time high of $187.9                                                                                                                          is the first year that excise revenue has exceeded
                                                                                                                     FICA taxes) which totaled $103 billion for a gain
                                        billion. The increase, $34.3 billion (22.3 percent)                                                                                                                              that of 1965, the previous top year in this category.
                                                                                                                     of $17.5 billion, or 21.3 percent, over the preceding
                                        over last year, was the largest ever recorded. Ec-                                                                                                                               Collections in subsequent fiscal years were affected
                                        nomic conditions, the income tax surcharge, an                                                                                                                                   by the Excise Tax Reduction Act of 1965, which
                                        increase in the rate of Federal Insurance Contribu-                              A large gain was achieved in corporation income                                                 repealed retailer's excise taxes and either rescinded
                                        tions Act taxes from 8.8 to 9.6 percent, and an                              tax payments, up $8.4 billion over 1968, for a total                                                or scheduled for eventual elimination many other
                                        increase in base coverage from $6,600 to $7,800 on                           of $38.3 billion. This represented a firm recovery                                                  excise taxes.
                                        January 1, 1968, were strong contributing factors in                         from the decline in 196B which had broken a steady                                                      The following table shows a comparison of col-
Data                                    achieving the record level.
                                            More than 70 percent of total collections were
                                                                                                                     upward trend started in 1963. This year's total not                                                  lections for fiscal years 1968 and 1969:
                                                                                                                     Gross Internal revenue collections
Processing                              processed through the Federal tax deposit system.
                                        This system provides for payment of taxes directly                           JDPII.. in thousands. For details a.. table 3, p. 1061

Activities                              to designated banks and was established to accelerate
                                                                                                                                                                                                                           Percent of
                                                                                                                                                                                                                                               1968               lip
                                                                                                                                                                                                                                                                                      1.11-0 or decrease,

                                                                                                                                                                                                                                                                                    Amount         Percent
                                           All Tax Collections
                                           Rose Sharply                                                                    Grand tolat     ......                          ......... .......    -------_--_--------               100.0     $153,636,938      SU?,M,Wo             $31,292.722              22.3

                                                                                                                     Impon. tain, totsl_..................                   ...................        .............              M3       1 108,148,565      i3s,778,05l             6Z9,487              25.
                                                                                                                                                                                                                                   21 1
                                                                                                                                                                                                                                   51:       , 29,896 520        SC337 646                   26              28 2
                                                                97.4                                                                                                                                                                   9       78~252:045        37,44W,44111        1, 1", 361
                                                                                                                                                                                                                                                                                    191 "1. 1                R5
                                                                                                                              Withheld by employer, I ....... _ ....... ..........     ........                                               57 30D. 546        To 192,11s         12,881,629
                                                                                                                              Oth.............              .................. ..................                                  14~ 5
                                                                                                                                                                                                                                    ,            951, 4"         V:2S*.Zlt           6,306,732               11.1
                                                                                                                                                                                                                                                                                                             31), 1

                                                                                                                                                                                                                                   17.6       29. Ws, 899        U OrA,gn            4.1192,759              173
                                                                                                                     Em          lo `ddi,I b`I1 1~ 'I
                                                                                                                           rdaI'' . r:                 i ; ce; i; ial     ...............................                                          620,648       11.4se'sal          41969,295               18.3
                                                         78.1                                                                                                   ":
                                                                                                                            i , Federal impirinex. coridnibut.....
                                                                                                                            t                                                      _-        ------                                 11-Is
                                                                                                                                                                                                                                    is. 9
                                                                                                                                                                                                                                        3     , 1.
                                                                                                                                                                                                                                              22s,:076,796       23,11111,allint
                                                                                                   TOTALS                     SWI-immiloyamint insurance contriouti ..... _:: -------------------------------                                      543                                1 ~ 699
                                                                                                                                                                                                                                                                                     "'4 '                   IHI
                                                                                                                          fiv,.loyintint mon.            .............. ...................                                                            ,
                                                                                                                                                                                                                                                   62 Wz          I=  '                                       5.5
                                                                                              1969    197.9                        retirement..............         .........................       ..........                        .5           858,448         134,6"               go 236                9.3

                                                                                              1960    153.6          Estate and gift lose....... ........                                                                            1.9             979            630,003          1, 448 086              14 5
                                                                                                                     Entire Man, total.... -------------                                                                             S, 2      " :20196
                                                                                                                                                                                                                                                '  ,             4:11,12.761            ?22:391               6:5
                                             MD)                                            CHANGE +22.3%
                                                                                                                          Alcohol...............              .......                  ......               ..........               2.4       4:                                                             6.2
                                                                                                                          Tobacco.   ...........__ .............                                                                               1,91,
                                                                                                                                                                                                                                               2 '121:169         :LL11 .              ''
                                                                                                                          Other..................................                      -    I
                                                                                                                                                                                      ------- ------- ------
                                                                                                                                                                                                     -         --                    4.7
                                                                                                                                                                                                                                     1.1              443         9,L%,797             , ,,4
                                                                                                                                                                                                                                                                                       Ir log                   I

                                                   383                                                                   i Collections are adjusted to exclude rimounts transferred to the Government of                       I
                                                                                                                                                                                                                         the Secretary of the Tiarneury:urscant to the Provisions of M. 201(e) of the Socis.
                                                                              33.1                                   ,.arx. for details - I a 1, P ~S
                                                                                                                        s        it     I"tpbl                  imilect.     P III                                                                                I it                             . a
                                                                                                                                                                                                                                                                  at! otdage and diestillity impredice indabs,
                                                                                                                           Estimate .-Col                 ' end
                                                                                                                                               on, of divid.. Income,iax* wit%hold are not reported sap-                                  I ......d' " 11-ses
                                                                                                                                                                                                                         Th. IOWA., . Invm for the I Mind"- In Mosel mixiner is.., were 11ri,
                                            29.9                       29.2                                          so,                   v1d                      Ithir I
                                                                                                                     isettily from I .!d~xga and disability Insurance I.,- on wain and eateries. Similarly,              subtatima the aid-elo, and disabittly imurami tax estimates it= tire curriblo,
                                                                                                                          factio a o in ivi net income tax not wit a of are not reported serrately frogmt                totals reported.
                                                                                                                     old-age and                          taxes an sell.                                                    ~ Revised.
                                                                                                                                                                          hopIn is based an estimates made by
                                                                                                                     old-age and donabi ity insurance tax collections s7 ".." I.-. - I               ."n"m P
                                                                                                      14.3 15.5
Gross Collections Increased $34.3
Billion,                                                                                     3.5
                                                                                                                     Prompt Refunding Program                                                                            Refunds to Corporations Expedited
                                                                                                               I          Although the Internal Revenue Service is cus-                                                    With enactment of the Revenue Expenditure
More than 70 Percent of Total                             Individual   Employment    Estlt  ad        Excise, tax.
Collections Processed through Federal                       Income       to..        gift us.                        tomarily viewed as a tax collection agency, approxi-                                                and Control Act of 1968 corporations may now ap-
Tax Deposit System.                                                                                                  mattly two out of every three individual income tax-                                                ply for adjustment ("quick" refunding) of estimated
                                                                                                                     payers once each year look to the Service for prompt                                                tax overpayments. Previously, refunding of esti-
ADP System Accelerated Refunding                                                     Change lrom 19ft                action in refunding money to them. This year, 49.6                                                  mated income taxes could not be accomplished until
 Program Including Quick Refunds                                                                                     million refunds amounting to $12.9 billion were                                                     the income tax returns had been filed.
to Corporations.                                                                                                      issued in all tax classes. Most taxpayers received their
                                                                                       +14.5                          refunds within a 4- to 6-wcek period. The timeli-                                                  Duplicate Refunds Detected
Mathematical Verification Results in                                                                                 Tess of the refunding process is illustrated by the
High Yield for Government.                                                                             +8.5                                                                                                                  Now that accounts for all of the Nation's in-
                                                                                                                     fact that interest of less than one cent was paid for
                                                                                                                      each dollar refunded.                                                                               dividual income taxpayers are incorporated in the
Continued Upward Trend in Returns
Filed.                                                                                 1               5                 The number of refunds issued decreased by 4.5                                                    master file, a problem which has plagued the Service
                                                                                                                      percent from the preceding year. This decline is pri-                                               since the inception of the withholding system has
More Corporations Report Tax                                                                                          marily attributable to the enactment of the income                                                  been largely overcome. This involves taxpayers filing
Information on Magnetic Tape.                                                                                         tax surcharge.                                                                                      more than one income tax return claiming a refund

10                                                                                                                                                                                                                                                    Data Processing Activities / 11
 for the same taxable period. Under automatic pro-                                            correct filing erTors; few are attempts to defraud the                                                                                                                                     It is not only the Government that benefits from
                                                                                                                                                                                                       Returns Filed Continued to Rise Except in                                     the delinquency check. Many taxpayers, by means
 cedures, a du licatc refund is identified immediately,                                       Government. This year, duplicate refund requests
                                                                                                                                                                                                       Partnership and Employment Areas
 and investigLion is undertaken before the refund is                                          totahng $6.4 million were detected.                                                                                                                                                    of the delinquency check, arc reminded to file a re-
 released to the taxpayer. Most of the duplicate re-                                             The following table presents data on refuncLs by                                                                                                                                    turn in order to receive refunds of their overpaid
 turns are filed to correct the original return, or to                                        class of tax for 1968 and 1969:                                                                                                                                                        taxes.
                                                                                                                                                                                                                                                                                         During 1968, a delinquency check was performed
Internal Revenue refunds, Including Interest                                                                                                                                                                                                                                         for tax year 1965 for the regions which were then
[For refunds by region and district. sea table 5, P. 1111                                                                                                                                                                                                                            incorporated in the master file. This resulted in the
                                                                                                                                                                                                                                                                                     securing of 20,000 returns indicating a balance of
                                                                                                                           Amount Worckul (PlirciPal            Amount of Interest WhIdId
                                                                                              Number                       ml but... 9--thousand delta.)            (thoursami delu.)                                                                                                tax due, including penalty and interest of $4.3 mil-
                                   Type of tax
                                                                                       1968                US,                1968                                1968
                                                                                                                                                                                        3M,                                                                                          lion; overpayments of $1.2 million; and a net yield
                                                                                                                                                                                                                                                                                     of $3.1 million. In 1969, a delinquency check was
       Total .fund, of Interest rensmu, I I............. ....... ........            51, M, 108         do, en, lis        r 11, 420,617        Z SM M              120,552             1:101 "a                                                            TOTAU                    performed for tax years 1966 and 1967 for all the
Urp.r.".. in... I ................... ............. ................                    149.695             W.M              1,313,3"           Lyn on              81 543               '14, So                                                          1969   110.7
nd lvidual income and employment taxes, total ..........................            '51, 706,096        49, 3n, us           9,829,388         ", $31: M            34:304               ts, na                                                                                      Nation's individuals who are entered in the master
                                                                                                                                                                                                                                                          1968   107.4               file. Preliminary results for tax year 1966 show that
     Excessive prepayment inoo me is x 3.......... ............ _ ---------          51; 039 242        at, sue sted         9 315 085          a'$" no                 16 337           IS'"S
    Of or Income tax and Fd. ral Insurance Contributions ACUIX02 1._. :                  632 52             ran: day          ' 508: 5M           W:05                       1
                                                                                                                                                                        17:7 14          IS, sag                                                        CHANCE +3.1                  more than 60,000 returns were secured, reflecting a
    11 2.1r(nd retirement.....     .......         ...................... ..                :6
                                                                                             413                 m                   521             led                       3               6
    Unemployment i ................................... .............                      33,789             371482               5,780            716=                    240               271                                                                                     balance due of $11.3 million; overpayments of $4.8
 Estate is...... ...........                   ............. ......                       7,677                   I'm            33, sag              as                3,692    S,M
Gift tax ....................... ........................... ....... ......              34, 817                  11                               2.                      141    213                                                                         22.3 22.0
                                                                                                                                                                                                                                                                                     milEon; for a net yield of $6.5 million.
 Excise taxes, total           ........                        .................             B23                 431211S
                                                                                                                     "d         242:
                                                                                                                                  1               an, no                  872 _zon
     Alcohol taxes,I............. ................
     Tobacco, ux. I ............           ........... .:::::::
                                                                                                                                 11 02            loo, six                    I
                                                                                                                                                                                                                                                                                     Mathematical Verification Produces
      Manufacturers' and retailers' lxcisd~ taxed, total                     ....         5,132                                   '' 682
                                                                                                                                125,' '"          11 '                     273                   a
          G."Un. used an to.................                                              1: 42
                                                                                          3                                      87 015
                                                                                                                                                  1341 124 ..........
          Gasoline. haphitimaxy, ---- ...........                                            2757                 2, M           26:503            an, ns ..........
          other .............. ........          .............. ....... I .......            430                  SIM            12,164            21, say            273                      611                                                                                         One of the principal benefits of computer process-
     All other excise, talc I.............. .................. ........                  20,937                  asters,         16,470            U, fuci                 590            3, an                                                                                       ing of returns to the taxpayers'and Goverrimcnit alike
                                                                                                                                                                                                                                                                                      is the electronic verification of the taxpayers'
  , Revised.     -L- than M.                                                                    I Includes refunds         "theraiss dassified."
.n'dFigur" have not been reduced to refiect reimbursements from the Federal Oldglll             I Includes drabk,l"d;tW .
                                                                                                                     "'t       1mpx                                                                                                                                                   arithmetic. Approximately 5-percent of the individ-
                                                                                                :1Wuc1dxI.bfi.ti.,.iI,                          y
                                                                                                                                     r'.d.%J~." purposes.
to SM,953,000 in 1969.nd $2     715,000 a 1968; rom the li~hraxy Trust Fund amount.                neludes; narcofied, silver, vnigerins (excise and stamps), capital stock, and other                                                                                                 uals who filed income tax returns in 1969 made mis-
Ins to $Z23,755.100 In 1969 and 1114,387,DDO .. 19GO: an from the Umunployermt
   ,                                                                                          ...he tax refunds.
 Trust Fund amounting to $6 852 000 in 1969 and $5,V9,000 in 1968.                                Excludes gasoline tax .fund.'                                                                                                                                           2A 2-6       takes in their favor. About 3-percent of the taxpayers cheeks totaling $24,137,000 in 1968.
     Net of
            127,547 undeffiWabl; checks totaling $10,539,000 in 1969 and 165,809 on-               Includes excess, FICA credits.

                                                                                                                                                                                                       Individual    Decl.ratlona
                                                                                                                                                                                                                                     1.0 1.0

                                                                                                                                                                                                                                                                 E,_ A
                                                                                                                                                                                                                                                  Corporation Employment Enis. and
                                                                                                                                                                                                                                                                                      made errors against themselves. Errors in addition,
                                                                                                                                                                                                       fiduciary     of Sell 'Id
                                                                                                                                                                                                                                                                          !II the,    subtraction, and improper use of tax tables or sched-
                                                                                               Number of returns filed, by principal type of return                                                                                                                                    tiles were common mistakes detected. The verifica-
 Upward Trend in Returns Filed                                                                                                                                                                                                                                                        tion process resulted in adjusting liabilities upward
                                                                                              (Figures, In thousands. For details, sea table 6. P. 1121
                                                                                                                                                                                                                                      Chanp from 1968
     A substantial pattern of growth continued when                                                                          Type of return                                  1968       less                               0                                                          in the amount of $315.1 million, and adjusting others
 more than I 10 million tax returns of all types were                                                                                                                                                                                                                                 downward by $140.2 million, providing a net yield
                                                                                                        Grand total....................................... ,107,3112                    US,
 filed in 1969, an increase of 3 million returns over                                                                                                                                        "I                                                                                       of $174.9 million.
                                                                                               Income tax, total......                     ----_------_.......             ,93,245       89, An                      +14.8
 last year. The number of Forms 1040 and 1040A                                                                                                                                                                                                                                             The program also included a process for checking
 rose by nearly 2.3 million to a total of 75 million, and                                             Individual and fiduciary, totaL..... _. ......... _...                                                                                                                          the credits claimed by taxpayers for estimated tax
                                                                                                           Individual-citizems and resident liers, total ----_..             72,679      74,962
  accounted for 68 percent of the total. The table at                                                                                                                                                  +3.2                                                                           payments. This resulted in a net yield for the Gov-
                                                                                                                                                                            54,062       67,2210
 the right presents data on returns filed by type of
                                                                                                                  Forms ID48............... ........
                                                                                                                  Forms 1040A ...... ........ .......                       18,617       17,733        -0            1                                                               ernment of $213 million, in addition to the assess-
 return for 1968 and 1969:                                                                                 All other individual end fiduciary.               ........         1,159       I'ZS3                                                                                       intent of $43 million in statutory penalties for failure
                                                                                                      Declarations of estimated tax, total ............                     ,6,187        7,1112                                                                                      to make required estimated tax payments.
                                                                                                           Individual .............................                         ,6,154        7, ON                                                                                            During the year, 65.8 million Forms 1040 and
                                                                                                           Corporation ...................... ------                            33
                                                                                                                                                                                                                                                                                      1040A were mathematically verified, compared with
                                                                                                      Partnership ............................                                  002
                                                                                                      C. .r.if. I ....................
                                                                                                      ot?                                                                     ':623
                                                                                                                                                                              1                      Nonfilers Are Identified                                                         74.9 million last year. The decrease is due primarily
                                                                                                            ................... ----------- ..............                       595           Sag

                                                                                              Employment is., total ..........................                              2Z 323       234 On          The Service is now able to use information docu-                            to (1) a reduction of 5.6 mMion in the number of
                                                                                                      .,FZ re. ndfi~
                                                                                                      loold,y.,"' Form III ----------_---------------
                                                                                                      Emp _._, or_                                                          15           15,426      mcnts and social security information recorded on                                returns carried over from June 1968 to be processed
                                                                                                                              ~bnustuhold I ,                ....              '55
                                                                                                                                                                             4,40'        4, sard                                                                                     in fiscal 1969, and (2) the deferment of a substantial
                                                                                                                    943 agriculture am; arm                                     629          3411
                                                                                                                                                                                              n      tape to make computer comparisons to identify non.
                                                                                                                _.,I F                                                           23                                                                                                   number of full paid returns from June 1969 to fiscal
                                                                                                      Unemployment "' U,`F`."M'9'dG_                                          1,709       1,!!14     filers. Further, it is possible, through master file
                                                                                              Estate tax.. .........                                                              119          .Us   comparison of the filing records, to select for invcsti-                        year 1970 processing because of manpower limita-
                                                                                              Gfft        ------- ................                                            1 , 139
                                                                                              Excise tax, total -------------
                                                                                                   tax                                                                            557     3, use     gation those taxpayers not appearing on the current                             tions. Detailed results of this ycaL?s program arc
                                                                                                                                                                                 948      Z, me
                                                                                                      1%pe"D ' a
                                                                                                              *          _,nii;ii~liiWi, Sec.) ...                               310         ills    record.                                                                          shown in the following table.
                                                                                                      Alcohol................................                                      21           n
                                                                                                      Tobacco................... ____ ---                                           6
                                                                                                      998" u a tax------------_----------- .......
                                                                                                          r                                                                      Z20             I
                                                                                                            ------------------------------------------                             52

                                                                                                    , Revised.
                                                                                                                                                                                                                                                                                                       Data Processing Activities / 13
  12 / Annual Report / Chapter Two
                                                                                                                                                                                    necessary to reflect the change being made. Acceler-       This technique affords both agencies substantial
 lnulwnuual Income tax returns mathematically verified
                                                                                                                                                                                    ated processing, made possible by the ADP system,          manpower savings and instills a higher degree of
                                                                                                         Total                     Farm 1040               Form 10400%              enables the Service to issue refunds to filers of this     accuracy in the recording of this information.
                                          Item                                                                                                                        -
                                                                                                                                                                                    new form much more expeditiously.                            A large number of corporations, banks, and other
                                                                                                  968                       1969               1XIS     1958          1363
                                                                                                                                                                                         A new style form was also introduced for indi-        businesses are using magnetic tape to submit re-
Numbs, .............                                         ...........                          74 926           ",an      57 063             0 Sao   17 963                an    viduals who are required to make quarterly pay-            quired information reports on such things as inter-
                                          ad,.-.- ~ ........ ....... ......        d l- : ~        5:034            5, 3"     3:824             3:07     1:210            1 , am
6,dum. .1 .!u,n, on Web changes
         Jh muous.:                                                                                                                                                                 ments of estimated tax. Each taxpayer who appears          est and dividends paid to investors and the wages
                                                                              _&....               3,008                     12,298        .    2. Us       720              m
    Amount ~ ......
ii,dums                                        ---------------------------- nd do ll. -
                               ..................                .... thousa                     266, 763           3'23"
                                                                                                                  31s, 03     0, 9"                     55, 774              6 51   to be potentially subject to this requirement of law       they pay to their employees. This year 47.6 million
    N..b,r             ...........                      ----------------- thwusumd, ::
                                                         -----_-_--                                ' 867
                                                                                                 135: '
                                                                                                                    a. no     ' 770
                                                                                                                            107: '
                                                                                                                                               107. M
                                                                                                                                                                             557    is mailed a package containing the forms he may            information reports were received in this manner
    Ammmt_                                                              thousand dollars                                                                28,097
Not V:U                                                                                                                     103,219            us M
                                                                                                                                                                                    need during the year to make his payments. The             as compared to last year's receipts of 34 million.
        I                                                                          do            130 M            IT.'son                               27 677           "'M
    Avoran                                -------- --- --------------                               1 . 75            2AS       . 81             'its                      IL&S     taxpayer's name, address, and social security number
                                                                                                                                                          1 . 55
                                                                                                                                                                                    are preprinted on the forms exactly as they appear in      Direct Data Entry System Installed
                                                                                                                                                                                    the tax records. Self-addressed envelopes for use in           A new system for taking information from tax
                                                                                                                                                                                    making the payments are also included for the tax-         returns and documents and preparing it for com-
Exempt Organization Master File                                                                 Exempt organizations on master file                                                 payer's convenience. This system, which is substan-        puter processing was successfully installed in the
Centralized                                                                                                                                                                         tially similar to widespread commercial practice, is       Southwest Service Center this year. The system is
                                                                                                                                                                 Numbw              designed to provide additional assurance that the
     Ile Service intensified its efforts to improve the                                                          Exemption subsection                            of organi-                                                                    called Direct Data Entry. It enables an operator to
                                                                                                                                                                  autd.n.            taxpayer's payments are credited to the proper
effectiveness of the Exempt Organization Master                                                                                                                                                                                                transcribe information directly from the documents
File System (EOMF) in 1969 to support adminis-                                                                                                                                                                                                  onto magnetic tape without going through the in-
                                                                                                                                                                          961            All taxpayers will have the benefit next year of a
                                                                                           501(c)(1) ..................................                                                                                                         termediate step of putting the data on keypunch
tration of the exempt organization provisions of law.                                      501 (c)(2) ..................................                               3,992         new individual income tax return. The new return,
                                                                                                                                                                     137,487                                                                    cards. The equipment performs certain arithme-
Centralization of EOMF processing responsibilities                                         501 (c)(3) ..................................
                                                                                                                                                                                     which will continue to be known as Form 1040, Will
                                                                                           501(e)(4) ................        .............
                                                                                                                                                                                     replace the earlier version of that form as well as the    tic and validity checks as the data are transcribed
in a permanent group working exclusively on exempt                                         501(c)(5) ..................................                               77, 737
                                                                                                                                                                      27,594         card Form 1040A. Essentially the return consists of        and it signals the operator when an error is discov-
organization matters at the Mid-Atlantic Service                                           501 (c)(6) ..................................
Center promotes uniformity in data collection, re-                                         501(c)(7) ................................. :                              36,189         a single sheet supplemented, wherever necessary, by        ered. The operator can also see on a video tube the
                                                                                           501 (c)(8) ..................................                                  989
duction of processing discrepancies, and consistent                                        501 (e)(9) ..................................                               4,330         separate schedules. This arrangement provides an
treatment of exemption matters, thereby enhancing                                          501(c)(10) .................................                                   467        improved way of organizing the information re-
                                                                                           501 (c)(I 1) .................................                                   14       quired under the tax laws.
efficiency, currency, and economy of EOMF                                                  501(c)(12) .................................                                4,211
                                                                                           501 (c)(I 3). ................................                              S,809             It is estimated that 31 -million taxpayers will rc-
operations.                                                                                                                                                            5,022
                                                                                           501(c)(14) .................................                                              quire only a single sheet of paper to report their 1969
   , Centralization of the EOMF operation also                                             501(c)(15) ... .............................                                1,728
                                                                                           501(c)(16) ... .............................                                    39        incomes. Another 22 million filers will need to
prompted centralized filing and processing of exempt                                                                                                                                .attach one additional schedule. Individuals who
                                                                                           501,W(17) .................................                                    674
organization returns at the Mid-Atlantic Service                                           501,(d) ....................................                                    40         previously filed Form 1040A will find that the new
Center, thus increasing tht potential for controlling                                      521 .......................................                                 6,462          form offers them an advantage not provided by the
returns in process and making them more readily                                                      Total ............ ..................                           416,291          card form of claiming such things as itemized deduc-
available for other Service needs, as well as for                                                                                                                                     tions, sick pay exclusion, and retirement income
developing more practical and effective delinquency                                                                                                                                   credit.
 programs.                                                                                      Ile number of exempt pension trusts on the
     An EOMF listing of 30,078 exempt organizations.                                          master file raw 25 percent, from 106,000 to 133,000,                                   Expanded Computer Operations
                                                                                              during the year.
that qualify under existing law as private founda-                                                                                                                                  Magnetic Tape Reporting Expands
 tions was furnished to SubcorriTnittee No. I of the                                          Tax Forms Simplified
 Select Committee on Small Business of the House of                                                                                                                                    The growing tendency on the part of the busi-
                                                                                                   The search for improvement and simplification in                                 ness world as well as the Government, to use the
 Representatives, which in turn published the list and                                        tax reporting, although sometimes frustrating, is a
 made it available to the general public through the                                                                                                                                computer to help solve paperwork problems is be-
                                                                                              never-ending one. The ultimate test of the success                                    coming more evident each year. There is an increas-
 Superintendent of Documents.                                                                  of the Service's efforts to simplify a particular form                               ing trend toward using magnetic tape instead of
     During the year, the number of organizations on                                           is the acceptance it gains with the public.                                          paper to meet reporting requirements between
 the master file increased 20 percent, from 358,000 to                                             A new form (Form 104OX) initiated in 1968 was                                                                                                This young lady is operating a direct data input station
 416,291, more than half of which are local organi-                                                                                                                                 Government agencies and between the Government              installed In the Austin Service Center. More efficient
                                                                                               widely used by taxpayers in amending individual
 zations covered by group exemptions. The distribu-                                                                                                                                 and private industry. The Internal Revenue Service          than traditional keypunch-key verify operations, it elim-
                                                                                               income tax returns. The appeal of this one-page
                                                                                                                                                                                    is using such tape in reporting the self-employment         inates card punching through use of a keyboard machine
 tion of exempt organizations on the master file on                                            form is its simplicity. It relieves the taxpayer of the                                                                                          that directly accesses to the computer with internal
                                                                                                                                                                                     information it receives on individual income tax re-
 December 31, 1968, shown according to sections                                                chore of completing all of the entries on Form 1041)                                                                                             verification and display of information. This time-saving
 and subsecdons of the Internal Revenue Code of                                                in order to amend his return. The new form requires                                  turns to the Social Security Administration for post-       equipment is scheduled for installation in all seven
  1954, was as follows:                                                                        from the taxpayer only those items of information                                    ing to the social security accounts of these taxpayers.     service centers.

                                                                                                                                                                                                                                                                  Data Processing Activities / 15
 14 / Annual Report / Chapter Two
U~L~ U~11~ili)W 60   WaL 11 , miStaXe Is maoe it can    to questions about the status of their accounts or a
 be corrected immediately. This reduces the need for   variety of other pending matters. The system is cen-
verification required under the keypunch system and    tered on a random access computer linked to video                                                Introduction
simplifies error resolution. The system is scheduled   inquiry stations located in the service center and the
for installation in all service centers by 197 1.                                                                                                         The Service expends a substantial portion of its
                                                       district offices within the region. This new technol-
                                                                                                                                                        resources on enforcement activities for the purpose of
                                                       ogy will enable the Service to retrieve information
Instant Retrieval System Under Test                                                                                                                     insuring that tax liabilities have been properly de-
                                                       within seconds that now requires much more time-
                                                                                                                                                        tcrmincd and paid. These major activities include
   A test is underway in the Southwest Region of a     consuming and expensive research. Its succe&4ul
                                                                                                                                                        auditing returns, considering appeals, securing de-
new system designed to enhance the Service's ability   testing promises much faster service to taxpayers
                                                                                                                                                        linquent returns, collecting delinquent accounts, in-
to provide taxpayers with much more rapid answers      and more economical operations.
                                                                                                                                                        vestigating allegations of fraud, and enforcing the
                                                                                                                                                        laws relating to alcohol and tobacco products and

                                                                                                                Enforcement                             firearms. Computer technology has been a valuable
                                                                                                                                                        tool in supplementing the human resources devoted

                                                                                                                Activities                              to enforcement and the increased use of the APD
                                                                                                                                                        system has been an additional deterrent to delin-
                                                                                                                                                        quency and fraud. Some of the more important
                                                                                                                                                        accomplishments of the Service's enforcement activ-
                                                                                                                                                        ities are set forth below.

                                                                                                                                                        Effective Audit Program Critical to
                                                                                                                                                            Tax returns are audited either by internal revenue
                                                                                                                                                         agents at the taxpayer's place of business (field
                                                                                                                                                         audits) or by tax auditors who interview or corre-
                                                                                                                                                        spond with taxpayers from offices of the Service
                                                                                                                                                         (office audits). Income tax audits conducted by in-
                                                                                                                                                         ternal revenue agents usually involve the larger more
                                                                                                                                                        complex returns requiring broad professional ac-
                                                                                                                                                         counting skills. Returns with less compl~x issues arc
                                                                                                                                                        assigned to tax auditors. Continued shift of emphasis
                                                                                                                                                        toward more interviews rather than correspondence
                                                                                                                                                         audits largely accounts for the decline in the number
                                                                                                                                                        of income tax office audits conducted in 1969. (See
                                                                                                                                                        table.) Although interview audits generally require
                                                                                                                                                        more time to complete, the additional time is repaid
                                                                                                                Audit Recommends Aaditional Tax and     in terms of audit effectiveness and better communi-
                                                                                                                Penalties of $3 Billion, 3 Percent      cations with taxpayers.
                                                                                                                Higher than Last Year.                      A portion of available audit resources is expended
                                                                                                                                                        on examinations of estate, gift, and excise taxes. Dur-
                                                                                                                Overwhelming Majority of Appealed
                                                                                                                                                        ing the year, 6.2 percent of total direct examination
                                                                                                                Cases Closed by Agreement with           time was expended on estate and gift tax returns and
                                                                                                                Taxpayer.                               2.2 percent on excise tax examinations. Audit
                                                                                                                Computer Utilized in Delinquent          coverage in the employment tax area derives mainly
                                                                                                                Returns Program.                         from income tax audits. Internal revenue agents
                                                                                                                                                         examining income tax returns of business taxpayers
                                                                                                                Value of Taxpayer Delinquent Accounts    verify assessed liabilities for employment taxes.
                                                                                                                Inventory Increases.                        The audit program record for 1969 is particularly
                                                                                                                                                        noteworthy. Despite budgetary and personnel limita-
                                                                                                                Tax Fraud Investigations Intensified.
                                                                                                                                                        tions, 2.5 million audits were completed, only 12.4
                                                                                                                New Legislation Expands Firearms        percent fewer than recorded for 1968. Additional
                                                                                                                Program.                                tax and penalties recommended totaled $3 billion
                                                                                                                                                         which, was 3 percent higher than the total for the
                                                                                                                                                         previous year.
16 / Annual Report / Chapter Two                                                                                                                                                                            17

                                                                                                                  W3-005 0-70----a
                                                                                                                                                                               Overassessments of tax exclusive of claims for refund                             Claims for Refund
                               Number of Tax Returns Examined and Additional Tax and
                                             Penalties Recommended                                                                                                                                                                   Amount recommended              The filing of claims for refund creates an addi-
                                                                                                                                                                                                                                      (thouland dollars)
                                                                                                                                                                                                   Type of tax                                                   tional audit workload. Claims for refund stem from
                                                                                                                                                                                                                                     1968          ISO           a variety of causes. Discovery of an error of overpay-
                                                                                                                                                                                                                                                                 in Tit by the taxpayer accounts for a large portion
                                                                                                                                                                                     Totg------------------------------------         177,929        an, 747
                                                                                                                                                                                                                                                                 of the volume. Other claims stem from certain In-
                                                                                                                                                                               Individual and fiduciary income. .............          51 019         a.
                                                                                                                                                                               Corporation income. .....               -------         94~ 894                   ternal Revenue Code provisions, such as the net
                                                                                                                                                                                                                                       2 945
                                                                                                                                                                               Gift_---                                                 " 43f
                                                                                                                                                                                                                                        1: 31               US   operating loss carryback which allows recovery of
                                                                                                                                                                                                                ....... I --------      l, '               in
                                                                                                                                                                               Est I ---------------- -------- _ .............
                                                                                                                                                                               Employment- . .... -------------                            512                    taxes paid in an earlier year because of a business
                                                                                                                                                                                                                                                                  loss in a subsequent year.
                                                                                                                                                                               New Techniques Used in Selection of Returns for                                       About two-thirds of all claims for refund referred
                                                                                                                                                                               Audit                                                                             for audit screening are verified and disposed of by
                                                                                                                                                                                   For several years the Service has used computers                               reference to Service records and do not require a
                                                                                                                                                                               to review income tax returns and identify those with                              contact with the taxpayer. Where judgment of the
                                                                                                                                                                                                                                                                 merits of a claim requires examination of the tax-
                                                                                                                                                                                high error probability. This year a much more
                                                                                                                                                                               sophisticated computer selection technique was                                    payer's records, the same policies and standards as to
                                                                                                                                                                                introduced called "discriminant function." This                                  the extent of the examination, evaluation of evi-
                                                                                                                                                                                technique is basically one of assigning numeric                                   dence and opportunity for appeal are applicable as
                                                                                                                                                                                weights-negative as well as positive-to certain re-                              would govern a regular tax audit.
         Total           Individual   Corporation        Estate               Excise                            Total   Individual   Corporation                                turn characteristics. The weights, plus or minus,                                     District and service center audit staffs closed
                                                                                                                                                     Estate        Excise
                                                        and gfft               and
                                                                                                                                                    and gift          rul       were determined according to the relative signifi-                                356,980 claims for refund in 1969. Of $506,955 mil-
                                .     mrs.i.tion                                                                                     organization
                                                                                                                                                                                cance of the return characteristic as an indicator                                lion claimed, $226,272 million was allowed. The
                                                                                                                                                                                of error.                                                                         greatest number of claims related to individual in-
                                                                                                                                                                                  The new computer technique was used this year                                   come tax, 308,620, followed by 31,765 corporation
                                                                                                                                                                               to select for audit a substantial number of individual                             income tax claims. Corporation claims involved
                                                                                                                                                                               income tax returns. Other sets of weights or formu-                                $265,241 million, while the individual claims in-
                                                                                                                                                                               las have been developed and will be used to select                                 volved $171,923 million.
                                                                                                                                                                               from the other income classes of individual returns                                   Section 6405 of the Internal Revenue Code of
                                                                                                                                                                               beginning in 1970.                                                                  1954 requires reports to the joint Committee on In-
                                                                                                                                                                                   The new selection technique for the first time af-                             ternal Revenue Taxation of any refunds and credits
                                                                                                                                                                               fords a uniform standard nationwide for selecting                                  of income, war profits, excess profits, estate and gift
                                                                                                                                                                               returns for audit. The system is expected io reduce                                tax exceeding $100,000. During the year, 685 cases
                                                                                                                                                                               substantially the number of audits that result in little                           involving overassessments of $393.7 million, were
                                                                                                                                                                               or no tax change. And, of course, will conserve the                                reported to the joint Committee.
                                                                                                                                                                               manpower previously used to screen returns visually                                   The following table shows data on claims closed
  The following table compares numbers of returns                                                      Audits Disclose Overassessments                                          prior to final selection.                                                         by audit during fiscal years 1968 and 1969: '
audited in 1968 and 1969 by type of return.
                                                                                                          The basic purpose of a tax audit is to determine
Number of tax returns examined                                                                         the taxpayer's correct taxable income and his correct
[Figures in thousandsl                                                                                 tax liability. Responsibilities of internal revenue
                                                                                                       agents and tax auditors in carrying out tax audits
                                             Total                 Field
           Type of return                                                        I        --           extend equally to the taxpayer as to the Government.
                                         1968       1999    1968       san            1968    ISO      This means that examining officers have equal re-
      Grand total._ .............                                                                      sponsibility for discovering and recommending an
                                        2. 9D4   2. W        747           all       2,157     1, us
Income tax, total .................. 7' 7
                                      73g                    601                                       overassessment where a taxpayer has erred in favor
                                                             162                     2. 136    1,823
    Corporation .................          163      im                                    I        1    of the Government. In 1969 audits of returns, not
    Individual and fidliCiary_...:      2,563
                                            12   2, Sea       12
                                                             427                     2,135     1, m
    Exempt organization... .......                   Is                                0)        ,      involving claims for refund, disclosed $203.7 mil-
Estate and silt tax................
Excise and employment tax........
                                           41        no 2    108
                                                              38            37           4             lion in overassessments. The following table shows
                                          12~         4                                 17        4
                                                                                                       these overassessments by type of tax:
 I Len than 50D.

18 / Annual Report / Chapter Three
                                                                                                                                                                                                                                                                                        Enforcement Activities / 19
  Claims for refund disposed of by district audit divisions, fiscal years 1968 and 1969
                                                                                                                                                                                                        During this fiscal year the Service examined re-         participating custodians under the interest equaliza-
                                                                                                                 Closed by audit divisions I                                                         turns of 11,845 exempt organizations and recom-             tion tax provisions. This designation permit% the par-
                                                                                                                                                                                                      mended revocation of exemptions in 167 cases. The          ticipant to certify (under certain circumstances) as
                             Class .1 tax                                      Number
                                                                                                                                   Amount (thousand dollars)
                                                                                                                                                                                                     number of examinations is expected to rise substan-         to complian*cc with the interest equalization tax pro-
                                                                                                                 b     as
                                                                                                                      areasis                 All-ld                        Disall-d                 tially under the revitalized program.                       visions of the law governing transactions involving
                                                                                                                                                                                                                                                                 foreign securities and debt obligations. To receive
                                                                     1968               in,          IN8              am                                 am          1968               less         Coordinated Audit Techniques Proving Effective              designation as a participating firm or custodian the
                    ........................................       368,olo              153,3u     00, 116
                                                                                                   7       3%, us                      2       23        ny, us                                         The coordinated examination program continued            applicant must notify the Service that it agrees to
 Estate alien mcam
 Cledipvidual income
                . ....        ------------- ------------- ::::.-    3~107:                                                                                                                           as a significant phase of total audit activity. As of the    comply with certain documentation, recordkeeping,
                                                                                                                                       1 ill   ~
                                                                                                     14.' ..
                         .............. ..... ... ......                                                ,
                                                                                                      1 fl~           ast, 1"                            17, sel        ffl,
                                                                                                                                                                     1 1b, 413            ...a

 Gif~ ...........                                                      ZOO
                                                                          1 6                ...
                                                                                        'p`: 1.
                                                                                          I. SU            065
                                                                                                                       as: .2
                                                                                                                                          7: 47
                                                                                                                                        13 155 D                       . 117
                                                                                                                                                                                          M Gas
                                                                                                                                                                                          17, res    end of the year 1,400 corporations had been identi-          reporting, and auditing requirements. Consequently,
 Carl- ... _... ............ ................. ........
                                                                      10, 274
                                                                           159              a-
                                                                                          7,359      '_8
                                                                                                      4., ~3
                                                                                                       3 884
                                                                                                                                           1: 346                            985
                                                                                                                                                                                                     fied which met the coordinated examination case              a large part of the audit activity in connection with
   mployment . . . . . . ....... .............................                                        41:534            9,93.                 655             Sir            879          iz 31
                                                                       7. 902             I'M             597            .,037                473              so        2:124             2, Us      criteria. These corporations have effective control         interest equalization tax involves inspection of par-
                                                                                                       Protested-transferred to appellate division,                                                  over 28,000 sub-entities. About 10,000 of these large        ticipants' records systems to assure compliance with
                                                                                                                                                                                                     case examinations were in process at year end.               recordkccping and auditing requirements of the law.
                             Class Of tax                                                                                         Amount (thousand dollars)
                                                                                                                                                                                                         Plans have been approved for a new Coordinated           In 1969, intCrTral revenue agents inspected records
                                                                              Number                                                             Recommended by audit divisions                      Examination Branch in the Audit Division of the              systems of 968 participating firms and custodians.
                                                                                                    Claimed by taxpayer
                                                                                                                                                                                                     National Office. The new branch will provide the                Other interest equalization tax activity during
                                                                                                                                              Ali   ad                     Disal1mved
                                                                                                                                                                                                     leadership essential to overall planning and uniform         fiscal 190 involved examinations of 1,737 Form
                                                                    1968               1369         1968             "$a              1968               im         1968            1969             nationwide execution of the program. It will monitor         3780, Interest Equalization Quarterly Tax Returns.
                                                                                                                                                                                                     and assist, on a case-by-case basis, development of          These examinations resulted in recommendations of
       T.UL ............................................              4,04
 Individual ince................................
                                                                                         1. us      153,714          112,30d     7
                                                                                                                                  i ~   k an                        140,693             103,5"
                                                                                                                                                                                                     audit plans; scheduling of examinations; and appli-          $9.3 million in additional tax and penalties.
                                                                             948         1: 114     1 2,020            9 us              1 051              106            969            8, 41412
             in'*"-- -------------- * --------_-
                                                                                                      U ,538
                                                                                                      0, 271
                                                                                                                                                          ":476     105: 068
                                                                                                                                                                      9,                 as, M       cation of resources including use and makeup of             Advisory Art Valuation Panel Proves Effective
                                                                                                                                          I                 112            92             a, us
                        ........................ I—' .... -                58               as            1
                                                                                                          341                    -------                                                             audit teams and assistance by support districts. The
                                                                                                                                                                                                                                                                    A 10-man panel of art experts was created in
 ""i",                                                                                                                                                                     3416
                         .. ... . ..... .. - --
                       .-------------------- --------------
                                                    ..........           611               462       :4
 Employment..... .... : ............ I ... .... _ ...........                                                          2.5511               59                          347
                                                                         279               us             353
                                                                                                            91         I'm                   6                                              am       new branch also will develop prototype audit plans
                                                                                                                                                                                                                                                                  1968 to help the Service determine whether realistic
     I Includes claims Moaned 1. 10,vithout Wrest examination of the return: 1968-253,11 thousand returns and $107.2 million; 1969-261.7                                                             and audit aids and techniques useful in the examina-
                                                                                                                                         thousand returns and $124.1 million.                                                                                    appraisals or fair market value have been placed
                                                                                                                                                                                                     tion of large complex cases.
 New System of Workload Controls To Be Introduced                                                                                                                                                       Several National Office sponsored meetings of            on works of art donated to charity and claimed as
                                                                                                 mentation was begun in 1969. The main thrust of                                                                                                                 deductions on tax returns. Creation of the panel
      Continued effort was made to complete examina-                                             the plan is the centralization of exempt organizations                                              internal revenue agents and coordinated examina-
                                                                                                                                                                                                     tion case managers were held during the yeAr for            was suggested by the Association of Art Museum
  tion of individual returns within 26 months and cor-                                           audit work, both the processing of applications and
                                                                                                                                                                                                     exchange of information and experiences on matters          Directors as an instrument thht could provide the
  p9ration returns within 27 months of the date of                                               audits of organizations, in about 13 key districts. At                                                                                                          Service with independent expert judgments of the
 filing. Expeditious audits save interest costs for both                                         least one group of 15 to 20 specially trained internal                                               peculiar to particular industries. These meetings are
                                                                                                                                                                                                     valuable to Nationwide uniformity and consistency           values of art objects.
 taxpayers and the Government where tax changes                                                  revenue agents under the direction of a specialist                                                                                                                 Activities of the panel have been highly successful
 result. Prompt completion of audits also minimize                                              supervisor will be attached to each of these districts.                                              in the identification and treatment of tax issues.
                                                                                                                                                                                                                                                                 in reducing controversies over art valuations. During
  the need for extensions of the period of limitations                                          Specialist reviewers and conferees will also be at-                                                  Servicing Departing Aliens                                   1969 the panel reviewed 396 works of art valued for
 for assessment and overassessment.                                                             taclied to the key districts.                                                                                                                                    tax purposes at $13.9 million. It recommended that
     After almost two years of feasibility study and                                                                                                                                                     Section 6851 (d) of the Internal Revenue Code
                                                                                                  . Internal revenue agents and other specialists as-                                                provides that no alien shall depart from the United         claimed values of 167 of the art items be reduced
 preparation of specifications the Service will soon                                           signed to exempt organizations work will be given                                                                                                                 by an aggregate of $2.7 million. A list of members
have in operation a computerized reports system that                                           special training beyond the scope of tax law and                                                      States unless he first procures a certificate that he has
                                                                                                                                                                                                      complied with the obligations imposed upon him              appears on page 65.
 will: Provide monthly inventories of returns at vari-                                          accounting-for example, basics of sociology, poUt-
                                                                                                                                                                                                      by the income tax laws.
ous stages in the audit process; age returns in inven-                                         ical science, and economics.                                                                                                                                      Appeals System Provided for Tax-
tories and classify over-age groups by reason for                                                   Functional leadership of the increased exempt                                                        Resources required to assist departing aliens and to
delay so that managers can identify problem areas                                              organizations effort is vested in a new exempt orga-                                                  issue compliance certificates where appropriate have        payers
quickly and adjust priorities or take other timely                                             nization examination branch established in the Na.                                                     risen sharply in recent years. Audit personnel proc-       Taxpayer Has Opportunity for Independent
action as the case may be; and reduce the files of                                             tional Office Audit Division. This organization will                                                   essed over 400,000 inquiries from aliens and issued        Administrative Review
audit record cards, now maintained in district of-                                             design the broad nationwide exempt organizations                                                      227,000 certificates of compliance during 1969.                 The appeals procedure of the Service provides the
ficcs, to microfilm registers. The system promises                                             audit program and develop specifications for the                                                          Plans are currently being implemented, in the in-       taxpayer with an opportunity for a prompt, con-
substantial savings in technical and clerical man-                                             annual work plan for each key district. Work plan                                                     terests of conserving audit resources, to place the re-     venient, and independent review of his case when he
years.                                                                                         execution will be controlled by close supervision of                                                  maining taxpayer assistance portion of the departing        does not agree with proposed adjustments to his tax
                                                                                              the process of selecting returns and assigning them to                                                 alien activiti), with taxpayer service employees.           liability. The purpose of the procedure is to present
Plans Formulated for Intensified Exempt Organiza-
tion Program                                                                                  key districts for examination. Broader uses will be                                                                                                                an opportunity for resolving tax disputes, without
                                                                                              made of the Exempt Organization Master File in                                                         Interest Equalization Tax                                   litigation, on a basis which is fair and impartial to
   Plans for a highly intensified exempt organiza-                                            determining selections of exempt organization                                                            As of June 30, 1969, 1,071 brokerage firms and            both taxpayer and Government.
tions enforcement effort were adopted and imple.                                              returns for examination.                                                                               66 banks were designated as participating firms or              The appeals function operates at both district and
20 / Annual Report / Chapter Three                                                                                                                                                                                                                                                     Enforcement Activities / 21
 regional levels. Both offices handle appeals on over-      appropriate cases of the small case procedures now
 assessments and on deficiency cases involving all in-      available before the Tax Court.
 ternal revenue taxes except those on alcohol, tobacco,        If agreement is not reached at either the district 01'
 firearms, narcotics, ande wagering. Both consider          regional office, the taxpayer can in most cases file
 cases which range from the simplest to the most            an appeal with the Tax Court. Even though this L,
 complex, from single issue cases to those with many        done and the case has been docketed for trial, the
 issues, from those involving few dollars to those in-      taxpayer may still carry on settlement negotiations                            Appeals--(Income, Estate, and Gift Tax Cases) Method of Disposal
 volving millions of dollars. Both offices have the same    with the regional appellate division. Asan alternative
 objective-to effect an early disposition of each case      to trial ifi the Tax Court the taxpayer can take his
 on a basis which reflects a fair administration of         case to a U.S. District Court or the Court of Claims,                                                                                        TOTAL
 the I aw-although there are some differences in their      but this requires payment of the proposed deficiency                                                          MW                         1969 27.616
 authority and jurisdiction'                                in tax, followed by the filing of refund claims and
                                                                                                                                                                                                      ISM 29,940
                                                           suit against the Government.
    In an overwhelming majority of cases a mutually                                                                                                                                                 CHANGE -7.8%
                                                               Actually, most cases are settled with the Service.
satisfactory answer to the disagreement is found at
                                                           For 1969, the appeals function disposed of 52,599
either the district or regional level and the dispute
                                                           cases by agreement. There were 720 cases tried in
ended administratively rather than through litiga-
                                                            the Tax Court and 471 cases tried in the District
tion. As a result, less than 2-percent of all contested     Courts and Court of Claims.
tax cases have reached the courts in recent years.             Districts were able to obtain agreements in 65
Early Hearings Provided                                     percent of the cases closed during 1969.
                                                               District conference activity is set forth in the
    The appeals procedure is designed to achieve dis-
                                                           following table:
 position of disputed cases with minimum incon-
 venience, expense, and delay to the taxpayer. The         District conference case work-load
appeals function is decentralized, affording the tax-
payer opportunity to discuss his umgreed case at                              It..                      Field      office       Total
                                                                                                        audit      audit
 one of 58 district directors' offices and, if agreement
 is not reached, at one of the 40 branch offices of the    Ca... pending
                                                           Cases -nnad~ ....
                                                                                  :::::---- ::-- :       21: 343
                                                                                                          '    3          122
                                                                                                                     1'5: ' 0         6

 regional appellate division. The Service also provides        N..b .....d!! : :::: - :::: --------
                                                                       1111,                             15,367
                                                                                                         15 647
                                                                                                                     10 739
                                                                                                                                  Q, 379
conference opportunities, on an as-necded basis, at            Agreed as a p    to total.. ' ::: - ::     a 62           72           65
                                                           Cases pending = . _ f ~ ..... : ... ::--         929       3,110       12,039
other locations where conference staffs are not
                                                                                                                                                                  Change from 1968
    Both district and regional offices offer conferences   Appellate Receipts and Disposals
within a short time after the case is received. The             Case receipts in appellate offices in 1969 were very                                      +15.7
convenience of the taxpayer as to date and time is          close to receipts for 1968, 33,103 compared to
a paramount consideration. In cases in which the            33,213. Average disposals of 49 cases per appellate
disputed tax is less than $2,500, a written protest         conferee remained high. Inventory was up 3 percent                                          2                                               1W

is not required for conference in the district office.      over the prior year, but remained in current
The same rule applies in the regional appellate             condition.
office provided the taxpayer has first availed himself          Over 80 percent of appellate workload is made
of a district conference. Proceedings in both offices       up of nondocketed cases (those not docketed for
are informal in nature and the taxpayer may repre-          trial in the Tax Court). In 1969, 81 percent of these
sent himself or be represented by a tax practitioner.       cases were closed by agreement with the taxpayer.
Both offices are independent of the examination             Agreements have averaged 81 percent over the past
branch and give completely independent and im-              5 years.
partial consideration to the issues in controversy.            Taxpayers filed petitions for hearings before the
    As an additional convenience, the Service has           Tax Court in 5,981 cases in 1969. Settlement negoti-
recently provided that in office audit type cases, the      ations on these docketed cases continue between tax-
taxpayer will be provided with an immediate con-            payers and the Service and most are ultimately set-
ference at the time of examination, if he desires and      tled. The result is that for 1969, 83 percent of all
circumstances permit. The Service is also revising         docketed case disposals were closed by agreement
its statutory notices to the taxpayer to advise him in     with the taxpayer.
22 / Annual Report / Chapter Three                                                                                                                                                               Enforcement Activities / 23
                                                                                                                                                                                      characteristics were output
      The following table shows the processing of both                                          Several business master file computer changes                  containing prescribed
    nonclocketed and docketed cases in 1968 and 1969.                                        were formulated during 1969 which should provide                 from the system on an accelerated basis to permit         Taxpayer Delinquent Accounts
    (For additional information see tables 16 and 17,                                        a better quality output, greater insight into reasons             more timely and direct application of enforcement
    page 119.)                                                                                                                                                 personnel. The amount of delinquent tax involved         Value of Accounts Rise
                                                                                            for taxpayer delinquency, and a conscque~t im-
                                                                                            proverrient in taxpayer relations. Implementation of               rose some $756 million, or 36 percent, to $2.8 bil-
    Appellate Division processing of all cases for 1968-1969                                                                                                   lion in 1969.
    (income, estate, gift, excise, employment, and offers In                                 these changes is scheduled for 1970, as well as
    compromise)                                                                             for the "tension of the delinquency check program                 Disposal of Delinquent Accounts Still Sizable                               Ir~
                                                                                                                                                                                                                                         21- 1_ I
                                                                     Number of uses         to taxpayers serviced by the Office of International
                                                                                             Operations.                                                          Considering personnel shortages brought about by
                                                                     1963       less                                                                          the year-long hiring restrictions, overall accomplish-
                                                                                             Efforts Joined With Other Government Agencies                    ments were good. Over 2.3 million delinquent ac-
    Pending July I__ ..........
    assailed ................. ... _ ......           ...........
                                                                                 Is, 2"
                                                                                                                                                               counts were closed in 1969; slightly less (2 percent)
I   Disposed .1. total.............      ............
                                                                     N 2'l 73

                                                                                 31,103         Extended coordination with other government
                                                                                                                                                              than were closed in 1968. In view of the higher
                                                                                             agencies in areas of mutual interest should lead to
                                                                     28,386      26, W       more effective utilization of enforcement personnel               dollar amounts established, the somewhat smaller
        U         loy
                                                                                                                                                               number of 1969 closures still accounted for $2.4 bil-
            and ofter-in-compronric. rflach.                          1,473       1,37,      and more fruitful results from the efforts expended.
                                                                                  1: In
              as Court
        ByTtaxpayer default On statutory notice or dismissal by
                                                                          259                                                                                  lion, almost $400 million more than in 1968.
             ad titi.. to the Tax Court
                                         ---- - --- -
        T', Onin the T., Court...........................
                                                                      ,3: 126
                                                                                  am   7"
                                                                                             A study was conducted by the Internal Revenue
                                                                                             Service, Department of Labor,. and State unem-               1   Inventory Rises for First Time in 4 Years
    Pending June 30.... ................... _ ...... _.. ....        31,264      32,027
                                                                                             ployment insurance services which indicated a
                                                                                             definite value in having a Federal Unemployment                       Inability to dispose of as many delinquent
                                                                                            Tax (FUTA) program in every district office. A                    accounts as were established, caused an increase in
    Increased Activity                                  in       Delinquent                                                                                   the ending inventory for the first time since 1965.
                                                                                            permanent FUTA program has been designed
    Returns Area                                                                             utilizing the insight provided by the joint study.               However, the 1969 ending inventory, 778,000
                                                                                                The Service has also coordinated efforts with the              accounts, approximately 170,000 or 28 percent
       Low delinquent account inventories at the be-
                                                                                            Bureau of Customs on a program for the enforce-                    above the 1968 level of 608,000 accounts, was only
    ginning of the year permitted the deployment of ad-
                                                                                            ment of excise tax requirements on certain imported               some 30,000 above the 1966 and 1967 levels. To a
    ditional enforcement personnel to delinquent re-                                                                                                           great extent, the increase was due to manpower
    turns activity for an extended period. The Service                                      motor vehicles. Procedures were developed whereby
                                                                                            vehicles are declared at the time of customs clearance             shortages experienced during the year. In smaller
    secured delinquent returns valued at $309.1 million                                                                                                        part it was also due to the accelerated release of de-
    in tax, interest, and penalties during the year. Ile                                    and the declaration forms are forwarded to the
                                                                                            Service for appropriate follow-up.                                 linquent accounts during the last 2 months of the
    major portion (740,000 returns assessed at $253                                                                                                            year which had not had sufficient time for closing
    million) was secured through the established delin-                                        Still another area of inter-departmental coordina-
                                                                                            tion involves marihuana and wagering taxes. Recent                 and, therefore, remained a part I of inventory. The
    quent returns program. ne balance was secured as                                                                                                           value of the 1969 inventory total ed $1,786 million,
                                                                                            Supreme Court decisions have not affected civil cn-
    a byproduct of audit examination.                                                       forcement in securing delinquent returns. The                       $407 million higher than last year. Some $139 mil-
    Operations Under ADP Broadened                                                          Service recently coordinated efforts with the Depart-               lion of this increase, however, was awaiting the ap-
                                                                                            ment of Defense Drug Abuse Control Committee                        plication of credits as the year ended.
        Planning and study in prior years concerning de-                                    which will result in the Service being informed of
     linquent fileis culminated in a broadening of ADP                                                                                                         Further Use of ADP Helps Enforcement Efforts
                                                                                            arrests of stateside military personnel. This will per-
     operations in several delinquent return program                                                                                                             Further efforts were made to increase the use of
                                                                                            mit Service application of the appropriate civil law
     areas during 1969. Major among these were the de-                                                                                                         ADP as an additional deterrent to delinquency. Pro-
                                                                                            in these cases.
    linquency check computer programis conducted na-                                                                                                           cedures were implemented for ADP system follow-up
    tionwide for the first time for the individual master                                                                                                      of accounts whose collection is impeded by the tax-
                                                                                            Taxpayer Delinquent Account Activity
    file and the exempt organization master file.                                                                                                              payer's financial condition or by inability to locate
        The individual master file oper-ation consists of
    an annual check for nonfiling of Forms 1040, In-                                           Almost 2.5 million delinquent accounts were es-
    dividual Income Tax Return. Information returns                                         tablished in 1969, an increase of nearly 300,000 or
     (Forms W-2, 1099, and 1087) submitted on mag-                                           12 percent above last year. In large measure, this
    netic tape are also used to identify delinquent filer                                   increase was triggered by two factors: (1) An
    cases. The exempt organization master file computer                                     unusually low number of delinquent accounts was
    program is designed so that delinquency letters can                                     established last year as a result of program changes
    be issued to taxpayers at any time during the year.                                     necessitated by budgetary limitations; and (2)
    Prompt personal contact is made by enforcement                                          although the budgetary impact was even more
    personnel when foundations and organizations fail                                       severe this year, several alternative programs were
    to respond to delinquency letters.                                                      successfully developed wherein delinquent accounts
    24 / Annual Report / Chapter Three                                                                                                                                                                                                     Enforcement Activities / 25
     the taxpayer. Computer analyses are made of these                                            Taxpayer Delinquent Accounts
     accounts, involving comparison with tax returns for                                                                                                                                       concentrating special agent manpower on fraud dc-           Gambling Casinos Scrutinized Closely
    subsequent years to determine collectibility and to                                                                                          Number                   Amount               tection activities designed to identify the more seri-
                                                                                                                                                thousands)          (thousand dollars)                                                                         Major investigations concerning casino operations
    assist in locating the taxpayer. When the taxpayer's                                                         Status                                                                        ous pockets of noncompliance by the racketeer seg-          in Nevada have continued. More than $7 million in
    financial condition has materially improved or a new                                                                                       K11      me        Ed]             EE           ment and taxpayers in general.                              additional taxes and penalties li~s thus far been rec-
    address is received, the account is referred to field                                        RI-blishd! ............ ........_ 12,228 2om 3 22:051,727                                                                                                 ommended for assessment and two of the major ca-
                                                                                                                                                                                 2.SM4$6       Drive Against Organized Crime
   enforcement personnel for collection.                                                         Closed, total.... ...... -------- --- 12.367 2. Us       053,853                2,4KM                                                                     sino operators in Las Vegas have been convicted for
       The internal offset program was in nationwide use                                             BY type of action:                                                                           The Intelligence Division continues to play an
                                                                                                          Collected._i- .......... . 1,955 1,962 21465135                        L as. us                                                                  filing false income tax returns. It is noteworthy that
                                                                                                          Additional .1 actions              -
   for the third consecutive year in 1969. This program                                                   Other disposals t ........... ....43 ........ , 532~653
                                                                                                                                                   353     56:065                    431.0a
                                                                                                                                                                                          "    import ant role in the Government's drive against           records of the Nevada State Gaming Commission
   provides for the partial or whole deduction of any                                            Pending June 30, total............                                                            organized crime. Since the inception of the drive           disclose that operators of gambling casinos in Clark
                                                                                                                                                   M 1,378,762                   1. age. con
   refund due for application to any prior years' unpaid                                                                                                                                       in 1961, the Service has conducted more than 6,000          County, Nev., reported approximately 34 percent
  liabilities. It has been most effective in capturing                                                ta.
                                                                                                  ..Includes disposals due to mcollectibility and -moun and displi.t. .-a.                     tax investigations involving organized crime drive          more income from gambling for the 12 months ended
  millions of dollars in overdue taxes. A'total of                                               nol Mire!luded.). items totaling $7401000 (Puerto Rico Accelerated collection Prelmou
                                                                                                            at 366                                                                             subjects. Among the results axe more than 2,200 con-        September 1968, than in the preceding 12 months.
  858,000 overpayments amounting to $124 million                                                                                                                                               victions with over $3 million in fines imposed. Ad-         It may reasonably be concluded that the Service's
  were applied to unpaid balances in the accounts of                                                                                                                                           ditional taxes and penalties recommended for assess-        continuing efforts in this area have promoted greater
  individual income taxpayers. In addition, a proce-                                             Number of Offers in Compromise                                                                ment in these cases are in excess of $300 million.          compliance with the income tax laws.
 dure was developed to enhance recovery of unpaid                                                Disposals Increase                                                                            Racketeer Infiltration     of   Legitimate    Business
 taxes occurring prior to the establishment of the                                                                                                                                                                                                         Service Strives for Balanced Enforcement
 ADP system. In this instance, accounts have been                                                  The number of offers in compromise cases proc-                                                                                                          Program
 transferred into the ADP system so that they are                                               essed during the year increased by 2,684 cases, or                                                 Gathering background information relating to the
subject to the internal offset and machine monitoring                                           26.8 percent from last year. Total liabilities involved                                        financial activities of racketeers is a significant facet       Tax evaders are found among all classes of tax-
 capabilities of the system.                                                                                                                                                                   of the program under which the tax affairs of per-          payers and in all walks of life, necessitating a U-
                                                                                                a decrease of 11. 7 million, or 12 percent.
      The delinquent accounts activity is shown in the                                                                                                                                          sons identified as racketeers are continuously scruti-      anced enforcement program. The enforcement effort
                                                                                                   The following table provides a summary of com-
table above.                                                                                                                                                                                    nized to assure tax compliance. In addition, the Serv-      against evaders is one of the most important deter-
                                                                                                promise cases closed in the last 2 years:
Offers In compromise disposals                                                                                                                                                                 ice has conducted in-depth investigations of many            rents to taxpayer wrongdoing. Among the many tax-
                                                                                                                                                                                               taxpayers who arc members or associate members               payers convicted in 1969 of criminal tax violations
                                                                                                           Number                               Amount (thousand dollars)                                                                                   were:
                                                                                                                                                                                               of the 22 closely-knit La Cosa Nostra families. In
                                   Type of tax or penalty                                                                                                                                      connection with this effort, data processing tech-              A real estate promoter and developer with a 10-
                                                                                                                                       Liabilities                       off'.
                                                                                                                                                                                                niques have been used to gather and consolidate in-         year failure to file record had constructed a palatial
                                                                                                                                 Ell                             1968                                                                                       mansion and furnished it at a cost of about $300,000.
                                                                                                                                                                                               formation pertaining to 40,000 racketeers drid
Often seassplad, total........... .......                   ......                                     7,091                                                                                                                                                A I -year sentence was imposed and additional taxes
                                                                                                                    $.an           26.767            ".an          5,604           a,=         related business entities. Ile availability of this ma-
                     0.1 , gh11.1                                                                        561           .55                                         3:
                                                                                                                                                                   I                           terial, for cross-nation distribution, will be of major      and penalties exceeding $165,000 were recorn-
     Employ .                     king ..i:::: --------------------------------------------                                                                                        a,-
                                                --                                                       443           377         3 29              as:.             '121         a,-
    0 he       a                   ----------- ........................ ..........                          5
                                                                                                          672           as
                                                                                                                        0           1,068                1"           492            a         assistance in completing investigations of top racket-       mended for assessment. Income was reconstructed
    Dwfilguemy milfiacm_41't ................. ................... ...........
    s       Pr.g.                                                                  ..........            741        1.21,1            '71712                           116
                                                                                                                                                      1.              155                      cers. Increasing involvement in information gather-          by contacting over 200 witnesses and examining
                                                                                                         209        I'M                                                 94
Offers rejected or, total-----------------------------------------------------
                        ------- ....... ............. ..... - ............ -----------                 2,917        3'an                                                                       Ing activities, including surveillance, undercover           bank and other third-party records.
                                                                                                                                 69,880              "'ass,      10,477            2,213
    Inasne. est%t1,.m1~l1tt .................. _.......................                                1,390                                                                                   assignment, and the application of machine T)roc-               A stock promoter diverted large sums of money
    I =11. _
    A        as 11,!"d            _- ------------------------ - ------                                              1. 312       52.228              "'gos.       7.748
                                                                                                                                                                      I            $,ges
                                                                                                         924           an          8,950              Can         2, 24            1,795
                                                                                                                                     106                M               19                     esses to the collating of such information enable's the     from his wholly owned selected investments corpo-
    otha.adut .. .                                                                                       175
                                                                                                          '7                                                                           25
    s                       .......... ---------------------------------------------                                  to           8,067              $.an            443            no
                                                          ----------------------------                   483
                                                                                                         '18           gas    ..... 530
                                                                                                                                     ...                W                                      Service to make a greater contribution towards the          ration and participated in a number of schemes to
             Pa. U............................                                                                                                                          27
                                                                                                                                                                      ...               1
                                                                                                                                                                                               drive against organized crime.                              swindle money from investors. He was convicted of
     Revised.                                                                                                                                                                                                                                              attempted evasion of income taxes and sentenced to
                                                                                                                                                                                               Strike Forces Active
Intelligence Division Marks Golden                                                               whole; and by developing evidence necessary to suc-                                                                                                        serve 3-ycars in prison.
Anniversary                                                                                     cessfully prosecute criminal elements in this coun-                                                The Departments of justice, Treasury, Labor, and            An unusual investigation involved a noncommis-
                                                                                                try, it plays a vital role in the President's stepped-up                                        Post Office and the Securities and Exchange Com-            sioned Army officer who failed to report profits from
   The Intelligence Division was created July 1,
                                                                                                program against organized crime.                                                                mission have instituted a new concept in law enforce-      black market operations in Vietnam. Additional in-
 1919, and for the past 50 years has played an
essential role in promoting compliance with the in-                                                                                                                                             ment known as "The Strike Force," with the ob-             come taxes and penalties exceeded $65,000. This
                                                                                                New Approaches Employed to Achieving                                                           jective of pooling the resources of various Federal         was the first occasion on which the Service presented
temal revenue laws. Over the years, numerous
                                                                                                Intelligence Objectives                                                                         law enforcement agencies and through their com-            evidence of tax evasion before a General Court-Mar-
individuals and corporations, including many rack-
eteers who otherwise might not have been brought                                               The intelligence mission of the Service is ac-                                                   bined efforts, to concentrate and strike out against       tial. The military court imposed a fine of $25,000.
before the bar of justice, have been successfully                                           complished through two principal programs: One,                                                     underworld elements in the major cities.                       A Florida nightclub owner and notorious "fence"
prosecuted for income tax violations.                                                       "General;" the other, "Racketeer." To stay abreast                                                     The Service is actively participating in the Strike     for stolen property was convicted of attempted eva,-
   Ile Intelligence Division, in enforcing the crinii-                                      of the more sophisticated schemes now being re-                                                     Forces now operating in Buffalo, Detroit, Philadel-        sion of cabaret excise taxes. The case was compli-
nal tax statutes, materially benefits society as a                                          sorted to in attempts to evade taxes, the Service is                                               phia, Newark, Miami, Chicago, Brooklyn, and New             cared by false defense testimony and fear by Govern-
                                                                                                                                                                                               York City.                                                   ment witnesses. A sentence of 13-years was imposed.
26 / Annual Report / Chapter Three

                                                                                                                                                                                                                                                                                  Enforcement Activities / 27
    A bookmaker and operator of a licensed Las Vegas        Foreign Financial Transactions Studied                                              State and local courts in connection with the pros-                                            Cases Involving Criminal Prosecution
 Race and Sports Book was convicted of conspiracy                                                                                               ecution of individuals charged with crimes other
                                                                The Service is conducting studies of evasion                                                                                                                                       Total additional taxes and penalties of $96 mil-
 to dcfraud,,attempted evasion of excise taxes on            through the use of foreign financial transactions and                              than Federal offenses. On occasion, where disclosure
                                                                                                                                                                                                                                               lion were involved in cases received in the Chief
 wagers, and failure to file income tax returns. The        foreign financial facilities. The ultimate purpose is                               of information is authorized by law, evidence
                                                                                                                                                                                                                                                Counsel's Office with recommendations of criminal
 investigation disclosed that wagen by preferred cus-        to devise procedures calculated to detect and deter                                gathered by Service personnel has been used by the
                                                                                                                                                                                                                                                prosecution. This was a dccrme of $22.3 millioii
                                                                                                                                                Department of justice and local officials in prosecu-
 torricirs were accepted on white slips of paper whereas     the use of foreign financial facilities, such as Swiss                                                                                                                             under the amount involved in the prior year.
                                                                                                                                                dons for offenses not under Internal Revenue Serv-
 others were accepted on pink slips. Although the           Bank numbered accounts, for tax evasion purposes.                                                                                                                                      An analysis of criminal tax cases of all types
                                                            In this connection, the Service has cooperated with                                 ice jurisdiction. Such prosecutions involved State
 white slip wagers constituted 80 percent of the total                                                                                                                                                                                          (other than wagering-occupational tax cases han-
                                                             the Department of justice and with the House                                       officials and others, under Federal conspira y star-
 accepted, they were not reported on the returns filed.                                                                                                                                                                                         dled'at the district level) flowing from the Assist-
                                                            Banking and Currency Committee in their consider-                                                                                 c
                                                                                                                                                utes, for zoning and financing manipulations; the
 Additional taxes and penalties exceeded $1.5 million.                                                                                                                                                                                          ant Regional Commissioners (Intelligence) through
                                                            ation of this problem.                                                              prosecution in Baltimore, Md., of one of the city's
 The operator was sentenced to serve I -year in prison                                                                                                                                                                                          the office of the Chief Counsel to the Department
                                                                                                                                                kingpin numbers operators; and the conviction in
 and to pay a fine of $ 10,000.                                                                                                                 the Superior Court of New Jersey of a Newark crime                                              of justice follows:
    The general office manager for a citrus fruit proc-
                                                           Prosecution Recommendations for                                                      syndicate leader on a charge of conspiracy to violate
                                                           Tax Fraud Increased                                                                                                                                                                 Receipt and disposal of criminal cases in Chief Counsel's
 essing plant was convicted of attempted evasion of                                                                                             State gambling laws.                                                                           Office
 income tax as a result of his failure to report over         Over 117,000 allegations of tax fraud were                                        Referrals to Department of Justice Increase
 $838,000 embezzled from his employer. Tax defi-           screened and evaluated in selecting the investigative                                                                                                                                                           Status                            190
                                                                                                                                                   A total of 854 income and miscellaneous criminal
 ciencies and penalties totaded $730,000. The court         caseload. Many of these required some form of                                       cases, with prosecution recommendations involving                                              Pending July I                                                 2~351         2. us
 imposed a 3-year prison sentence.                         investigative activity.                                                                                                                                                             Received, total__ ..... _ .................... ........         1,128        I.m
                                                                                                                                                875 prospective defendants, were forwarded to the
    A $10,000 fine and a 3-year probation sentence            There was a significant increase in the number of                                 Department of justice. Compared with the prior                                                                                  pm&mxrtIon:::::,:
                                                                                                                                                                                                                                                   With mummendatiopl [atetc........                           1,046        1.ft9
                                                           prosecution recommendations for tax fraud in the                                                                                                                                        With requests for opinion,                  . .....             82            a
were incted out to a lumber company executive who                                                                                               year, this was an increase of 11.9 percent in the                                              Disposed of, total .... ...................................     1,331        ii,urg
 diverted over $1 million in corporate funds to corri-     income tax area. This was accomplished by the di-                                    volume of referrals. In 1969, indictments of such
                                                           version of special agent manpower from wagering                                                                                                                                         Prosecution not worranted-........... ................         128         IW=
 cealed personal bank accounts. The funds were used                                                                                             cases were down 3.2 percent and the total disposal                                                 Departiripat of Justice declined---
                                                           tax investigations since recent adverse Supreme                                                                                                                                         P scutmrs .... ....... ...........                           13,0.           an
                                                                                                                                                 of cases in those categories in the district courts                                               Orinither delivered.... ..........................
                                                                                                                                                                                                                                                         ... closings.                                              70           OF
 to purchase nontaxable municipal bonds and to                                                                                                                                                                                                     A                                                              179           in
                                                           Court decisions (the cases of James Marchetti and                                     decreased 5 percent.
invest in trust funds for his children. Additional taxes                                                                                                                                                                                       Pending June 3D ............ ...........................        2,148         2, On
                                                           Anthony M. Grosso) practically eliminated pros-
 and penalties exceeded $2.4 million.                                                                                                               In income, excise, and wagering tax criminal
                                                            ccutive action for wagering tax violations,                                                                                                                                                                 ilacti, Department of Justice ndusive of wagering tax
    A 1 0-year prison sentence and $40,000 fine were                                                                                             cases, 470 defendants pleaded guilty or nolo con-                                                               a
                                                              The decline in completed investigations is the                                     tendere, 91 were convicted after trial, 20 were ac-                                             2 Includes wagering tax clues disposed .1 folloveirg th. "Marcheal" and "Grossm"
imposed upon a Detroit racketeer for income tax            result of the initiation of very few wagering tax                                                                                                                                   Supreme Court decision.
evasion. Taxes and penalties approximate $350,000.                                                                                               quitted, and 244 were dismissed.
                                                           investigations in 1969 and the loss of 95 special agent                                  A comparison of indictments and court actions                                                  Additional detail on legal workload involved in
The defendant was reputed to be an "enforcer"              man-years due to hiring restrictions.
for the Mafia.
                                                                                                                                                 for the last 2 years follows:                                                                  the prosecution of criminal cases by Service attorneys
                                                              A tabulation of the investigations undertaken by                                                                                                                                  during the past 2 years is provided in the following
                                                           special agents in 1969 follows:                                                      Results of criminal action In tax fraud cases
Enforcement Projects Stressed                                                                                                                                                                                                                   table:
                                                           Tax fraud Investigations                                                                                                                                     Number of
    The Service continued to stress project-type en-                                                                                                                         Action                                     defirruints             Tax and penalty and number of tax years Involved In
                                                                                          Type                              1968                                                                                                                criminal fraud case disposals
 forcement actions designed to uncover complex cor-                                                                                                                                                                   Ell         am
 porate schemes to evade taxes through obscure finan-      Investigations completed, total.....         ............. _     9,739    41, us                                                                                                     (Exclusive of wagering and col-Imnated gaining device man)
                                                                                                                                                                                         ........... ..
 cial transactions with closely related corporations.          Prosmortionmeassommention, total                   .......   1,620    1,135      1 nalleteeru.nd Infismiallim Total
                                                                                                                                                                                 ....                                    026           OU                                             Tax yamassis       I TO and penalty
                                                                     Fraud ......... ... .........           ...........                         DiSfami total.---------------                                         1 739           an                Disposition
This concentration of enforcement action is directed                                                                          952    a,"              Pl~inW.1%.t.r nolo contend.In...... ......
                                                                                                                                                      C                                                                  638           On
                                                                    C                           ---------------
                                                                                      in i;iiivi--.....................       586         1.,                          td.1                                              Ila                                                                           968 x
at multi-company combines usually controlled by one                           I                                                13          4          A [ft-d ............. .......
                                                                                                                               69         53                                                        ............           39           as                                                 - $109,680,088
individual, a family or a tightly drawn group of                                                                                                      N~.Ypnoswdl Or dismissed I........... _ ............ _             944
                                                                                                                                                                                                                         -                            Total ...............         3,545  2. 1102                       UU.220,M
                                                           Investigations in p'rocres, June 30.. ..............             7,217   I'val
investors. It is focusc~ upon widespread and flagrant                                                                                                            lexure.rd imicallarma.. ca... I                                                APmessiZions.                       -  575  2. as7 44 360 302             . no .13
                                                                                                                                                 Indichmentsvind information ...................__ ........               652                    11 the            .. ..... :       2' 970     765 65, 319: 785           U:"?:"s
situations wherein an alleged tax evasion practice                                                                                               Disposals, total                   ....... ..... _ .............1       660
                                                           Assistance Given to Other Government Agencies                                              CPIO~~,,,=, note cambind., ........... .............
                                                                                                                                                                    Or                                                   475
has been widely adopted in an industry. Typical of                                                                                                                      trill........ .............. ---------              89                    1 Includes uses declined by Department of I ussfice.
                                                               The Service furnished assistance to the Secret                                         A0.
                                                                                                                                                       hi~.Pi:tml - -------- ------_ ............ _                         31
these projects is an extensive probe into the practice                                                                                               a, discru d I              ...... ...... .....           65           n
of large corporations claiming political contributions
                                                           Service in the protection of the President and other                                                                                                                                 Additional Taxes From Direct
                                                           officials. Thirty-five special agent man-years were                                   Indictrimitimul Inform.-AIC'nirg!" .................                34 9           U
as legitimate business expenses for tax purposes, in       devoted to this responsibility, for which President
                                                                                                                                                 Disposals, total                                                       1,07
                                                                                                                                                                                                                           7            1"      Enforcement
violation of the taxing statutes and other Federal                                                                                                   Pies, guilty or nolo contendere....                                  163            U
                                                           Nixon expressed his appreciation in a letter dated                                        Convi led after trial_.. ---------       ............                 29            al         The importance of direct enforcement is not
laws; an investigation of the "give-up" commissions        February 5, 1969.                                                                                mixed or dismissed................. _ ..........              879           in       limited to the dollars collected. A balanced enforce-
practice on the part of mutual funds and brokers;              The Service maintains close liaison with other law                                     Include, uses diluni ...d fii~lthe folkiivinS ,.a... :9 because of,..f principal     ment program covering all classes of taxpayers at
and a study into the practice within certain indus-        enforcement organizations, including State and local                                     . or bad
                                                                                                                                                 am., ,....des                              6
                                                                                                                                                 defordir-Ob..7-irlurmus Inem!ndb because principal defendant adplasided                         every level of society generates a public feeling to-
                                                                                                                                                                  -.1.1hidmairilat, ...
tries to make rebates to customers.                        agencies. During the year, special agents testified in                                 and firearmsitU%M." "i gift, and excise Inear other than wagering, alcohol, tobacco,           ward compliance. The vast number of taxpayers

28 / Annual Report / Chapter Three                                                                                                                                                                                                                                                    Enforcement Activities / 29
   who voluntarily file tax returns and pay their correct
                                                                                                  Results from Direct Enforcement                 Workflow In the Internal Revenue Service and the courts,                                          , Amounts ofrevenue Involved at each level of thetax systern
   liabilities with no enforcement work required is a                                                                                             fiscal years 1968 and 1969                                                                          fiscal years 1968 and 1969-Continued
                                                                                            Taxpayer Delinquent Accounts ~ollected Show
   tribute to the enforcement system of the Service.                                                                                                                                                                                                                 INCOME, ESTATE, AND GIFT TAXES
                                                                                            Largest Increase                                                                                                  1968
       Ile bulk of taxes are collected quite simply and'                                                                                                                                                                 1    -
                                                                                               2,383                                                                                                                                                                          Civil can,
   routinely. The enforcement efforts of the Service are                                                                                                                                                              Returns
   directed toward maintaining full compliance with                                                                                                                                                                                                 Additional fee and penalties in ... disposed Of I. audit
                                                                                                                                                  Tax returns filed, total -----------------------      1107,382,432              no, on, 03          division, by easement, p7-1, Or default.                      1 368    i'm
  the tax laws, through collection of delinquent taxes                                                                                                                                                                                              Additional tax and penalties n uses disposed *i
                                                                                                                                                       Individual income .........................        73,839,802               76.m an            dnisions by agreement, Payment, of d             ..........     325      341
  due, examination of returns, and prosecuting those                                                                                                  =alluSi come...................
                                                                                                                                                              a                                            1,622,605                1, M: US        Additional tax and penalties determined by settlement in
                                                                                                                                                                                                                                                                            ------------------------ i .........       82
  who have violated criminal aspects of the tax laws.                                                                                                  E
                                                                                                                                                       Emplo nnentllt~ -----------------------                 257:77%
                                                                                                                                                                                                          22,322 20                  V4:g`
                                                                                                                                                                                                                                  M02 "             Add
                                                                                                                                                                                                                                                      Taffi=,"li;          tallies determined by Tax Court d.l.
                                                                                                                                                                                               ........        556,705            1. US, no           slons:
  Revenue resulting from direct enforcement is sub-                                                                                                   other 6;w; ..........................                '7; 783, 814           8'rol                  Dli,mll,d-;                      _: -------                   IS3
                                                                                                                                                                                                                                                                                         . .......                              0
  stantial even though it represents a small percentage                                                                                                                                                                                               GO "Islonsco
                                                                                                                                                                                                                                                    Addithimilin,aand penalties in uses decided by Sup, in,
                                                                                                                                                                           INCOME, ESTAT~ AND GIFT TAXES                                                                                                               6        Ill
  of the total collected.                                                                                                                                                                                                                                  r
                                                                                                                                                                                                                                                    Amu.t1,jI..qarcbjP texpa'yaeles-W                Wd ii~ i&---     55        47
       In 1969, recommendations for additional assm-                                                                                              Numbircif turn, ...!.ad ( For,,
                                                                                                                                                                                       it b                  2,779,156                                                       Fraud us. I
                                                                                                                                                      Fill .1th adjustment, propon y             t                                                  Deficiencies and penalties in man disposed of In intelligence
  ments of tax, penalties, and interest as a result of                                                                                                  d 1 n...... ---------------- ....... ..              1,838,715              1. San, as
                                                                                                                                                  Disposed of by audit divisions:                                                                     divisions:
 examination of tax returns totaled $2,383.1 million,                                                                                                                                                                                                    Prosecution recommended ............................       '119        83
                                                                                             .. F,, on    losses.,    Delinquent      Math            Agreal Or do
                                                                                                                                                                c                                              2
                                                                                                                                                                                                             1,539 238              1 374 an             Prosecution not recommended...............                  '29        go
  an increase of $174.9 million over 1968. In addition,                                          lost]   definition                verification                                                                  48:255              ,M:..
                                                                                                         -eNt          Secured                        S-                                        ---              45,290                     on
                                                                                                         collected                                    Other ............. ........................                5,932                  3.735         Revised.
 $309.1 million delinquent taxes were collected, a
                                                                                                                                                                                                                      Calls                            I miludes out,. fee-
 gain of $15.9 million over the prior year.                                                                                                                              Civil cases
      Ile following table sets forth for the past 2-ycars
                                                                                                                                                  Total received in appellate dlvlslons                          24,737
 the source of additional tax, penalties, and inter-                                                                                              Disposed of by a pellate divisions:                                                  U-Suall       Improving Tax Administration
                                                                                                                                                  .. Agreed, pal11. .crjd.f.u1ted... --- -------------           25, this              21.924
 est assessed including other results of direct                                                                                                       Iris of oiNfinal jurisdiction:
                                                                                                                                                       Tax Court;                                                                                    Through Federal-State Cooperation
 enforcement:                                                                                                                                                 Tat I petitioned to Tax Court._._                                         G,au
                                                                                                                                                              Dilmicned------------                              "IN5                      272          Many years ago the Service adopted the policy of
                                                                                                                                                              Settled by Stipulation......                       5, D58                 -.7711
Gross tax, penalties and Interest resulting from direct                                                                                                 bill Settled fill Tax Court dechdinn. ----                  fill                   713       cooperating with State and local tax administrators
                                                                                                                                                              Decided yU.Curilb.t.ppallUl. ...                      235                    S25
enforcement                                                                                                                                                  'Ict courts and Court of Claims:
[In thousinds of dollars)                                                                                                                                     Total tied in         kt courts and Court of                                            to the fullest extent permitted by law. Over the
                                                                                                                                                                Claim, ...... dill                                1 403                 &.m          years, this policy has been augmented with the sign-
                                                                                                                                                              Settled in districi i;Yri;;Wd_I5;iiii;i              '792                 1,02
                                                               1968                                                                                           Decided by district cmint, and Court Of
                                                                                                                                                                Clai- ....                                           516                    an       ing of formal tax coordination agreements establish-
                                                                                                                                                  Court. cf:xgull:
Additional to., p.OSltl.,, and frollmostnuented, boul .... 13,253,896                                                                                   Settle Jy, of Upeal, decision --- ......                                       m        ing procedures for the exchange of tax return infor-
                                                                           3.3".335                                                                                                                                  24'
                                                                                                                                                              F. ,able to GO....marit ..                             170                    an       mation. and providing for reciprocal action by State
From Uscringthm Of tax returns, total..                 --- 2.208,151      2. an, m                                                                           Favorable to UUS -..                                    51                     u
                                                                                                                                                              Modified ......... ---------_-                          22
    Income tax, total.......... --................. 1,820,476              1, as, on                                                                     Decided by courts of appeals but reviewed by                                                and Federal tax officials to improve the administra-
                                                                                                                                                         ST.- C.1t__ .......... _ ...........                           4
                                                            ~,075 447      1, gag~ no                                                             Supreire curt:                                                                                     tion of the tax laws of their respective jurisdictions.
                                                              745:029         7U,Tn                                                                    Settled by Supreme Court decision.......                         4                      6     The existence of the cooperative exchange program,
    Enot-milifthia                                             181~.101
                                                                      1      n,:
                                                                              go                                                                                       Fraud clun, I
    =mt tax (iwc                                                54:                                                                                                                                                                                  coupled with increasing knowledge of its operation
                                                                44,060            am                                                              Received for foll-scole investigation in intellig oce
                                                                                                                                                    division......... _ ... ...............                       2.249                 2,.3         by the general public inevitably leads to improved
Fnienrinthmeati 1.11ficati-limcconcetaxiet .......           '266 763        3U,10                                                                Disipsanitif by int,111U.I. dl,lsiorl:
Front verification of estimated tax payments cl.infi.d.        495: fin      M, 092                                                                    P-scolu,nneclornmeord,id
                                                                                                                                                      Pro,                                                                              L Sun,       taxpayer compliance -the most important benefit
                                                                                                                                                           .. I.. not                                                I713
                                                                                                                                                                                                                     9                  1.m
From delinquent returns sicumd, byhol..... ............        293.143       jo,075                                                                   Pins, thy
                                                                                                                                                  Disposed of b Otficeof Chief Counsel:                                                              of the program. The increase in the number of States
                                                                                         different activities depends on the complexity of the        P - on                           Including uses
        district collection dl,!,Io................... _,     255,56A        232, M                                                                      OKI ined
                                                                                                                                                        marecutionsby the Department of Justice..
                                                                                                                                                                          ""'Tted'                                   252                    Son      levying an income tax, the trend to conforming
      Y distinctudit division..........................         37,577        U,gss      items and issues involved. Many returns are proc-                          ..............................                   630                    in       State tax laws more closely to Federal tax laws, and
Claims diselfinved, total ............                        362,930        gaill      essed to ultimate disposition within a short period           Furvised.                                                                                       the case with which tax return information can be
     By disilrict audit division-                             i7s57:59       iss,in     while others require work by different divisions of           Includes ..fee is. ....
        agoinal.pisellatedivislons._...                             2373     M,M                                                                                                                                                                     exchanged by use of computers have led the States
                                                                                        the Service and are not closed during the year of                                                                                                            to place a greater reliance on the use of information
                                                            1,521,935      1,9n,uh.
                                                                                        filing.                                                    Amounts of revenue Involved at each level of the tax system                                       from Federal tax returns and the Service's audit
   Revised.                                                                                                                                       fiscal years 1968 and 1969
                                                                                           The unit of measurement at the audit level is on                                                                                                          activities.
                                                                                        a ,, basis. In the appellate and intelligence divi-        [Million, Of diAl..]                                                                                 Formal Exchange Agreements.-During the year
Workflow in the Service and the                                                         sions as well as in the courts, the work unit is the                                                                          Eil             am             a tax coordination agreement was signed with the
Courts                                                                                  case. A case may involve more than one return and                                                                                                            State of Georgia, bringing to 45 the number of
                                                                                                                                                   Internal revenue collections, total---------      ........        153.637          Son, via
   The major portion of the work of the Service                                         more than one taxpayer. The following tables reflect                                                                                                         agreements with the States and the District of Co-
                                                                                                                                                        I fidividunil income taxes,                ..........
results directly from the millions of returns filed each                                comparative data on actions completed by the Serv-                                                                            78l              ", US         lumbia. In addition to Georgia, agreements are now
                                                                                                                                                               Withholding.. .... .....__ ---- _ _
year. The time needed to process a return through                                       ice during 1968 and 1969:                                              Other -----                              ......        2570,-No'        To '"
                                                                                                                                                                                                                                       27:2111011    in effect with: Alaska, Arizona, Arkansas, Cali-
                                                                                                                                                        Estate and
                                                                                                                                                        Corporation J!,rcome taxes ----------------- .......           29.897          fornia, Colorado, Delaware, District of Columbia,
                                                                                                                                                                         Ittaxes---                                     3,092           3M
                                                                                                                                                                                                          ----         28,213          ":M           Florida, Hawaii, Idaho, Illinois, Indiana, Iowa,
                                                                                                                                                        Employment 0-as----------- -------- _ ...........
                                                                                                                                                        Excin to .................... ......                           14,320          go, Us
                                                                                                                                                                                                                                                     Kansas, Kentucky, Maine, Maryland, Massachu-

30 / Annual Report / Chapter Three
                                                                                                                                                                                                                                                                                           Enforcement Activities / 31
  setts, Michigan, Minnesota, Mississippi, Missouri,    oped to extend the cooperative audit program pro-
  Montana, Nebraska, New Hampshire, New Jersey,         cedure to as many States as feasible.
                                                                                                                     Alcohol, Tobacco and Firearms                               provisions and set forth comprehensive restrictions
                                                                                                                                                                                 on commercial and private transactions involving
 New Mexico, New York, North Carolina, North                Information Exchange by Computer.-Under                  Enforcement Restructured                                    firearms and ammunition and on the transportation,
 Dakota, Ohio, Oklahoma, Oregon, Pennsylvania,          this program, the Service furnishes selected informa-                                                                    shipment, and receipt of these articles in interstate
                                                                                                                     Level of Liquor Law Enforcement Reduced
 South Carolina, South Dakota, Tennessee, Utah,         tion from the individual master file on magnetic tape                                                                     and foreign commerce. Under the provisions of this
 Vermont, Virginia, Washington, West Virginia,          to the States. Tbirty-four States and the District of            Expansion of the Service's responsibilities relating    law the Service was faced with a massive licensing
                                                         Columbia have participated in the program for               to firearms necessitated redeployment of investigator       task. Following enactment of Title 1, 86,958 appli-
 Wisconsin, and Wyoming.
                                                        either tax year 1966 or 1967, or both.                       manpower to implement the Gun Control Act of
    Model Agreement.-A "model" agreement was                                                                                                                                      cations were received for firearm licenses upon which
                                                            Although complete information on the benefits             1968 and the firearms provisions of the Omnibus
 drafted to take into account developments in the                                                                                                                                 action was required to be completed within 45 days
                                                                                                                     Crime Control and Safe Streets Act of 1968. This
                                                         accruing to the States is not yet available, prelimi-                                                                    following receipt. In connection with these applica-
 Fcderal-Statc program which were not covered in                                                                     reprograrning of resources resulted in a 30 percent
                                                         nary reports indicate that many millions of dollars                                                                      tions, 39,205 field investigations were made to assure
 existing agreements. Additional provisions in the                                                                   reduction from 1968 in the manpower expended on
                                                        of additional revenue were collected by the States                                                                        that applicants met licensing eligibility requirements.
 "model" include (1) a broadening of the scope of                                                                    illicit liquor investigations, and was a principal con-
                                                        and many thousands of nonfilcrs of tax returns were          tributing factor to the 26 percent decrease (from            In addition, 47,454 investigations were made of li-
 the agreement to cover cooperative activities in ad-
                                                        add ed to the tax rolls as a direct result of using the
 dition to the exchange of information; (2) a state-                                                                  4,136 in 1968 to 3,063 in 1969) in seizures of illicit      censee operations to ascertain compliance with the
                                                        magnetic tape data.                                          distilleries in 1969.                                        provisions of the new law. By the end of the year,
 ment of conditions under which State tax officials
 may furnish tax return information to tax officials
                                                             Training of State and Local Tax Personnel-                  Although the main thrust of the Service's liquor         77,573 licenses had been issued, 1,705 licenses had
of a political subdivision; (3) a strengthening of
                                                        The Service, under the authority of Public Law               law enforcement program continues to be centered              been denied, and 1,328 applications had been
 measures designed to protect the confidentiality of     87-870, assists in the training of State and local tax      in the southeastern States (the only remaining geo-           withdrawn.
                                                         personnel. Training included attendance of six State         graphical area of the United States where substantial            Title II of the Gun Control Act of 1968 (effective
 returns; and (4) authorization to inspect returns.
                                                         tax personnel from four States in classes conducted         revenue frauds persist and which accounted for 90             November 1, 1968) amended the National Fire-
 This "model" will be used as a guide in drafting new
                                                         by the Service. A total of 109 correspondence               percent of all illicit distillery seizures in 1969), the     arms Act by inclusion of the destructive devices cate-
 agreements or in revising those in existence.
                                                        courses were furnished to five States for use by State        concentrated emphasis on Operation Dry-Up could             gory of firearms and the insertion of more stringent
    Increaring Audit Coverage-One of the proce-
                                                         tax personnel. Additionally, the Service supplied 74         not be maintained. The Dry-Up program which is              penalties for criminal violations of the act. Ile act
 dures in use for many years to expand audit coverage
                                                         sets of training material to four States for their use       based on intense investigative effort, strong public         required that all firearms, as defined by Title 11, not
 at State and Federal levels has been the exchange                                                                    information campaigns, and close cooperation with
                                                         in conducting training classes.                                                                                          previously registered had to be registered within a
of information in abstract form relative to audit
                                                                                                                      State and local enforcement agencies, has as its goal        30-day amnesty period immediately following the
 adjustments. This exchange has continued unabated      More Federal Assistance to           State and      Local
                                                                                                                      the ultimate elimination of large-scale illicit liquc~r     effective date. During this period, 57,258 firearms
with a resulting increase in additional tax assess-     Authorities
                                                                                                                      operations.                                                 were registered and added to the National Firearms
ments. The major benefits of this exchange accrue            During the past year Service personnel rendered             In the first 5-years of Operation Dry-Up more             Registration Record. The Service was also give re-
primarily to those States which have only a limited      more assistance to State and local law enforcement           than $27 million in additional revenue was collected,        sponsibility for enforcing Tide VII of the Organized
number of personnel assigned to the examination          officials than in any year in history. Alcohol, tobacco,     probably due to shifts in the consumption of alcoholic       Crime Control and Safe Streets Act of 1968, which
of returns.                                              and firearms enforcement personnel have for many             beverages to legal markets. In the first State in which      prescribed penalties for the illegal possession of
    An extension of the audit abstr-act program has      years maintained outstanding liaison with other law          the prograin was implemented, illicit distilling ac-          firearms.
been the development of a coopcrativc~audit proce-       enforcement agencies. During the past year, demands          tivity of major commercial scope virtually disap-                Manpower expended on firearms activities in
dure which has promise of being most productive,         for the Service's assistance increased as a result of the    peared. In the other two States to which Operation            1969 doubled from the 290 positions used in 1968.
not only from the standpoint of the States, but also     enactment of new laws providing Federal support              Dry-Up was extended, substantial inroads against             Investigations conducted under the firearms pro-
for the Federal government. Under this program,          to State and local law enforcement officials in their        large-scale illicit operations were made. Although           gram in 1969 resulted in the completion of 1,595
State enforcement personnel audit the State returns     fight against crime. Alcohol, tobacco, and firearms           the further planned reductions in violations of major        criminal cases, the arrest of 715 violators, and the
of taxpayers whose names were selected by the Serv-      enforcement personnel have been called upon to ap-           scope did not materialize in thew two States in 1969,        seizure of 4,152 firearms. These figures compare
ice after a review of the taxpayer's Federal return.    pear before State legislative bodies as advisors in           it is anticipated that beginning in 1970 additional          with 919 criminal cases, arrest of 449 violators, and
The significance of this procedure lies in the fact     formulating new State firearms laws, and at law               manpower can be applied to Operation Dry-Up with             the seizure of 1,092 firearms in 1968.
that the returns of the taxpayers would not normally    enforcement training schools, seminars, and meetings          ultimate restoration of all necessary resources for full
be reached for audit by the Service because of rc-      to discuss mutual operational endeavors; and to as-           program effectiveness.                                      Importation of Firearms and Ammunition
source limitations. Under this procedure, adjust-       sist in investigations of crimes in which firearms were                                                                      The Gun Control Act placed responsibility on the
ments made by the State to the taxpayces State          involved. In addition to the actual participation in         Firearms Program Expanded                                    Service for implementing the act's importation pro-
return would generally lead to a similar adjustment     investigations, enforcement personnel have trans-                                                                         visions. The volume of applications for permits to
                                                                                                                        The Firearms function of the Service became a
of his Federal return. Ile effect of this program is    mitted oral and written information on 9,375 viola-                                                                       import firearms and ammunition far exceeded
                                                                                                                     major enforcement program as a result of the enact-
to expand the number of returns subjected to audit,     tions to State and local authorities and to other Fed-                                                                    original estimates. From October 1968 through June
                                                                                                                     ment of the following strengthened firearms control
with a consequent increase in both State and Fcd-       eral agencies, of which 6,581 related to violations of       laws.                                                        1969, permits were issued to import 19,074 sport-
cral revenue. At year's end, plans were being devel-    State or local firearms laws.
                                                                                                                        Title I of the Gun Control Act of 1968 (effective         ing firearms. During this same period 270,775
                                                                                                                     December 16, 1968) strengthened firearms licensing           sporting firearms were imported, and 1,428 appli-
32 / Annual Report / Chapter Three                                                                                                                                                                       Enforcement Activities / 33
                                                                                                                         M-005 0-70----d
cations were disapproved covering imports totaling                                          Results of criminal action in alcohol, tobacco, and firearms
                                                                                            cases      .
 59~,901 firearms not meeting the importation
criteria.                                                                                                                                                     Number of

   In addition to the functions assumed under the                                                                     Action
                                                                                                                                                                                                                            Public Hearings Held on Labeling and
Gun Control Act, the Service, under executive Or-                                                                                                          IK~j       11149                                                 Advertising of Distilled Spirits
der No. 1 143 2, was given responsibility for admin-
                                                                                            Ia dictuments and information , .. -~_ ......... ...........    3
istering the importation provisions of the Mutual                                           Disposals Intel-........................                        3: 21'5        2'"1
                                                                                                                                                                           2~ .1                                               In April 1967, the Service announced (after re-
                                                                                                ,,v,,t1ty or nolo
                                                                                                          site         tender ........                      2,536
Security Act of 1954 covering articles on the U.S.                                                             r th. On ........ - ....... -------
                                                                                                                     I                                         461                                                          cei.ving comments and suggestions from interested
                                                                                                ftquitleL          ...................................         147            in                                            industry members and evaluating the recommenda-
 Munitions list (includes arms, ammunition, and                                                 N,I-p..ed or dismissed ............... .............           481            m
implements of war).                                                                                                                                                                                                         tions of the Distilled Spirits Standards and Labeling
                                                                                                                                                                                                                            Survey Committee) that a series of three public
Seizures and Arrests in Firearms Cases Rise                                                 Chemical Laboratory Services Ex-                                                                                                hearings would be held to consider amendments in
Substantially-Decreases Continue for Illicit Liquor                                                                                                                                                                         the regulations in Title 27, Code of Federal Regula-
                                                                                            tended to Other Agencies
  Seizures and arrests resulting from investigative                                             Samples of illicit spirits analyzed in the national
                                                                                                                                                                                   Supervision                              tions, Part 5, "Labeling and Advertising of Distilled
work in 1969 are compared with 1968 data in the
following table:
                                                                                            and regional laboratories dropped from last year's
                                                                                             8,120 to 3,884 and narcotic samples from an all-time
                                                                                                                                                                                   of the                                      In September 1968, the second of these hearings
                                                                                                                                                                                                                            culminated in the issuance of a Treasury Decision

Seizures and arrests for alcohol, tobacco, and firearms
                                                                                             high in 1968 of 11,500 to 7,315. These changes re-
                                                                                            flect, in part, the shift of investigative time from
                                                                                                                                                                                   Alcohol and                              which established standards of identity for blended
                                                                                                                                                                                                                            applejack and certain flavored distilled spirits (pri-

                           Itire                                1968
                                                                                            liquor law enforcement to the critical firearms area,
                                                                                            and the programed transfer of work to the Bureau
                                                                                                                                                                                   Tobacco                                  marily flavored brandies), and amended the stand-
                                                                                                                                                                                                                            ards of identity for gin and vodka. This Treasury
              as .............       .......... ru.b.-            4,136            3,063
                                                                                            of Narcotics and Dangerous Drugs Laboratories.
                                                                                            Physical evidence samples and materials examined
                                                                                                                                                                                   Industries                               Decision also requires the alcoholic content and the
                                                                                                                                                                                                                            net contents (where the product is not pack-
    Stills at distilleries ........._..__...do__                  5,         1.    4 3112
    Nortupaid distilled spirits ......... ..... gallons..
    Rush- ._ ................ ...... .....
                                                              2,697,345           M. on
                                                                                            in connection with criminal cases rose to 2,758, an                                                                              aged in bottles conforming to the standards of fill)
    Firear s .............................. number..              1,092            4,132    increase of 558 over the previous year. The greatly                                                                             to appear on the brand label of all distilled spirits
    Vahi'i ........ -----------
       ................        ......... _
    Property (appraised value).... ....... ..
                                                                  1: ..
                                                              1,876 730
                                                                             a.    1.=
                                                                                             expanded capabilities of the photographic laboratory                                                                           and prohibits net content statements from being
                                                                                             has resulted in the annual production of more than                                                                             qualified by any descriptive term such as "jumbo,"
  I Includes 715 arrests I., firearms violations, 2 1.;, tub-, and 19 for         14,000 color and black and white photographs of                                                                                 "full," and "giant."
    er violation! 1. 1969 courripwad with 449 r fit       rams, 5 for tobacco, and none
for other violations in 1968.                                                                physical evidence, and art objects.                                                                                                The third and final hearing was held in April
   Not-I       ud. unures and arrests In casea, adopted, as well as ofillosted, by the
Internal Reveno
            "I    a service, of Investigated jointly with State or local law enforcement
                                                                                                During 1969 the National Office Laboratory be-                                                                               1969. The notice of the hearing, which also con-
                                                                                             came actively involved in use of a new and more ef-                                                                            tained several substantive proposals not previously
Indictments and Disposals in Alcohol, Tobacco, and                                           ficient technique developed for dating writing inks                                                                            considered, was published in the form of a proposed
Firearms Cases                                                                               which formerly was done only through the use of                                                                                new regulation. At the close of the year a Treasury
   Recommendations for prosecution were pre-                                                 neutron activation analysis. The laboratory was able                                                                           Decision was being drafted to dispose of the issues
sented to U.S. attorneys in a total of 2,758 cases,                                          to acquire a complete library of domestically manu-                                                                             considered at the hearing and to include a complete
involving 4,129 defendants, as 'a result of actions                                          factured inks, as well as a library pf authentic domes-                                                                         rewrite of the regulations.
taken against violations of alcohol, tobacco, and fire-                                      tic typewriting specimens. With the availability of a
arms laws.                                                                                   complete ink, typewriting and paper analyses library,                                                                          Administration Developments Relat-
   A comparison of indictments and disposals for the                                         laboratory work is now being performed for other                                                                               ing to Alcohol Industry Operations
last 2 years is shown above.                                                                 agencies and in organized crime investigations.
                                                                                                                                                                                                                            Plastic Containers Being Tested
                                                                                                                                                                                                                               In view of the continuing trend toward the use of
                                                                                                                                                                                                                            plastic containers for an increasing variety of prod-
                                                                                                                                                                                   Alcoholic Beverage Advertising           ucts, the Service announced that, for experimental
                                                                                                                                                                                   Reviewed for Compliance.                 purposes, consideration would be given to applica-
                                                                                                                                                                                                                            tions for permission to bottle distilled spirits, during
                                                                                                                                                                                   73,349 Applications for Certificate of   1969, in plastic liquor bottles of less than one-half
                                                                                                                                                                                   Label Approval Processed.                pint and of one-half gallon capacity. It was specified
                                                                                                                                                                                   On-Premises Workload Continues           that such plastic liquor bottles must be made of
                                                                                                                                                                                                                            polyvinyl chloride containing only such additives as
                                                                                                                                                                                   Upward Trend.
                                                                                                                                                                                                                            have been approved by the Food and Drug Admin-
                                                                                                                                                                                   Chemical Analyses Made for               istration, and the Department of Health, Education,
                                                                                                                                                                                   Regulatory Work.                         and Welfare for use as containers in packaging al-

34 / Annual Report / Chapter Three                                                                                                                                                                                                                                               35
 cohol products. Several distilled -spirits plant pro-        beverage permittecs; practices which are contrary            Continuing Inspection Program                               agencies and private industry in three collaborative
 prietors engaged in this experiment.                         to the provisions of section 5(b) of the Federal Al-                                                                     experiments to be considered for sanctioning by the
                                                              cohol Administration-Act. In addition, action was                Although the total number of inspections made           Association of Official Agricultural Chemists. These
Alcoholic Beverage Advertising Spot Checked for               taken on 13 offers in compromise of violations of             during the year remained approximately the same
Compliance                                                                                                                                                                             experiments were directed toward the determination
                                                              the Internal Revenue Code.                                    as the previous year, the number of onsite inspections     of cadmium in various food products; of glucose in
   While it is not feasible to examine A alcoholic                                                                          of regulated alcohol and tobacco plants and facilities      plants and of iron in alcoholic beverages.
                                                              Increase in Permits Issued,. Formulas Processed               dropped considerably. This drop is attributed to (I )
 beverage advertising disseminated at producing,                                                                                                                                            "Analytical Profile of Cistern Room Whiskies,"
 wholesaling, and importing levels throughout the                In the National Office, 67 permits to use tax-free        the freeze on hiring to fill inspector vacancies, (2)
                                                                                                                                                                                        an extensive study utilizing analytical methodology,
United States, a sampling is made of advertising              spirits and 10 permits to use specially denatured            the use of 24 inspector man-years on firearms deal-          was published in a scientific journal. This report
published in selected newspapers and magazines of             spirits were issued to Government agencies. The Na-          ers inspections (the total of 28,954 inspections com-        tabulated pertinent data on mashing, fermentation,
                                                              tional Office processed 1,139 (up 300 over last              pleted during the year includes 5,554 firearms              and distilling techniques for each sample. Character-
general circulation in various regions of the United
                                                              year) formulas for rectified products, including such         dealer inspections), and (3) deployment of inspec-          istics of these samples were compared with those re-
States. During the year, advertisements in approxi-
                                                              products as cordials, cocktails, and blended whiskies,       tors to on-premises supervision because of many             ported in studies as early as 1898.
mately 18,000 newspapers and magazines were                   and 208 formulas for wine.                                   existing on-premiscs inspector vacancies (on-
examined.                                                                                                                                                                                   The analytical portion of a profile on straight
                                                                                                                           premises supervision is required by law and rcgula-         bourbon whiskey has been compiled and will soon
   While distilled spirits am not generally advertised        On-Premises Workload                      Continues          tions).
by radio and television (because of restrictions im-                                                                                                                                   be completed. It will include the effect on whiskey
                                                              Upward Trend                                                     Continuing emphasis was placed on developing            of entry proof, type and size of barrel, warehouse
posed by the radio and television codes of the Na-                                                                         and applying quality criteria in the selection of
                                                                                                                                                                                       conditions of temperature and humidity, and the
tional Association of Broadcasters and voluntary                    Distilled spirits plant proprietors received tax de-   plants and facilities for onsite inspection to assure        time of storage in charred new oak cooperage. These
actions on the paxt of members of the Distilled Spirits        ferral benefits on imported spirits upon enactment          compliance with Federal law and regulations. Com-           and other research programs resulted in the publi-
 Institute), both media are employed for the advertis-         of the Watts Bill (Public Law 90-630). This law             plementing the onsite inspection program are the
                                                               provided for the transfer of bulk imported spirits to                                                                   cation of seven papers which contributed to thefund
ing of wines and malt beverages. During the year,                                                                          examination and audit functions of the regional             of technical information for both Government 'and
 602 broadcast or televised commercials were re-               internal revenue bond, making such spirits eligible         offices. During 1969, personnel of these functions          private industry.
viewed. In addition, 1,066 proposed advertisements             for the longer tax deferral upon their subsequent           processed 22,185 notices and applications for per-
                                                               withdrawal from internal revenue bond under the                                                                              The national and regional laboratories examined
 and advertising campaigns were reviewed and com-                                                                           mits, examined 28,950 tax returns, and reviewed
                                                               present taxpayment-on-shipmcnt plan. Such trans-                                                                         7,048 formulas for specially denatured alcohol arti-
mented upon as a service to industry. Unlike labels,                                                                       5,907 reports for determination of assessible liability.
                                                                                                                                                                                       cles, 2,119 formulas for nonbeverage foods, flavors,
 advertisements are not required -by statute to be ap-         actions are required to be supervised by an on-
                                                                                                                                                                                       and internal medicinal products, and 10,211 label
proved prior to dissemination.                                 premises inspector. The on-premises workload has            Chemical Analyses Made for
                                                                                                                                                                                       approval requests. Figures for the previous year were
   Actions taken as the result of such examinations            increased due to the fact that proprietors have ac-         Regulatory Work                                             4,379, 2,398, and 10,568, respectively.
involved criticism of some 1,400 advertisements                quired bonded warehouses to avail themselves of the                                                                          More than 100 major categories of materials are
                                                               Watts Bill benefits.                                           The National Laboratory has pursued a continu-
either in conference or by correspondence.                                                                                  ing program of instrumentation and analytical              analyzed each year by the national and regional
                                                                    Production of distilled spirits increased from                                                                     laboratories. Among these are alcoholic beverages,
Large Number of Labels Microfilmed                                                                                         studies in developing new methods and techniques
                                                               905.5 million tax gallons in 1968 to 985.6 million                                                                      food products containing, alcohol, flavors, toilet
                                                                                                                           for carrying out the scientific aspects of its regulatory
     In administering the provisions of the Federal            tax gallons in 1969. During the year, 240.3 million         functions.                                                  preparations, lubricants, and tobacco. This year a
  Alcohol Administration Act and its related regula-           tax gallons of spirits were removed from bonded                Using atomic absorption spectrophotometry, the           total of 19,736 regulatory samples were analyzed as
  tions, the Service received and processed 73,349 ap-         storage upon determination of tax, 686.8 million            laboratory cooperated with other Government                 compared to the previous year's figure of 22,048.
,plications for certificate of label approval during           tax gallons were withdrawn tax-free, and 304.0 mil-
'1969. This volume is significantly larger (21,830)            lion wine gallons were bottled. At the end of the year,
  than that processed during the preceding year. The            1, 166.1 million tax gallons were on storage in inter-
  increase is principally due to the resubmission of pre-      nal revenue bonded warehouses. Production of rec-
  viously approved labels for distilled spirits in further-    tified distilled spirits products totaled 117.2 million
  ance of a project to convert label records to micro-         proof gallons.
 film. This project was initiated due to increasing                Production figures for other taxable products are:
  difficulty in maintaining voluminous label files.            Beer 122.7 million barrels (31 gallons each); Wine
                                                               243.5 million gallons of still wines, 13.0 million gal-
Offers in Compromise Processed                                lons of effervescent wines, 5.7 million gallons of
   Fifteen cases were closed upon the acceptance of            vermouth, and 18.3 million gallons of other special
offers in compromise pursuant to section 7 of the              natural wines; large cigars 6.9 billion; small cigars
 Federal Alcohol Administration Act. These cases               631.6 million; and cigarettes 573.0 billion.
involved such matters as the furnishing or giving of               Alcohol and tobacco tax collections continued to
equipment, services, things of value to retailers, or         climb, totaling $6.7 billion in 1969 as compared to
paying the retailers for advertising by alcoholic              $6 A billion in 1968.

36 / Annual Report / Chapter Four
                                                                                                                                                                             Supervision of the Alcohol and Tobacco Industries / 37
                                                                                                         Trial court cases won, lost, or partially won by the Govern.
                                                                                                         anent                                                                                                   Case Disposals by Office of Chief Counsel
                                                                                                                                                     Tax C~urt          Court of
                                                                                                                                                                        Cl.i.,            Dlitrict               Disposals in
                                                                                                                                                                                          co.rtz                 Alcohol and Tobacco Tax Area
                                               Introduction                                                               Action
                                                                                                                                                                                                                 Show Largest Increase
                                                                                                                                                    1968      an$      1968    im       1968      1913
                                                 The legal work of the Service is performed in the
                                                Office of the Chief Counsel. The Chief Counsel           Won------------- ...................       213         sic      48        ix    3DI
                                                                                                                                                                                         I           in
                                                                                                         Loci....                 ...........
                                               renders opinions to officials of the Service on sub-                               ...........        12-0        n
                                                                                                                                                                1-        3
                                                                                                                                                                         19        23     65
                                                                                                                                                                                          50         an

      chap                                     stantive legal questions. The office furnishes tech-
                                               nical assistance to the Treasury Department's legis-         In the trial or settlement of cases in the Tax Court,
                                               lative program. (See p. 40.) The legal staff also         $154 million was successfully defended. In refund
                                               prepares drafts of proposed regulations implement-        suits in the Court of Claims and the U.S. district
                                               ing the tax laws and participates in the rulemaking       courts, $73 million was successfully defended. A
      Legaland                                 process involving these regulations. For a discussion
                                               of the regulations program, see chapter 1, page 9.
                                                                                                         total of $227 million of revenue was thus saved for
                                                                                                         the Government in these cases. At the end of the                                                                 I
      Legislative                              For a list of selected regulations published, see ap-
                                               pendix beginning on page 80.
                                                                                                         year, $1.8 billion was involved in taxes and penalties                                                               6,187 6.121                       1968            25,950
                                                                                                         being contested in trial courts (see table below).
      Activities                                  Ile Chief Counsel represents the Commissioner
                                                                                                         Taxes In litigation
                                                                                                                                                                                                                                         t 4,606
                                               in trying and in helping to settle cases docketed in
                                                                                                        [in thm-d, of doll-I
                                               the Tax Court of the United States. The legal staff
                                               also furnishes advice relating to refund litigation,                                                              Tax can
                                               general litigation, criminal enforcement, and alcohol,             stuu3                Total                                              t cation
                                                                                                                                                     Deficiencin        Ovarpay.
                                               tobacco, and firearms matters. Important court ac-                                                                        -ta,                                                                                           1 573
                                                                                                                                                                                                                                                        ~331 1.15, 1,114i~;
                                               tions are included in the appendix beginning on                                                                                                                                                                                    868 790
                                                                                                        ft.qlng My 1                           1     $1 322 214            $55 931           1 1: 217
                                                                                                                                                                                           ~31 '41
                                               page 81. Statistics on legal activities are shown in     Rac-od ...............
                                                                                                        D                             1, 540 55        1 419: 477            9:461
                                                                                                        P..1"ad                          820: 31,
                                                                                                                                         11 111          31,3:,6,2          11: 85451
                                                                                                                                                                                   0           4,7:37
                                               tables 18-25 on pages 120 and 121. Criminal pros-                                                            34                                               Collation            Tax         Alcohol   Enforcment     Mud
                                                                                                        Arna. at .,ad     ---------     227,287              145,589                                                                                                               Othgr
                                                                                                                                                                              8,696             73,002       litigation          Court          and      litigation
                                               ecution cases are shown under chapter 3, Enforce-                                                                                                                                            tobacco tax
                                               ment Activities, page 29.                                  , Raxind.

                                               Caseload Inventory Down Slightly                         Tort Claims                                                                                       and disposals occurTed at the national and field
                                                Caseload receipts in the Chief Counsel's Office            The Service acted on 151 administrative claims                                                 levels and related to both cases in litigation and non-
                                              during 1969 were 25,591. Disposals totaled 25,946,        under the Federal Tort Claims Act during the year.                                                court cases. Most of the decrease in casework relates
                                              down four cases from 1968. At the end ofthe yearthe          The Service also acted on 79 claims under the                                                  to cases involving court proceedings. Case receipts
                                              pending total caseload was 22,970, a decrease of 355.     Military Personnel and Civilian Employees' Claims                                                 concerning matters in court decreased by 870 cases
                                                                                                        Act of 1964.This represents almost no change in the                                               in comparison to 1968 and receipts involving cases
                                              Civil Litigation                                          number of claims under the Federal Tort Claims                                                    not in court, such as advisory opinions, decreased
                                                The Supreme Court rendered two decisions in             Act and an increase of approximately 8 percent in                                                 by 398 under the preceding year. Case disposals for
                                              Tax Court casesduring the year. The Court decided         the claims under the Military Personnel and Civilian                                               1969 were down from 1968 figures by 836 cases in
                                                                                                        Employees' Claims Act of 1964 over the preceding                                                  court matters and 343 cases in non-court matters.
                                              one for the Government and one in part for the
                                                                                                        year.                                                                                             For detailed statistics on case receipts and disposals,
                                              Government. The Supreme Court rendered four
                                                                                                                                                                                                          see tables 23 through 25 on page 121.
     Government Successful in Overwhelm-      decisions in tax refund suits. The Government's
                                                                                                        General Litigation Legal Services                                                                    There were no Supreme Court decisions in gen-
     ing Majority of Trial Court Cases.       position was sustained in each case.
                                                                                                                                                                                                          eral litigation cases during the year, but there were
                                                 Ile Government won, in whole or in part, 283 of            Case receipts and disposals relating to general                                               a number of significant decisions by the courts of
     Service Assists in the Drafting of       the 349 civil tax cases decided by courts of appeal
     Tax Reform Proposals.                                                                              litigation matters handled at the national and field                                              appeals. These decisions relate not only to issues
                                               (exclusive of general litigation and alcohol, tobacco,   levels decreased in comparison to the preceding year.                                             arising in connection with the collection of Federal
     Legal Staff Decreases.                   and firearms legal matters). See table 21, p. 121. In     There were a total of 10,201 cases received during                                                taxes and the assertion of tax liens, but also relate
                                              the trial courts (Tax Court, Court of Claims, and          1969 as compared to 11,469 cases received during                                                 to issues arising in cases involving the civil enforce-
     $154 Million Successfully Defended       U.S. district courts) the record of Government wins,       1968. Disposals for 1969 were 10,475 as compared                                                 ment of internal                  revenue summonses.             These civil
     in Settlement or Trial of Cases
                                              losses, and partial wins appears as follows:              of 11,654 cases disposed of in 1968. The inventory
     in the Tax Court.                                                                                                                                                                                    summonses enforcement cases continue to be a major
                                                                                                        of pending cases at the end of 1969 stands at 4,913,                                              area of litigation at the appellate level. Summaries
     Interpretative Activities Focused on a                                                             a decrease of 274 cases under the 5,187 cases pend-                                               of some of the courts of appeals cases may be found
     Wide Variety of Problems.                                                                          ing at the end of 1968. The decreases in case receipts                                            starting at page 84.

                                                                                                                                                                                                                               Legal and Legislative Activities / 39
    Extensive legal assistance was furnished in con-                                                                                intended to liberalize and simplify certain controls
                                                                 Hearings before the         Committee on Ways and
                                                                                                                                                                                              permits the addition of wine spirits to certain nat-
 nection with disclosure of information matters, in-       Means on the subject of tax reforTn, which began                         over wine production.                                     ural wines of other than a winemaker's own produc-
 cluding matters arising under the Freedom of              on February 18, 1969, were concluded on April 24,                           Public Law 90-630, also enacted October 22,            tion; (3) liberalizes restrictions on the sweetening
 Information Act (5 U.S.C. 552). Also, national             1969. During the remainder of the year, the com-                        1968, amended sever-al provisions in Chapter 51 of        of high acid wines; and (4) changes the alcohol
 office and regional general litigation supervisors and    mittee met in executive session, on numerous oc-                         the Internal Revenue Code related to distilled spir-      content limitations applicable in the production of
 attorneys participated extensively in training sessions   casions, for the purpose of considering tax reform.                     its. Under the new law, bulk imported distilled spir-      certain wines.
 conducted during the year throughout the country          Although a bill relating to this matter had not been                    its may be transferred to Internal Revenue bond               Public Law 90-630 (1) extended the loss provi-
 in the new Advanced Technical Training Program            introduced at year end, the committee chairman                          from Customs custody prior to determination of             sions of the Internal Revenue Code relating to spirits
 for Revenue Officers.                                     had announced certain tentative decisions for pur-                      tax. Controls over bottling of distilled spirits for      to losses of distilled spirits after bottling but before
                                                           poses of drafting legislative language.                                 export arc liberalized somewhat, and provision is         removal from bottling premises; (2) eliminated the
 Revenue Legislative Assistance                                                                                                    made for some minor additional allowance with             requirement that spirits be bottled or packaged cs-
                                                           Legislation Completed             During Year
 Provided                                                                                                                          respect to tax on distilled spirits lost after removal    pecially for export with benefit of drawback but re-
                                                                Public Law 90-518, enacted September 26, 1968,                     from bond but before shipment from the plant              quired that drawback claims be filed only by the
     The Service provided extensive technical assist-      amended section 1263 of Title 18, U.S.C., relating                      where received for bottling.
  ance to other offices of the Treasury Department                                                                                                                                           bottler or packager; and (3) authorized bulk im-
                                                           to identification of intoxicating liquors shipped in                        Congress enacted a number of public laws related
  and to committees of Congress in the development                                                                                                                                           ported spirits to be transferred to internal revenue
                                                           interstate commerce. This pro vision is enforced by                     to tax matters, some of the more important of which
  of legislation and legislative proposals relating to                                                                                                                                       bonded warehouses without payment of the tax.
                                                           the Service. The new law permits identifying in-                        arc listed below:
  internal revenue matters. Although a substantial         formation to be placed on bills of lading in lieu of                                                                              Pending Tax Legislation
                                                                                                                                       Public Law 90-607, relating to the effective date
  portion of this activity was directed toward legisla-    the      previously      required     marking        of   shipping      of the change in the definition of earned income for         Among the tax bills which had been passed by
  tion which was enacted by the Congress during            containers.
                                                                                                                                  purposes of certain pension plans made by Public           the House and, at the end of the year, were awaiting
  the year and to bills pending before the Congress             Public Law 90-615, enacted October 21, 1968,                       Law 89-809.                                               Senate action are:
, at the close of the year, the major portion of the       included a minor technical amendment to the tax
   activity was directed toward tax reform proposals.                                                                                  Public Law 90-621, relating to the income tax            H.R. 8654, extending tax relief to the crew of the
                                                           drawback provisions of the Internal Revenue Code
  The Service also conducted research and study proj-                                                                             treatment of certain statutory mergers.                    U.S.S. Pueblo during imprisonment by North Korea.
                                                           with respect to tax-determincd distilled spirits used
  ects involving tax administrative problems and un-                                                                                   Public Law 90-622, relating to the income tax            H. R. 995 1, which, among other things, provides
                                                           in manufacture of nonbcverage products.
  intended benefits and inequities with a view toward                                                                             treatment of earnings derived from the ownership          for quarterly collection of the tax under the Federal
                                                                Public Law 90-618, the "Gun                 Control Act of
  the development of corrective legislation, and evalu-                                                                           or operation of a communications satellites system         Unemployment Tax Act.
                                                           1968,"        approved     October 22,        1968, significantly      by a foreign entity.
  ated a number of legislative suggestions made by                                                                                                                                              H.R. 12290, which would (1) extend the surtax
                                                           amended Title         18, U.S.C.,      Chapter 44,        firearms
  Congressmen, taxpayers, and its own employees.                                                                                       Public Law 90-634, which amended the. provi-         on individuals and corporations at the 10 percent
                                                           controls previously enacted (but not yet effective)
     The technical assistance was performed in several                                                                            sions of prior law relating to the treatment of in-       rate for the period July I through December 31,
                                                           as Title IV of the "Omnibus Crime Control and
  ways but principally by (1) preparing information                                                                               terest on industrial development bonds in the case         1969, and at the 5 percent rate through the first 6
                                                           Safe Streets Act of 1968." These controls arc ad-
  reports, technical reports, drafts of bills and ac-                                                                             of certain small issues.                                   months of 1970, (2) repeal the investment tax
                                                           ministered by the Alcohol, Tobacco, and Firearms
  companying technical explanations, and other data                                                                                    Public Law 91-36, which extends through July         credit, (3) postpone for 1 year the scheduled reduc-
                                                           Division of the Service. Changes included modifica-
  pertinent to the legislative proposal under consider-                                                                            1969 the rates of withholding of income tax (includ-      tion of the excise taxes on passenger automobiles
                                                           tion     of   standards    for   licensing     firearms   dealers,
  ation, and (2) attending public hearings and                                                                                    ing withholding of surtax) in effect with respect to      and communication services, (4) provide a low in-
                                                           manufacturers,        and importers;          extension, to long
  congressional committee meetings.                                                                                              wages paid before July 1, 1969.                            come allowance for individuals, and (5) allow fast
                                                           guns of certain controls applicable only to hand-
                                                                                                                                      Public Law 90-618 (the Gun Control Act of             tax depreciation of costs of certain air and water
Tax Reform Proposals                                       guns; and advancing the effective date of import
                                                                                                                                  1968) (1 ) channeled interstate and foreign com-
                                                           restrictions.                                                                                                                    pollution control equipment.
   Studies and proposals for tax reform were devel-                                                                              merce in firearms through importers, manufacturers,
                                                                Title II of Public Law 90-618 substantially re-
oped by the Treasury Department during the ad-                                                                                   and dealers licensed under meaningful Federal              Legislative Cooperation
                                                           vised the National Firearms Act (Chapter 53 of the
ministration of President Johnson pursuant to the                                                                                standards, (2) curbed the flow into the United                The Service has been cooperating with the staff of
                                                           Internal Revenue Code of 1954). A prime objective
request of Congress in the Revenue and Expendi-                                                                                  States of surplus military weapons and other fire-         the joint Committee on Internal Revenue Taxation
                                                           of Title II is to overcome the effect of the January
ture Control Act of 1968. These studies and pro-                                                                                 arms not suitable for sporting purposes; (3)
                                                           1968 decision in Haynes v. United States (390 U.S.                                                                               in drafting amendments to the Internal Revenue
posals were referred to in identical letters, dated                                                                              amended the National Firearms Act to extend the
                                                           85). This decision had significantly reduced the ef.
                                                                                                                                strict controls over gangster-typc weapons to de-           Code designed to eliminate obsolete and unnecessary
December 31, 1968, from President Johnson to the           fectiveness of the act's controls over machineguns                                                                               provisions in the alcohol, tobacco, and firearms areas.
                                                                                                                                 structive devices, such as grenades, rockets, mortars,
Speaker of the House of Representatives and the            and sawed-off shotguns by declaring unenforceable,                                                                               The joint Committee anticipates early passage of a
President of the Senate. Copies of these studies and                                                                             incendiary bombs, mines and similar devices; and
                                                           as compelling self-incrimination, provisions related
                                                                                                                                  (4) prescribed penalties for the knowing sale of fire-    noncontroversial bill to achieve elimination of
proposals were transmitted to the Chairman, Com-           to     registration   of   or    possession    of,   unregistered                                                                "dead wood" from the Code.
                                                                                                                                 arms to certain persons (including convicted felons,
mittee on Ways and Means, and the Chairman,                firearms.
                                                                                                                                 narcotics users, and those adjudged mentally dcfec-
Committee on Finance, by the Secretary of the                   Public Law 90-619, enacted October 22, 1968,                    tive), and for the unlawful receipt, possession, or         Interpretative Activities
Treasury in January 1969.                                  contained amendments to the wine provisions in                       transportation of firearrWs in commerce.                       Cases referred to the Interpretative Division by the
   Tax reform was the subject of President Nixon's         Chapter 51 of the Internal Revenue Code. These                             Public Law 90-619 (1) allows the use of special       Assistant Commissioner (Technical) and the litiga-
message to the Congress on April 21, 1969.                 amendments, which are of nrinor significance, are                    natural wines in the production of wine spirits; (2)        tion divisions in the Office of Chief Counsel during
40 / Annual Report / Chapter Five
                                                                                                                                                                                                        Legal and Legislative Activities / 41
the year included a large number of particularly            Legal Staff Decreases
significant legal issues. Of special interest are a senes      As of June 30, 1969, the Chief Counsel's Office
of rulings in the cooperative area; a          variety of
                                                            employco 1,249 Persons, with 620 attorneys and 629                                                Introduction
problems involving public policy; wide numerous
                                                            non-attorncy employees. This represents a decrease
questions regarding depreciation and the investment         of 29 attorneys and a decrease of 4 non-attomey em-                                                 The broad overseas program of the Service con-
credit. Segregated schools and groups concerned with        ployees from last year. Attorneys are assigned to the                                             sists of three functions. One involves providing
urban renewal received particular attention in the
                                                            National Office and regions as follows:                                                           assistance when requested to developing countries in
exempt organization area. Both litigation and ru ng                                                                                                           improving their systems of tax administration. An-
requests generated numerous interesting accounting,                                                     Number of                                             other is the administration of tax laws as they apply
earnings and profits, and corporate reorganization                                                       .1t.r.,y,                                            to U.S. citizens living abroad, nonresident aliens,
issues. Varied questions relating to the taxability of      National Office --------------------------------                                                  and foreign corporations. The third function involves
                                                            Central Region --------------------------- - ---    48
nonprofit organizations were encountered. The areas                                                             59                                            participation in the negotiation of tax conventions
                                                            Mid-Atlantic Region---------------------------
of organization classification, taxation of insurance       Mid-st Region------------------ ---------           53                                            or treaties with foreign countries to prevent cco-
                                                            North-Atlantic Region--- ----------------------     66
companies, constructive receipt of income, part-                                                                                                              nornic double taxation. When approved and put
ncrships, and natural resources have been pamcu-
larly active during the past year.
                                                            Southeast Region -------------------- - --------
                                                            Southwest Region----------------------------
                                                            Western Region-- - - - - - - -
                                                                                                                     Activities                               into effect, these treaties become useful and necessary
                                                                                                                                                              guidelines in administering our tax laws in the for-
                                                                                                                                                              eign area. Some of the more important highlights
                                                                                                                                                              and accomplishments resulting from the Service's
                                                                                                                                                              efforts to carry out these functions during the year
                                                                                                                                                              are related below.

                                                                                                                                                              Foreign Tax Assistance
                                                                                                                                                                  For the past 6-years the Internal Revenue Service,
                                                                                                                                                              through the Foreign Tax Assistance Program, has
                                                                                                                                                               been providing technical assistance to developing
                                                                                                                                                               countries of the free world at their request. This
                                                                                                                                                               program is mainly a joint effort with the Agency for
                                                                                                                                                               International Development (AID), in which AID
                                                                                                                                                               provides the funds and the overall development
                                                                                                                                                               policy, and the Service provides the technical pro-
                                                                                                                                                               gram, direction, and staffing. International and
                                                                                                                                                               private organizations which have formulated pro-
                                                                                                                                                               grams for tax reform in developing countries are
                                                                                                                                                               continually consulted to insure consistency and to
                                                                                                                                                               prevent duplication in the programs. Among those
                                                                                                                                                               consulted are the Organization of American States,
                                                                                                                                                               the Inter-Amcrican Development Bank, the Inter-
                                                                                                                                                               national Monetary Fund, the United Nations, and
                                                                                                                                                               Harvard University.
                                                                                                                     Foreign Tax Assistance Staff Gives       Onsite Assistance Provided
                                                                                                                     On-Site Technical Advice.
                                                                                                                                                                  Onsitc technical advice is one of the two major
                                                                                                                     Inter-American Center of Tax             features of the program. At present there are 61
                                                                                                                     Administrators Holds Third Annual        long-term advisors staffing 21 overseas teams. Seven-
                                                                                                                     Assembly in Mexico City.
                                                                                                                                                               teen of the teams are located in Latin America:
                                                                                                                     Overseas Taxpayer Assistance Furnished   Argentina, Bolivia, Brazil, Chile, Columbia, Costa
                                                                                                                                                              Rica, Dominican Repubfic, El Salvador, Guatemala,
                                                                                                                     "Competent Authority" Activity
                                                                                                                                                              Honduras, Nicaragua, Panama, Paraguay, Peru,
                                                                                                                                                              Trinidad and Tobago, Uruguay, and ROCAP
                                                                                                                     $23 Million Additional Tax Remitted        (AID's Regional Office for Central America and
                                                                                                                     by Foreign Governments or Withholding     Panama). The four remaining teams are in Korea,
                                                                                                                     Agents under Tax Treaty Provisions.       the Philippines, Turkey, and Vietnam. This year the

42 / Annual Report / Chapter Five                                                                                                                                                                                 43
  major phase of the project in India was successfully       during the year, increasing the number of countries       Overseas Taxpayer Assistance                                  The functions of the foreign posts are varied. They
  completed and the onsite team was withdrawn. On            represented to 21. The Third Annual General As-           Furnished                                                  include district type activities such as audit, collec.
 the other hand, a long-term team was sent to Trini-         sembly took place in Mexico City in May 1969,                                                                        tion, informal conference, and collateral assistance.
 dad and Tobago. The program is also providing               where the members concentrated on various aspects             Tax assistanot was furnished U.S. overseas tax-        Compliance is promoted by assisting taxpayers and
 technical backstopping for retired Service and              of planning for tax administration. Fifty-nine'dele-       payers for the 16th consecutive year. Participating       U.S. business firms and organizations abroad. Offices
 Treasury personnel who are engaged in assisting the         gates from member countries participated, together         in this program were 12 field agents and seven office     of Chief Counsel, Department of justice, and Treas-
 Republic of China, Jamaica, Lebanon, and                    with over 50 observers from international organiza-        auditors. Over 100,000 miles were traveled during
                                                                                                                                                                                  ury frequently are assisted on tax matters involving
 Singapore.                                                  tions and other countries within and without the           the 1969 filing period in offering tax assistance to      foreign areas. Extensions of the foreign post duties
    In support of the long-term teams, 24 specialists       hemisphere. The U.S. delegation was headed by               some 25,000 taxpayers located in 109 cities, in 53       include such activities as locating and interviewing
 were given short-term assignments to 13 countries.          Commissioner Thrower, and included Deputy Com-             different countries plus the Canal Zone and the
                                                                                                                                                                                  witnesses, assisting with depositions, serving sum-
 Surveys of tax administration reform needs were            missioner Smith and Harold Moss, Director of the            Islands of Wake and Guam.
                                                                                                                                                                                 monses, arranging contacts and giving guidance on
 completed in British Honduras, Ethiopia, Lebanon,          Foreign Tax Assistance Staff. Mr. Smith was one of             A series of income tax seminars on tax assistance     tax matters to Government officials who travel
 and Singapore.                                             the featured speakers. Lic. Roberto Hoyo, General          were held for U.S. taxpayers in 16 pre-selected cities.   abroad.
                                                            Administrator of Income Taxes of Mexico, was               These seminars were held on an experimental basis
                                                                                                                                                                                     Income tax treaty administration matters are
 More Countries Participate in U.S. Training"               elected president of CIAT's Executive Council, and         to provide economical but highly effective assistance     among the important functions of the foreign posts.
    The other major clement of the program is the           Commissioner Thrower was elected First Councilor.          to large audiences. The experiment was so successful      In this area they assist with competent authority
 orientation and training of foreign tax officials.             Among its other activities, the Center sponsored       that a decision has been made to expand this type of
                                                                                                                                                                                 matters, maintain close liaison with forei       tax offi-
 Supervisory and managerial training is provided in         its first technical seminar in San Jose, Costa Rica, in    taxpayer assistance next year.                                                                        gris
                                                                                                                                                                                 cials, handle informally matters that otherwise might
 the United States, in major foreign languages, while       January, for directors of audit. The United States             During the 1969 filing period the document "An-       become complex and serve as advocates Pf U.S. citi-
 technical training is done in the host countries. This     was represented by Mr. Singleton Wolfe, Director           swers to Questions Most Frequently Asked by U.S.
                                                                                                                                                                                 zens and business firms when foreign taxation con-
 year 219 participants from 58 countries took part in       of the Service's Audit Division. Based on the success      Taxpayers Abroad" was used in television and radio        trary to treaty provisions is proposed.
 training in the United States. Since the inception of      of that effort, a similar seminar on automatic data        broadcasts and in the newspapers to assist the maxi-
                                                            processing has been scheduled for nexfycar.                mum number of taxpayers abroad with their tax             U.S. Investment Abroad Increases
 the program, the Service has been host to 1,693 such
 visitors from 94 foreign countries.                                                                                   problems. This booklet is available for reference pur-
                                                            Tax Harmonization in Economic Communities                                                                                Under present law, information returns must be
                                                                                                                       poses in all U.S. embassies and consulates.
    A new feature of the training activity this year was                                                                                                                          made on Form 959 by every citizen or resident who,
                                                               The formation of communities of developing                 To provide tax assistance to the military commu-         on or after January 1, 1963, owns 5 percent or more
 the preparation and distribution, through AID mis-
                                                            countries, such as common markets and free trade           nity abroad, the Office of International Operations        in value of outstanding stock and by every officer or
sions and Service teams, of a Spanish-language home
                                                            areas is an increasingly impoqant clement in advanc-       (010) and The Judge Advocate General of the                director of such foreign corporations.
study course in accounting. This course is intended        ing economic progress. The harmonization of inter-          Army again sponsored a program of classroom basic
to fill a need for accounting training in those coun-                                                                                                                                Information from these reports is incorporated
                                                           nal tax systems will play an important role in improv-     income tax law instruction to selected members of
                                                                                                                                                                                  in our ADP system and used to identify U.S. owner-
tries in which such training is difficult to obtain.       ing the pace and quality of this development. The          the Armed, Forces. Over 800 servicemen attended             ship in foreign corporations for audit purposes and to
Development of Systems Analysis Capability                 Foreign Tax Assistance Program's regional advisor          these tax schools which were conducted at military
                                                                                                                                                                                  determine the trends in investment abroad. It is also
                                                           for Central America and Panama rendered active             installations in Europe, the Far East, and the Canal
   Systems analysis capability is essential to the de-                                                                                                                            used to develop Treasury and Service programs in-
                                                           assistancc to the Permanent Secretariat of the Gen-        Zone. Upon completion of the program, the students
                                                                                                                                                                                  volving United States-foreign transactions.
velopment of tax administration institutions in Latin      eral Treaty for Central American Economic Integra-         returned to their military units where they made in-
                                                                                                                                                                                     Analysis of these reports indicates that more U.S.
America. A pilot System's Analysis Training Pro-           tion (SIECA) in the development of a tentative             come tax advice available to approximately two-
                                                                                                                                                                                  businesses are entering foreign markets through di-
gram (SATPRO) was developed and given as an                plan for harmonization of tax policy and administra-       thirds of our Armed Forces abroad.                          rect investment in foreign corporations.
experimental course to 25 participants from five           tion. This effort is being watched quite closely since
                                                                                                                      Foreign Post Activities                                        In 1969, 3,161 new foreign corporations were
countries in 1966. Experience gained from this pilot       it will provide a precedent for tax harmonization in
                                                                                                                                                                                  identified from 7,288 Forms 959 filed. At the close
program led to the'dcvclopment of SATPRO 11                subsequent common markets.                                    Tax interests overseas are of major importance due
                                                                                                                                                                                  of the year the total number of foreign corporations
which is designed for onsite presentation in each                                                                     to U.S. citizens and business interests abroad. The
                                                                                                                                                                                  identified in which U.S. persons own at least 5 per-
country. The program includes a five-volume set of         New Tax Conventions Negotiated                             Service depends largely upon a staff of 17 technical
                                                                                                                                                                                 cent of the stock increased to 39,627. Canada, United
materials in Spanish and provides 60 weeks of com-              Attorneys from the Office of the Chief Counsel,       and nine clerical employees, assigned to nine foreign
                                                                                                                                                                                 Kingdom, Mexico, and France, in that order, are
bined classroom and on-the-job training. Successful        as representatives of the Commissioner of Internal         posts, to carTy out the mission of the Service in over-
                                                                                                                                                                                 the top four foreign countries in which U.S. persons
completion is a necessary"first step in the develop.       Revenue, assisted the Treasury Department in nego-         seas areas. The foreign posts are located at Bonn,
                                                                                                                                                                                  have made investments.
ment of senior analysts. Courses were initiated this        tiations with eight countries concerning bilateral        London, Manila, Mexico City, Ottawa, Paris, Rome,

year in Chile and Costa Rica.                              inconic tax conventions and with three countries           Sao Paulo, and Tokyo. As foreign geographical areas        Expansion of Automatic Data Processing to 010
                                                           concerning bilateral estate tax conventions. In 10         are divided among these nine foreign posts, some post         The task force appointed last year has identified
CIAT Expands Operations                                    cases the negotiations took place outside the United       areas are vast, encompassing thousands of miles. For       the systemic and procedural problems which have
   The Inter-American Center of Tax Administra-            States.                                                    instance, 16 foreign countries are included in the         in the past prevented the processing of 010's low
tors (CIAT) is a regional self-help institution com-           Instruments of ratification of an income tax con-      Sao Paulo post territory whHe the Rome post includes       volume, high complexity returns under the Service's
 posed of the principal tax administrators of Western      vention between France and the United States were          14 countries on three continents and requires 4,000        automatic data system. Some of these problems are
Hemisphere countries. Canada became a member               exchanged on July 11, 1968.                                miles of travel to the most distant point.                 the extended filing date for taxpayers overseas, the
44 / Annual Report / Chapter Six
                                                                                                                                                                                                        International Activities / 45
  income exclusion provisions of the Internal Revenue     diction notwithstanding the fact that both the tax-          deductions between related enterprises. This has
  Code, the location of taxpayers all over the world      payer and his assets were in a foreign country.                                                                           It is contemplated that if other treaty couritrics
                                                                                                                       brought about an increase in international allocation     request certifications similar arrangements will be
 which necessitates the exclusive use of airmail, the        Ile case in point was United States v. Hendrik
                                                                                                                       type cases which have necessitated consideration          negotiated to follow the in effect.
  use of Spanish language by taxpayers residing in        uan der Horst, et al. The United States District Court       by the respective competent authorities.
 Puerto Rico, and other peculiarities which makes         for the District of Delaware ordered the sequestra-
 the processing of 010's returns unlike the process-      tion of 5,000 shares of preferred stock, the certificates
                                                                                                                          Various issues were acted upon by the U.S. com-        Income From Foreign Investment in
                                                                                                                       petent authority and his counterparts under the
 ing of returns filed by stateside taxpayers.             for which were located outside the United States, and
                                                                                                                       treaties which included determinations of nature of
                                                                                                                                                                                 the United States
    These problems have now been resolved, includ-       rendered judgment in favor of the United States.              income, dual residence status, permanent establish-             Each year the Service compiles statistics on in-
 ing the issuance of Spanish language fornis and cor-    This ordpr was rendered under the provisions of               ment problems, and foreign tax credit problems.             come flowing from U.S. sources to nonresident
 respondence, making it possible to machine process       Delaware law. The Delaware law provides that the                                                                         aliens, foreign corporations, and other foreign en-
                                                                                                                          During the year 63 treaty cases (income and es-
these returns. Therefore, OIO's conversion to data        situs of stock in a Delaware corporation is presumed
                                                                                                                      tate tax issues) were considered and 34 cases were           tities. This income, whether subject to or exempt
 processing has been scheduled for January 1, 1970,       to be in Delaware regardless of the location of the                                                                      from withholding, must be reported to the Service
                                                                                                                      closed. The greatest activity in the treaty area in-
for business returns and January 1, 1971, for in-         stock certificates. This law allows creditors of share-                                                                  by the U.S. payer. Analysis of these statistics pro-
                                                                                                                      volving competent authority intervention was with
dividual returns. The Mid-Atlantic Service Center        holders in Delaware corporations to foreclose their                                                                       vides useful data on the nature, source, and amount
                                                                                                                      the United Kingdom and Canada. Even further
has been selected to process these returns.              liens by action in Delaware on such shares even
                                                                                                                      activity in the competent authority area is expected        of foreign investments in the United States. This
    Included in the documents which will be taken        though the stock certificates are unavailable and the                                                                    information is used by Treasury and the Service
                                                                                                                      because of the expiration of Revenue Procedure
into the system are approximately 200,000 returns        debtors beyond reach.
                                                                                                                      64-54. For taxable years beginning after December            in considering legislation and compliance programs
filed by U.S. citizens residing abroad. Because these                                                                 31, 1964, taxpayers who are subjected to economic           in the international area.
                                                         Requests for Relief Under Revenue Procedure
returns frequently contain unique issues not found                                                                    double taxation due to section 482 allocations made
                                                         64-54 Continue                                                                                                                Latest statistics available show that for calendar
in the returns of resident citizens, they cannot be                                                                   between related domestic-foreign entities may apply         year 1967, as in past years, substantially all of the
identified for examination by the computer under             Revenue Procedure 64-54 provides for admin-
                                                          istrative relief from double taxation where Section         for relief to the competent authority, if a treaty          foreign investment in the United States originates
the discriminant function system being used to screen                                                                 country is involved,                                        in foreign countries with which the United States
the returns of other taxpayers. Special procedures        482 allocations are made between U.S. taxpayers
                                                          and their controlled foreign entities. This Procedure                                                                   has income tax treaties. These treaties. provide, in
arc being adopted to screen 010 returns manually                                                                      Service Achieves       Uniformity    in   Certification     most cases, for preferential tax treatment of the in-
at the service center through the use of specially        has expired for taxable years beginning on or after         Program
                                                          January 1, 1965; however, requests for relief from                                                                      come from investments in the United States by per-
selected audit criteria.
                                                          economic double taxation submitted under this pro-               The Service withholds at the statutory rate of 30      sons resident in treaty countries. At the present time
Some Returns Not included in ADP System                   (:cdure continue to be received.                             percent on income flowing abroad to nonresident            the United States has income tax treaties with 32
                                                                                                                        aliens unless the address of the payee indicates that     countries. These include 10 countries to which the
    Remaining outside the ADP system will be re-             At the end of 1969, 128 requests had been re-
                                                                                                                       a treaty country reduced rate is applicable. On the        22 basic treaties were automatically extended when
 turns filed by nonresident aliens (Forms 104ONR),       ceivcd claiming $12 million in offsets. Action was
                                                          completed on 99 requests involving $9.6 million.             other hand there has been a trend among treaty             they became independent.
 foreign corporations doing business in the United                                                                     countries to use a certification system to determine
 States (Forms 1120F), and withholding agents re-         Relief denied for various reasons totaled $2.8 million                                                                       The following table is a summary of income paid
                                                                                                                       if U.S. recipients of income from their respective
 sponsible for withholding tax from income flowing        or 29 percent of the total claimed.                                                                                     to nonresident aliens and foreign entities and applic-
                                                             Relief under Revenue Procedure 69-13 is ex-               countries are. entitled to reduced treaty withholding
 abroad (Forms 1042). These returns, almost                                                                            rates.                                                     able tax withheld from such income during calendar
  100,000 in number, will continue robe filed with and   tended to domestic corporations and their domestic                                                                      year 1967. The table shows that persons from
                                                         subsidiaries located abroad. It'is too early to de-               The Service has encountered administrative prob-
 processed manually in CIO, along with the ap-                                                                                                                                    Canada, Switzerland, and the United Kingdom in-
                                                         termine the additional volume of requests that will           lems in certifying to all the information requested
 proximately half-million information documents                                                                                                                                  vested the largest amounts in U.S. enterprises. The
                                                         be received under this new concept. However, initial          by these treaty countries; furthermore, there has
  (Forms 1042S) which accompany withholding                                                                            been a lack of uniformity among the treaty countries      amounts shown in the fourth column of the table,
 agents returns. Study of these returns will continue    requests indicate that they will be unique and
                                                                                                                      as to the nature of the information requiring              headed "Tax from Foreign Governments or With-
 in boom of resolving systemic and procedural prob-      complex.
                                                                                                                       certification.                                            holding Agents," represent additional tax remitted
 lems to permit their inclusion in the automated Sys-    Expanded Competent Authority Activity                             A study of income received by U.S. recipients         to the United States in excess of the reduced rate on
tem at an early date.                                                                                                  from treaty countries indicated that potentially more     dividend income provided for by an applicable
                                                             The elimination of double taxation by the com-
Developments in Collection of Taxes Overseas              Petent authority under tax treaties with foreign            than 123,000 requests for certifications could be          treaty when received by persons not entitled to the
                                                          countries is an activity growing in scope and               received annually. Considerable effort, therefore,         reduced rate. This income is subjected to withhold-
   The location of taxpayers and their assets outsice                                                                 was devoted to achieving consistency and simplicity
                                                          importance each year. The expanded activity during                                                                     ing in the United States at treaty rates since it is paid
the United States and the collection of taxes from                                                                    in a certification program which would find accepta-
                                                          this year is attributable to several factors. There has                                                                to per-sons with addresses in treaty countries. Where
these taxpayers generate unique problems for 010.                                                                     bility by the United States and its treaty partners.
                                                         been a large increase in U.S. investments abroad.                                                                       the recipient is a nominee and the beneficial owner
However, a precedent established by success in a         There has also been an increase of foreign invest-                The Service developed a standard format which         is not a resident of a treaty country the treaty country
court case during this year will somewhat alleviate      merits in the U.S. primarily due to the Foreign              has been accepted by six treaty countries (United
these problems.                                                                                                                                                                  collects and remits an additional amount to meet
                                                          Investors Tax Act. In addition, the Organization            Kingdom, Belgium, Germany, Netherlands, Italy,             the U.S. statutory 30 percent withholding require-
   Normally, U.S. courts cannot assist in these cases    for Economic Cooperation and Development meet-               and Luxembourg). Basically, this certification states     ment. Of the $23 million additional tax remitted by
because of lack of jurisdiction. However, in one         ings; have made treaty countries aware of the prob-          that the particular U.S. person has filed a U.S.          foreign governments, nearly $21 million was from
case, it was discovered that the U.S. court had juris-   lems of the proper apportionment of income and                income tax return as a resident of the United States.    Switzerland.
46 / Annual Report / Chapter Six
                                                                                                                                                                                                       International Activities / 47
Income payments to nonresident alien persons of treaty and nontreaty countries during calendar year 1967 and tax
withhold therefrom

                                                                                                                                          Thousand dollart
                                                                                                                                                                                                                                         Research Studies Taxpayer
                                                                                                    Number of
                                                                                                                                   Tax withheld
                                                                                                                                   b y dominitic
                                                                                                                                                         Tax from
                                                                                                                                                          foreign             tax
                                                                                                                                                                         T ot a l
                                                                                                    fttinnimt,        1-in.         withholding        government;       withheld
                                                                                                                                      agents          or withholding
                                                                                                                                                          agenda                                                                            Research activities were directed toward advanc-
                                                                                                                                                                                                                                         ing the overall administration of the tax laws. Rc-
     rebel...................................... ..............                                         475,650        928.947           114,346              23,305            137, 51                                                   search projects were initiated to:
Treaty     nine.;
    A    o
    AUV21it----------------------- ------------------------------- -
       us .                                                                                                3 546         2 453                                                         300                                                   1. Assist the Treasury Department in formulating
                                                                                                           1: 798        4: 133               M3                                        123
              and ..1aeni;iiiii;                            -------------------
                                               ......... ........ _......                                  7 864
                                                                                                                        15. 279
                                                                                                                       190 920
                                                                                                                                            1 ,943               188                 2 13 1                                              its legislative program.
                                                                                                                                          24 302               1,211 1              15:5
                                         ........ :: ......       ---------------------
   F                                                                                                           2
                                                                                                                 32      5: 64
                                                                                                                                              '2                                                                                             2. Measure the extent of taxpayer compliance in
                                                        .........                           ....                        40,545             4,299                  50                                                                      reporting specific types of income, and
   ledlr:l          I
                U1-_W             ------ ......... ...                                                                                                                               4
                                                                                                                                                                                     2:   34
                                                                 ...... .............                    20.917          4 157
                                                                                                                         f: .              2,143     --------- ......
   Gr                                                                                                                                                                                       9
   lialenW. :::::::                                                            ......                      3 172         3 230
                                                                                                                                                31    ---     -------                     2~ 3                                               3. Effect improvements in procedures, forms and
   1                                                                                                                                                                                      4R
                                      - -                      ......                                       :795        :1:1 12               17'

                                                                                                                                                                                                 Activities                               instructions.
              ---------------------                                                                        1: 33
                                                                                                           2 78          7 1"
                                                                                                                         6: 1                 s47                                         947
   Lu-bouii..:                                                                                                  4             48              634                 94                      729
   Whvi.rd,       ---------- * ........ -----------------------------------------                         4 907
                                                                                                           1:6          86 654            10 452                 5257                                                                        Assistance in Treasury Legislative Program-
                                                                                                                        22~925             3: 154                                   10. 1 5
   No. Zeal and
          .       .......... .......... .........                                                                                                                                    3, 1
                                                                                                                                                                                                                                         The assistance provided the Office of the Secretary
   =W :_                                                         ......... ..................                07
                                                                                                          3,757              33B
                                                                                                                         2, 33'               221
                                                                                                                                               11                                           '
   Sweden--- ------------------------------------------------------------- ......
                                                                                          ::::::                             292              934                                          14
                                                                                                                                                                                          95,                                            on tax legislative proposals took many forms. The
                                                                                                          3,509         14,350                 51        ............
   11~" of nd
     .                              ... .........................
                                                                                                        30,9283        174.536            20.102              20 754                       51
                                                                                                                                                                                           53                                            impact of tax reform proposals on the Service's costs
                                                                                                             D9             814               218                  B:               '91
                                                                                                                                                                                                                                         and resources was periodically updated; optional
   U led K                                      ...................      ..........                       7 397
                                                                                                          7: 72                           28,
   Nontreat     ,                                                                                       1 '
                untf     by Form & 1042S.. . . _ . _ .. -~ ...                                                         T : Of
                                                                                                                       52                 13,27                                      3:2M
                                                                                                                                                                                    2' 0 '
   Treaty a nd"o ntru ty countrieli by Coupon Bond
                                                                                                                                                                                                                                         sets of tax tables were designed to implement various
                     ies                                                                                30,916         10,513                 879                                     87-1
    . Arriounts too iunall to report.                                                                                                                                                                                                    tax rates proposed; and the administrative implica-
                                                                                                                                                                                                                                         tions inherent in changes in legislative proposals
                                                                                                                                                                                                                                         were reviewed as proposals took various shapes in
   When reporting income payments to foreign per-                                                  authorities of these foreign countries. During calen-
                                                                                                                                                                                                                                         the legislative process.
sons the U.S. payer submits an information docu-                                                   dar year 1968 approximately 400,000 information
ment, Form 1042S, identifying the recipient of the                                                                                                                                                                                           Studies to, Measure Compliance.-Studics to de-
                                                                                                   documents were automatically sent to these foreign                                                                                    terTninc the extent of taxpayer compliance in report-
income, the nature and amount of income paid, and
the amount of tax withheld. Under the automatic                                                    tax authorities. In return, the Service received 123,-                                                                                ing various types of income provided objective bases
exchange of information provisions of income tax                                                   000 documents from them giving similar informa-                                                                                        for legislative proposals, regulatory changes, and
                                                                                                   tion on income received by U.S. taxpayers'from                                                                                        other program modifications. Prominent among
treaties with foreign countries the Servico.- furnishes
                                                                                                                                                                                                                                          these compliance-oriented studies completed or in
copies of these information documents to the tax                                                   sources within their countries.
                                                                                                                                                                                                                                          process were the following: (I) A study of tax-
                                                                                                                                                                                                                                          payer's compliance in reporting Federal unemploy-
                                                                                                                                                                                                                                          ment tax conducted in cooperation with the Bureau
                                                                                                                                                                                                                                          of Employment Security of the Department of
                                                                                                                                                                                                                                          Labor; (2) a study to determine the extent to which
                                                                                                                                                                                                                                          farmers rcpor~ as income payments from the Depart-
                                                                                                                                                                                                                                          ment of Agriculture under major conservation and
                                                                                                                                                                                                                                          commodity stabilization programs; and (3) a
                                                                                                                                                                                                                                          sample survey to ascertain the extent of compliance
                                                                                                                                                                                                                                          in the reporting of interest from the redemption of
                                                                                                                                                                                                                                          series E savings bonds.
                                                                                                                                                                                                                                             Research to Improve Overall Administration-
                                                                                                                                                                                                 Planning Geared Toward Growing           Research studies having an effect on overall tax
                                                                                                                                                                                                                                          administration included a review of the present filing
                                                                                                                                                                                                                                          due dates for tax returns and information returns
                                                                                                                                                                                                 Continued Studies Measure Compliance.    to determine whether any changes would assist tax-
                                                                                                                                                                                                                                           payers and the Service. In addition, a study is under-
                                                                                                                                                                                                 Computer Selects Returns for              way to determine the most effective approach for
                                                                                                                                                                                                 Statistical Samples.
                                                                                                                                                                                                                                           employing computer methods, to assert penalties for
                                                                                                                                                                                                 Planning-Programing-Sudgeting             failure to comply with requirements for timeliness
                                                                                                                                                                                                 System Focuses on Key Management          and adequacy of tax deposits for employment, excise,
                                                                                                                                                                                                 Issues.                                   and estimated income taxes.

48 / Annual Report / Chapter Six                                                                                                                                                                                                                                                              49

                                                                                                                                                                                                    363-OD5 0-70---6
     E§orts Expended to Better Coordinate rvith Facil-     Requirement For Effective Plan-                             from both the individual and corporate returns filed      areas grew. As a consequence, the effects of the hir-
 ities and Systems of Employers and States.-A sur-                                                                     phases of TCMP will be used in developing resource        ing restrictions had to be absorbed predominately
 vey of payroll practices and systems of employers was
                                                           ning-The Taxpayer Compliance                                allocation models; determining needed changes in          in the audit program.
  initiated in order to provide benchmark data for         Measurement Program                                         audit class definitions; evaluating taxpayer assist-          A "Specialized Analysis of Programs for Reduc-
 devising improvements in the various employment               In planning effective programs to solve the long-       ance programs; and measuring the level and changes        tion of Crime" was conducted as a part of an execu-
 tax laws, and to enable the Service to adjust with-        range enforcement problems of the Federal tax              in taxpayer compliance by audit class, the gross tax      tive branch effort to identify resources allocated to
 holding and collection systems in accordance with          system, the Service requires an accurate measure of       administration gap, and the indirect effects of tax        combat crime. A decision was made to increase re-
 facilities available to employers. Also, with a view       its workload as well as its major characteristics so      return audits on taxpayer compliance levels.               sources allocated to the drive on organized crime.
 toward facilitating the interchange of tax informa--       that alternative applications of its limited resoumes         In the delinquent accounts and returns areas, two          As an integral part of the PPBS, the Service con-
tion between States and the Service, State tax agen-        can be evaluated. For this purpose the Taxpayer           surveys were initiated during 1969. For the first time     tinued to conduct several in-depth analyses of sig-
 cies and employment securities offices were surveyed       Compliance Measurement Program (TCMP),                    a TCMP delinquent accounts survey was developed            nificant Service programs in order to facilitate the
 to obtain basic information about their data procm-        which is the major long-range scientific research pro-    using a sample of taxpayers from the individual and        selection of alternative courses of management ac-
 ing systems.                                               gram of the Service, was established in 1963.             business master files. The purpose of this survey is to    tion. Among the most significant of these are:
 Projects To Assist Taxpayers                                                                                         determine the overall size and nature of the delin-            1. A special study of the total "Taxpayer Assist-
                                                               In emence the TCMP can be described as a re-
                                                           search system whose purpose is to determine whether        quent accounts problem in terms of taxpayer delin-         ance and Services" program to re-examine the over-
    A survey of the reporting practices of payers of
                                                                                                                      quent account issuance levels; sources of issuance;        all objectives in areas of rulings and interpretations,
 annuity benefit was conducted during the year. The         the operational plans of the Service are attaining arid
                                                                                                                      and distribution by size of delinquency, geographic        forms and publications, printing and distribution of
purpose of this survey was to obtain data to provide        maintaining the objectives of tax administration at
                                                                                                                      area, and tv pe of tax. This survey will also be used
                                                                                                                                   ,                                             tax forms, taxpayer assistance and related services,
 a basis for improving the content of information           reasonable cost. T'his means that in addition to de-
                                                                                                                      to develop and maintain a master file model for use        and taxpayer education and public information.
 furnished to recipients by the taxpayers. Also, assist-    veloping cost yield relationships the major uses of
                                                                                                                      in analysis and evaluation efforts where a sample of           2. A complete review to re-evaluate the role of of-
 ance was given in preparing an instructional booklet,      TCMP data will be: (1) To measure the levels of
                                                                                                                      taxpayers, rather than a complete count, will be suf-      fice audit in accomplishing the overall Service mis-
 which in layman's language provides rules on the tax       compliance and tax administration gaps for deter-         ficient.                                                   sion of maximizing voluntary compliance with the
treatment of annuity payments received by regular           mining the Service's long-term enforcement policies;                                                                  I nternal Revenue laws.
and disabled Civil Service retirees. The Civil Service                                                                    The third TCMP delinquent returns (nonfarm
                                                             (2) to determine changes in compliance levels over                                                                      3. A study which is to result in a developmental
Commission mailed approximately 600,000 of these                                                                      business) survey was also initiated during 1969. For
                                                            a period of time for proper direction of enforcement      this third cycle, the survey was extended to all seven     effort aimed at designing and implementing a data
booklets to disabled and regular retirees.                                                                                                                                        processing system to provide the capabilities required
   Additionally, in order to alleviate hardships on         programs; (3) to develop better selection procedures      Service regions as planned so as to completely meas-
                                                            to improve the effectiveness of enforcement opera-                                                                   by tax administration in the 1970's. A contract was
taxpayers arising from overwithholding of income                                                                      ure the extent and tax significance of return filing
                                                            tions; and (4) 'to identify alternative methods of                                                                   negotiated with a systems engineering consulting firm
tax, a study to determine the primary causes of such                                                                  delinquency among nonfarm business taxpayers; to           to assist the Service in planning and conducting this
overwithholding was completed and recommenda-               operations to achieve greater operating economics.        measure the level and changes in noncompliance; to
                                                               Since its inauguration, TCMP efforts have been                                                                    study.
tions were made to: (1) eliminate withholding on                                                                      test the coverage completeness of the ADP master             . Two major program issues were designated by the
nontaxable employees; (2) liberalize the rules for         expanded to cover fourmajortax enforcement areas:          file system; to determine taxpayer characteristics as-      Budget Bureau for PPB studies. A study of the "Level
claiming additional withholding allowances; and             (I ) Individual income tax returns filed, (2) corpora-    sociated with nonfiling; and to measure the returns        of IRS Audit Coverage" was completed and a long-
 (3) provide for optional cumulative withholding           tion income tax returns filed, (3) delinquent ac-          filing delinquency gap not accounted for by current        range study of Service organization, aimed at pro-
where compensation is not spread evenly over the           counts, and (4) delinquent returns. Planning or            operations.                                                 ducing a plan of organization best suited to the tax
year, as in the case of commissions, bonuses, and          implementation efforts were undertaken in each of                                                                      administration job of the next decade, was initiated.
seasonal employment.                                       these four areas during 1969 despite severe shortages      Planning-Programing-Budgeting Sys-
                                                            of enforcement manpower.                                                                                             Service Workload Expected to
Systems Development Activities                                                                                        tem Focuses on Key Management
                                                               The first use of the computerized discriminant
Plans for Third Generation Equipment at Data                function system in 1969 for seJecting low-income          Issues                                                     Continue to Grow
Center                                                      individual income tax returns for audit was a major           Analyses of the 1969 program alternatives were             The projected expansion in U.S. population, em-
   A request for proposals for replacement equip-          benefit from the use of TCMP data. Research using          conducted to meet the resource restrictions imposed        ployment, and income indicates a continuing growth
ment for the Detroit Data Center was made to the            data from a more recent cycle of the TCMP indi-            by the "Revenue and Expenditure Control Act                in the number of tax returns to be filed through 1980,
computer industry in October 1968. The present              vidual returns filed survey was also undertaken to         of 1968" (Public Law 90-364) as a part of the             and the need to plan for the required resources and
equipment is almost 10 years old, and it is antici-         update and improve the efficiency of the discrimi-         Service's Planning-Programing-Budgeting System            systems capable of handling the workload associated
pated that modern computers, with modern pro-              nant function formulas to be used in selecting               (PPBS) to minimize the impact of hiring restrictions     with the increased volunne. Effective planning re-
graming aids and operating systems, can greatly            individual returns for audit from all income classes        on tax administration programs. First priority was        quires projections of tax returns to be filed for vari-
reduce programing time and production time, im-            in 1971.                                                   assigned to data processing programs in order to           ous detailed categories to meet specialized needs for
prove computational capability and reduce the unit             The first TCMP survey of small corporation (with       make timely tax deposits, to issue refunds, and to         processing and auditing returns, and for estimating
cost of production. Six potential suppliers responded      assets of less than $1 million) returns was started         issue bills for taxes due. Second priority was afforded    long-range requirements for the number of personnel
with proposals which were evaluated in part through        during the year. Data from this survey will be used        to the delinquent accounts and returns programs.           and facilities. In addition, the projections are used
live "benchmark" tests. Equipment selection is             to develop discriminant function formulas for select -     Since the Service has no way to control the number         for current work planning, budget development, and
scheduled for April 1970 for installation in October       ing returns for audit from the small corporation re-        of delinquent accounts issued, or the number of leads     the allocation of funds and manpower between re-
 1970.                                                     turns procemed in 1973. In addition, survey data           to unfiled returns, inventories in these enforcement       gions and service centers.

50 / Annual Report / Chapter Seven                                                                                                                                                                          Planning Activities / 51
    Between calendar years 1960 and 1969 the num-                                           Statistics of Income                                       Individual Income tax returns: Number of returns, sources of Income, and Itemized deductions
 her of individual returns rose 24 percent and corpo-
 ration returns 57 percent. The more complex indi-                                              Two 1965 Statistics of Income volurnm--onc for                                                                                                                                              lecormy...
 vidual returns, those with incomes over $10,000, in-                                        corporation income tax returns, the other for non-
                                                                                                                                                                                                                                                          1963                                              I 966
 creascd from 4.7 million in 1960 to 19.1 million in                                        corporate businesses were released, completing the                                                                                                                         I   f-          In       lit",
  1969 (306 percent) and are expected to increase to                                        series of reports representing the 50th consecutive                                             A. Number at returns                                                                            (Thousands)
 44.9 million by 1980.                                                                      year of the publication of statistics with respect to                                                                                                                           65.376               67,596
                                                                                                                                                       All individual returns, total ..............................................................         63,943                                            70,160           71,652
                                                                                            the operation of the income tax laws. A list of other
    The total returns workload grew from 94.5 million                                                                                                       Taxabl--------------__.................. ............................... ......                 .2 2D
                                                                                                                                                                                                                                                            11:6311          11:31
                                                                                                                                                                                                                                                                             1,                  53 19116
                                                                                                                                                                                                                                                                                                 13:8           3:7
                                                                                                                                                                                                                                                                                                              11 1             58,673
                                                                                            Statistics of Income reports published during the               Nontaxable -----------_ ..................                 -------------_........ _:                                 069                              451          12.979
 in 1960 to I 10. 7 million in 1969 and is expected to
                                                                                             year appears on page 92.                                  Returns with itemized deductions, total---                                        ...........        28,154           26,910              27,872       28, 56D          29,774
 reach 113.2 million in 1970, 124.7 million in 1975,                                                                                                                                                                                                        252 8216         211:11              211:1915
                                                                                                                                                                                                                                                                                                       11     26:792           281:122
                                                                                                Some highlights of the most recent data, pub-               T ..It ---------------------- ------------------- ........ ........                                 32               900                                                652
 and 137.7 million in 1980. Projections for some of                                                                                                         Nontaxable------------_-------------_- ------- ..........                                                                                             768
                                                                                            lished or unpublished, are:
the major categories of returns are as follows:                                                                                                        Returns with standard deductions, total I ......... ................................ .......         35,789           38,446               39,724      41,600           41,977
                                                                                                1. Individual income taxpayers reported a record   ----------------------------- ......... ..................... ..............              11:115
                                                                                                                                                                                                                                                             10              12:19
                                                                                                                                                                                                                                                                            11 1                  f1:71
                                                                                                                                                                                                                                                                                                 17           29               1
                                                                                                                                                                                                                                                                                                                               3D, 551
 Selected Types of Returns Filed In 1968 and 1969 and                                                                                                       Nontaxable] ------------------------------- __. -----------------_...........                       294              16                  980a     ll:'1.3            1,327
                                                                                             high $505 billion adjusted gross income for tax year
 Projected for 1975 and 1980, by Calendar Year                                               1967, an increase of almost 8 percent. Tax liability                                           0. Sources of income                                                                        (Million dollars)
(I. thousands)                                                                              rose to $63 billion, a substantial 12 percent increase.
                                                                                                                                                       Adjusted limas income, total ............................................................           368.778         396,660              429,2DI      468,451          504,M
                                                                      Projected             Net capital gain showed the sharpest rise of ;uiy
           Type of Return                I
                                        Actual 1   Fill ate 2                                                                                              an as to
                                                                                                                                                           S&1,,,,.1ax ,"d,*,.                                                                   ......    299 443         323 266              347 15'      11 117           411646
                                                                                            source of income, art increase of almost 38 percent.                               and
                                                                                                                                                                               "' '_jiW_m ion........ ___ ............................
                                                                                                                                                                                        _                                                                   23: 872         25:628               27:953       30:258           30:745
                                           969       1969
                                                                  1975        1980                                                                         Dividends in adjusted gross---------------------------------------------------
                                                                                                                                                                                          Inc... 1. ~ --------------------- ---------- --------------       1 452           11,91                1
                                                                                                                                                                                                                                                                                                 12 961       13 998           14,202
                                                                                            Some summary data for 1967 are presented in the                P
                                                                                                                                                           Intemstracermd ..................................... ...........................                  9 12            0,1275                1:29G      113:225          14,899
                                                                                                                                                             artrmship.......................... I ................... ........................              9 313           9 731
                                                                                                                                                                                                                                                                             7: 939              10 606        90,726
                                                                                                                                                                                                                                                                                                                  941          11,534
Total returns.... -------------- 108,900            110,917      124,686      137,6V         table on page 53.                                             ca pita! gains ......................                                                             6:449                               10:181                        13 682
                                                                                                                                                           Other.-..'-----------------_-                                          ---------------------      9,037           8,055                 9,055       9:236
     Individual,                        72, U5       75,131      85,757        95,272           2. Preliminary estimates of data taken from
          AGI under $10,000-.. ...... 57.317             030         goo       50.349       Schedules C and F, Forms 1040 for 1967, indicate                                               C. Itemized deductions                                                                 (Million d.11...
          AGI $10,000 and al- ....      15,5U        "
                                                     19:101      ": 957
                                                                 33           f,_T'          that there were 9.1 million sole proprictorships for
     Corporation, total .............. 1,710          1,780       2.153         2, U5                                                                  Itemized deductions, total ...............................................................        46,053             46,832                50,739       54,566           59,623
                                                                                             1967 with business receipts totaling $21 1 billion and
          Forms 1120.rd 1120Speoml,                                                                                                                ....................................................... -----------------                                                                    17 468
            total      ............... 1,493           1,545        2,811                   net profit of $30 billion. These estimates reflect very         ConI b I,
                                                                                                                                                            Interest paid                                                                                                     2~ 2
                                                                                                                                                                                                                                                                            1'R. 17                            14:111,
                                                                                  111 11,                                                                                                                                                         IN.. tabulated                 4
                                                                                                                                                                                                                                                                                 0 JN.1 tabull4d J
                                                                                                                                                                                                                                                                                 E7                                    J.ol tab.13und
               Assets under S50.01)) I_     647          667          772             893   minor increases over similar data for 1966.                     Medical and dental expense-.................
                                                                                                                                                            other                                                                                                             7:8095                            7
               Assets $50,0D), under                                                                                                                               deductions------------------------------                                                                   4 92                              5,322
                  $1,000,0DO_ ........      750          781          925          1,086        3. Preliminary estimates of data taken from Part-
               A...ts. S1,010,001) or                                                                                                                      Note.-Returmolassified astaxable am thosawith incametax after credits.
                  more----- .........         96          97           114            134   ncrship tax returns filed for 1967 show that 906,000
    pignei'mm, 1120S.nd 1122 ......
       or                                   217          235          342             432
                                                                                        6   entitites, representing over 2.9 million partners, had         I I ncludes, returns with no adjusted gross income.
E.        .01.                                 1      ll:"o
                                                      22 111     2I                                                                                          For 1963, reduced br sick pay exclusion and certain enangte business expenses. For 1964-1967 firms, selarles am shown.
All        ....                         12: 1412
                                        U                                                                                                                    Ex
                                                                                                                                                             Re=tor 1967, on ~u1, desId amounts reported on Forms 104 A.
                                                                    2 5418
                                                                    ':'           13
                                                                                  21: RN    busin .. receipts totaling $78 billion and net profit                     d byseH-emp eye pension deduction for 1963and by self-employed pension deduction.sick pay exclusion, employee business expense deduction, and employee mov.
                                                                                                                                                       Ing expense deduction to, 1964-1967.
                                                                                             of $11 billion. While net profit showed a small in-
  1 Data by size class arerg.rt-1 returnI d;. ,,d
    Band on most recent                                    I                  d
     n add itia~n to Farm a 104 a nd 1040A. :11.d 'FloMr. " of "A, olll!" n'd'S
                                               i"       a 040C,'N                           crease, the number of partnerships and amount of
  -1-d mas 940 94 gat                            43PR, CT-1 and CT-2.                        business receipts declined slightly, continuing a long-   items) can be determined under prescribed condi-                                             1040A; the effect of various surcharge rates on the
  -Includes individual declarations. perinership restate,
special =.d.m, fidod.7, -In tax returns, i d Fmm1ff7`0t0'4-.xUd p(.t af`2X.',-.UF-,N"x      term trend.                                                 tions. The models are capable of measuring the cf-                                          number of balance due and overpayment returns;
1120L.              Form 104 but *mind. corporation declarations in 1968.
                                                                                               4. Data for 1966 from the complete corporation           fect of simultaneous changes on each tax record and                                         projections of income sources through 1985 to aid
Computer Designates Returns For                                                             income tax return report reveal that there were             projecting the results to the entirt taxpaying                                              in projections of returns filed by income classes.
                                                                                            almost 1.5 million returns filed for such entities, re-     population.                                                                                    The past year found a larger portion of model
Statistical Samples                                                                         flecting total receipts of $1.3 trillion, total deduc-         The 1966 models for individuals and corporations                                         tabulations being directed to requests for economic
    Computer selection of tax returns for statistical                                       tions of $1.2 trillion, and net income (less deficit)      have recently been used to evaluate various tax re-                                          data by other Federal Government agencies. The
purposes was extended to corporations. First used                                           of $81 billion, all 9 percent increases over 1965.          form proposals including repeal of the investment                                           Service provides these data, on a reimbursable basis,
to select 1965 Form 1040 and 1040A returns at a                                                                                                         credit, a minimum income tax, and new individual                                            to the extent that the projects do not interfere with
single service center, this computer application is                                         The Tax Models in 1969                                      income tax return filing requirements.                                                      regular internal programs. Two recent examples of
now in oper-ation at all service centers to produce a                                                                                                      Various segments of the Service have found the                                           these types of tabulations are: Geographic distribu-
                                                                                               During the past year, the Service expanded the           Models increasingly useful as an aid in determining
stratified probability sample from all individual and                                                                                                                                                                                               tions of sole proprietors with and without employccs
 corporation income tax returns entering the master                                         uses of the "Tax Models." Originally developed 6            and evaluating workload problems. Some examples                                              by size of gross receipts (Bureau of the Census);
file system. In the individual area the technique has                                       years ago to meet the Treasury's need for timely es-        of tabulations in this area include: Redefinition of                                         and, geographical distributions of farm income, farm
permitted a reduction of 100,000 returns in the size                                        timates of the revenue effect of proposed tax legis-
                                                                                                                                                        audit classes of individual income tax returns re-                                           program payments, and sources of nonfarm income
of the sample. This represents a one-third decrease                                         lation, these models have proved to be valuable             flecting the discontinuation next year of the Form                                          for farm proprietors (Department of Agriculture).
and a substantial cost saving in processing informa-                                        planning and economic tools.
tion. Sample returns so selected are used in the two                                           Each Tax Model consists of a magnetic tape file
 major statistical efforts of the Service-Statistics of                                     containing a randomly selected sample of taxpayer
 Income and the Taxpayer Compliance Measure.                                                records, and computer programs capable of manipu-
 ment Programs.                                                                             lating these records so that tax (or other return
52 / Annual Report / Chapter Seven                                                                                                                                                                                                                                                             Planning Activities / 53
                                                                                                       Early executive decisions on the Service's ap-                                                               this report, were implemented in 1969. However,
                                                                                                   proach were essential if plan managers were to                                                                   the total man-year and dollar savings realized-
                                                                                                   maintain a balanced operation. Priorities were set                                                               $14.7 million-fell $2.1 million short of the record
                                                                                                   to insure the processing of the uncontrollable work-
                                        Financial Management Continues                                                                                                                                              savings reported in 1968. The negative impact of
                                                                                                   load of tax returns received, while allowing other                                                               severe resource restraints Was Certainly a contrib-
                                        Contribution to Improvement of Re-                         crucial programs to continue at reduced, but                                                                     uting factor.
                                        source Management                                          relatively balanced levels.                                                                                          Managers and employees throughout the Service
                                                                                                      To meet the basic requirements of the law special
                                            Over the past several years the Service has taken                                                                                                                       again demonstrated their ability to devise better and
                                                                                                   controls and reporting procedures had to be estab-                                                               less expensive methods of doing their work. This is
                                        a number of measures toward achieving maximum
                                                                                                   lished. Supplementary controls and more timely                                                                   illustrated by the fact that $11 million, or 75 per-
                                        utilization of resources in accomplishing its work
                                                                                                   reporting procedures were also established to help                                                               cent, of the total savings achieved in 1969 stemmed
                                        programs-an effort which continues to challenge            insure that resource management decisions were
                                        the imagination and ingenuity of all Service officials.                                                                                                                     from improvements originating at working levels,
                                                                                                   made promptly, and that ~Ian managers had the flex-                                                              mostly in the field. The balance of savings, $3.7
                                        These measures include the Planning-Progranting-
Management                              Budgeting System and related Special Studies Pro-
                                                                                                   ibility to respond quickly to changed conditions.
                                                                                                      For fiscal year 1969 the Internal Revenue Serv-
                                                                                                                                                                                                                    million, was derived from major projects originated
                                                                                                                                                                                                                    by the National Office. In 1970 and 1971, the
                                        gram; the Taxpayer Compliance Measurement
Activities                               Program; the annual operating financial plan; the
                                                                                                   ice was authorized an increase of 836 positions and
                                                                                                   $60.7 million over 1968. However, because of re-
                                                                                                                                                                                                                    Service is projecting savings goals of $15 million
                                        position management system; work planning and                                                                                                                               and $15.1 million, respectively.
                                                                                                  strictions placed on manpower and expenditures,
                                        control systems; and the decentralization of man-                                                                                                                           Emphasis on Quality Suggestions Brings Increased
                                                                                                   the Service was unable to realize 1,002 of the man-
                                        agement and control of resources to the lowest feasi-      years of work originally planned for fiscal year 1969.                                                           Savings
                                         ble operating levels. The Service's financial manage-
                                                                                                      Forced savings from employment restrictions were                                                                 As part of a new look for the suggestion program,
                                        ment operations are vitally concerned with these           applied to reduce the supplemental appropriation                                                                 communications were improved and emphasis was
                                        efforts.                                                   required for pay increases as shown in the following                                                             placed on quality suggestions. By mid-year there was
                                                                                                  table.                                                                                                            a noticeable decrease in the number of suggestions
                                        Service Responds to Employment Restrictions
                                                                                                  Utilization of savings                                                                                            received and adopted, but savings nearly doubled
                                             During 1969 the over-riding restraint on accorn-     [in .111imns of d.11.,,l                                                                                          over those for the same period the previous year.
                                          plishment of Service programs was the restriction                                                                                                                         Thirty-six Service employees were honored at the
                                                                                                                                                           Total cost         Forced               supple.
                                          imposed on employment by the Revenue and Ex-                            Appropriation                               of Pay          savinid
                                                                                                                                                                              Opp,, s                  mental       Department of the Treasury Fifth Annual Awards
                                          penditure Control Act of 1968. This act limited                                                                                                                            Ceremony. Of this number, one received the Excep-
                                          Government employment by prohibiting the filling               Total ......................                          30,266              20,924                  9,342    tional Service Award and three received the
                                          of more than three of every four new vacancies oc-      S Will. and allimses------------- -----                       1,014                  564                    450
                                                                                                                                                                                                                     Meritorious Service Award.
                                                                                                  11:11.u, accounting and processing - ::::::
                                                                                                  C    'I                                                       5: 112                                      5 592
                                          curring through attrition. This ratio was later cut       men lance----------------_- _                                  660     ----- Wiia,                     3: 300
                                          to seven of 10. As a result, the Service lost many                                                                                                                        Revised Administrative Accounting System Brings
                                          employees whom it could not replace, and so was            Man-years authorized and realized by appropria-                                                                Added Benefits
                                          unable to accomplish all the work which had been        tion for 1968 and 1969 (exclusive of reimburse-                                                                      The administrative accounting system has been
                                          provided for by the 1969 appropriations passed by       ments) are compared below:                                                                                        revamped to incorporate accrual and cost informa-
                                          Congress.                                               Man-years authorized and realized                                                                                 tion and to meet overall financial management and
                                             The fact that these restrictions came on the heels                                                                                                                     reporting needs. A few of the changes resulting from
                                                                                                                                              Authorized                Realized               Pence
                                          of severely unbalancing expenditure cuts imposed in                                                                                                   realize e
                                                                                                                                                                                                     rtal           study of the financial and accounting systems were
                                         fiscal year 1968 magnified the damage. In these 2                                                                                                                          as follows:
                                                                                                                                             1968    1969        1968         1M             1969         suene
                                         years, the Service lostsome 4,900 positions which                                                                                                                             1. The 1970 Operating Financial Plan or internal
                                         it would otherwise have, had available to perform        =3R d eX,PtGnWS -----
                                                                                                    ,,,, in, ,,,                             1,479   1,515       1, 497       1, 48;         101 . 2        58, 2   cost budget provides allocations of funds and man-
                                         vital compliance and returns processing work.                      a         :::: --- :: - :    42: 6
                                                                                                                                         21 141      - :1       22 891
                                                                                                                                                                42:          zz.-            104.3         a.. 4    power by program to major operating levels. The ac-
Nationwide Promotion Plan Developed.      (About 2,500 of these were the result of the fiscal
                                                                                                                                               D9    42, "          966      as, an          100.6          n.r;
                                                                                                        Toto                                 6,036   69 472     67 260       U no         101.9             92.6    counts make readily available to each financial plan
Hiring of and Services to the Blind      year 1968 cuts; about 500 were new people,'au-                      1
                                                                                                  increase 1969                         .6                                     is.       .......
                                                                                                                                                                                                                    manager information on cost and fund allocations
Expanded.                                thorized by Congress for fiscal year 1969, who could
                                                                                                     For more detail by appropriation, by activity and                                                              as well as the status of obligating authority.
                                         not be hired; and approximately 1,900 were attrition
Training and Development of Managers     vacancies, occurring during fiscal year 1969, which      also obligations by districts, regions, and National
                                                                                                                                                  I                                                                    2. Plan managers now work from an Operating
Receives Renewed Emphasis.               could not be filled.) Under these circumstances the      Office, see tables ~6 and 27 on pages 122 and 123.                                                                Financial Plan which consolidates appropriated and
                                        Service was obligated to give the clearest possible                                                                                                                         reimbursable funds. Only the reimbursement pro-
Systems Approach Applied to a Variety                                                             Management Improvements Yield                                                                                     gram manager in the National Office is responsible
                                        explanation to the Congress of the real effects of
of Training Programs.
                                        these cuts on the tax administration system. In re-
                                                                                                  Savings of $14.7 Million                                                                                          for measuring the execution of the reimbursement
Surveillance Maintained Over Internal   sponse to these problems the Congrem has authorized         Many noteworthy cost reduction and manage-                                                                      plan. He coordinates all planning of reimbursable
Operations.                                                                                       ment improvement actions, described elsewhere in                                                                  work and advises plan managers on the status of
                                        3,486 additional positions in fiscal year 1970.
54                                                                                                                                                                                                                                       Management Activities / 55

execution against amounts included in their plans.        Change in Financial Management Improves Over-all                                                                                                                                       Cooperative Work-Study Participants Increase
                                                          Program Quality                                              tial source of replacements for professionals, partic-
This procedure provides plan managers some relief                                                                      ularly accountants, in the face of a diminishing
and, at the same time, aids in the planning and con-                                                                                                                                                                                                The Service continued its efforts to attract under-
                                                              By treating the fiscal year 1970 training programs       supply.
trol of reimbursable funds.                                                                                                                                                                                                                     graduates majoring in accounting and to prepare
                                                          as a unified support program, the planning, report-             Because of the urgent need to proceed with service                                                                    them for careers in the Service as internal revenue
   3. The system provides accounting data on ac-          ing, and administering of Service training funds have        center hiring, very few vacancies were left to be filled
cruals and costs in the detail and at the levels re.-     been simplified. This approach enables training                                                                                                                                       agents and internal auditors. The program is struc-
                                                                                                                       under the 70 percent rule. As a result, only 600 pro-                                                                     tured either for alternating extended periods of work
quired to support the Service's cost-based budget          personnel to devote more manpower to progiram               fessionall employees were hired. As an exception to
                                                           management rather than funds control and facili                                                                                                                                      in Service offices and on-campus study, or students
and to control the execution of the Operating Finan-                                                                   the legislative limitations, the Bureau of the Budget                                                                    may work part-time throughout the school year and
cial Plan. Reports on plan execution which compare         tates decentralization of the administration and           authorized, late in the year, the filling of 599 en.
planned with actual man-year and dollar expcndi-           financing of training programs.                                                                                                                                                      full-time in the summer. Although the manpower
                                                                                                                      forcement-type positions for the organized crime                                                                           ceiling restrictions continued to curtail full-scale
tures have been changed in format to allow a more
meaningful managerial review. These reports on            Personnel and Training Programs                             drive.                                                                                                                    participation by many offices, 175 students partici-
                                                                                                                          The Civil Service Commission authorized special                                                                       pated in the program. Seventy-one percent of the
plaxicxecution furnish Service-wide data on program       Improve Quality and Increase Effi-                          higher salary rates for newly recruited revenue offi-
accomplishments and related costs and supply finan-                                                                                                                                                                                             students completing the program during calendar
                                                          ciency                                                      cers in California. This action was designed to aid                                                                       year 1968 became full-time Service employees.
cial information required by the Bureau of the                                                                        in recruiting and retaining these necessary enforce-
                                                          Service Center Employment Increases as Redeploy.
Budget.                                                                                                               ment personnel in an extremely competitive' Cali-                                                                          Nationwide Promotion Plan Developed
                                                          ment Approaches Final Phases
Consolidation of Alcohol, Tobacco and Firearms                                                                        fornia labor market. The new rates became effective                                                                          In line with continuing efforts to improve the
                                                              Concentration of returns processing operation in        in April and are applicable to future recruits as
Laboratories                                              seven service centers continued to present a staffing                                                          well                                                                   quality and utilization of employPercosm           ,othe Service
                                                                                                                       as to the 74 entrance level (GS-5 and 7) revenue
   Alcohol, Tobacco, and Firearms Regional Lab-            problem. More than 90,000 employment applica-                                                                                                                                                                                                tion Plan,
                                                                                                                      officers already on duty.                                                                                                 deveclopceodveras niertwuaScyrvailcle-n%oiridscupervisory positions
oratories in Chicago, Dallas, New York, San                tions were processed in securing 14,000 seasonal               Man-years realized during each of the past 2 years                                                                    in the Service and replaces eight different promotion
Francisco, and Seattle were consolidated into multi-       card punch opera tors, clerks, and tax exanriners          and employees on rolls at the close of 1968 and 1969
                                                           needed to assist mi ' processing the high volume of                                                                                                                                  plans previously used by the regions and the Na-
regional laboratories located in Atlanta, Cincinnati,                                                                 are shown in the following table:
                                                           tax returns. Major recruitment efforts were re-                                                                                                                                      tional Office. The benefits of a single plan will be
and Philadelphia during the year. In these larger,
                                                           quired, since the labor market for clerical employees                                                                                                                                twofold-it will provide uniform procedures and
better equipped facilities, more efficient use of man-                                                                                                                                      Man
                                                                                                                                                                                                                     at close
                                                                                                                                                                                                                     Number an rolls
                                                                                                                                                                                                                                                promotion opportunities for all employees, and it
power, space and equipment is expected to provide          continues to be extremely competitive.                                         Location and type
                                                                                                                                                                                             rinaiiyze'd's                          of year
                                                              The Service is continuing to carry out the dala                                                                                                                                   will enable managers to be better aware of qualified
better services to regions at an annual savings in                                                                                                                                    1963            =              1968             sea       employees outside their immediate offices.
                                                           processing conversion with minimum adverse im-                                                                                                                       .
excess of $162,000 annually.
                                                           pact on affected employees. Of the initial 12,000         Service, let-[................ -----------                      67,574          Go.oica        65,177            u, rpor
                                                                                                                                                                                                                                                Assessment Centers Utilize Advanced Selection
   Narcotic drug analysis formerly done for the Bu-                                                                      Permanent ........... _ ..........._
                                                          employees affected, approximately 10,800 have been         Nob Temporary-------          ..........
                                                                                                                                                                                                     U M
                                                                                                                                                                                                        "            59,517
reau of Narcotics was phased out as the justice De-       redeployed without resorting to any adverse person-
                                                                                                                                                                                                                                       6, in
                                                                                                                                                                                           967       ~ 3 an
partment's Bureau of Narcotics and Dangerous                                                                                                                                                                          3:.71            .:n,
                                                                                                                                                                                                                                      as            The Service has developed and implemented a
                                                           ncl actions or involuntary transfers. Although there      Fia Idonsaelmqj!ec 1-at -a 19-                                  1613: 607       U: "2           61 77               M
Drugs activated laboratories to take over this work.      will be approximately 1,200 positions for such em-               Data prociesaing, total--.-.------- __                    21,665          a, Of          119,820           n, us      pilot Assessment Center Program for helping select
This change was required by Presidential Rcorgani-         ployees remaining in the districts, staffing imbalances         Collection, total                       ----------        10,213          is, an          9.951            la'an      first-line supervisors, This technique (first applied
zation Plan No. I of 1968.                                in certain offices will require further redeployment                             .                                          6.118              us          6:030             5'..      by the American Telephone and Telegraph Co.)
                                                                                                                                     in            ..........                         3,935           .
                                                                                                                                                                                                      ': 236         3 921
                                                          solutions (already identified) for approximately 250
                                                                                                                                                                                                                                       4. U2     involves trained managers' observations and evalua-
                                                                                                                           Audit, total..........
Reports Management Program Produces Signifi-                                                                                                                                         21,155          aff, an        21,154            n,m
                                                                                                                                                                                                                                                 tions of candidates as they perform in a series of
cant Results                                              employees. The Southeast Region completed :its                          Revenue agents...... .........                         430         = ya            13 061           32, 611
                                                           phase-out of manual operations last year, and four                      t,
                                                                                                                                  Offil.a.ifit.r. and tax tectmida-,                 '3
                                                                                                                                                                                      3:147           2:8             5
                                                                                                                                                                                                                      3;'001           2.11      group and individual exercises which simulate super-
                                                                                                                                  Of er - -----------_---_--_                         4,578           4. 02              D92           s,-
   The Service-wide Reports Management Program            more regions were scheduled to complete change-                                                                                                                                       visory situations. Selecting managers then receive a
                                                                                                                           Intelligence, total                                        2,386           2. n3
continues to move forward through high level man-          over by July 1969. The Service is exerting all possi-
                                                                                                                                                                                                                     ~, _                       written report which gives them data on different
                                                                                                                                  Specialegent- -------____                            1,
 agement emphasis and active participation by Serv-       ble efforts to conclude redeployment with the same                      Orth- ----- _._. -----------_                             "'
                                                                                                                                                                                             ,,       1- -
                                                                                                                                                                                                         M            ",',3,'          1,-
                                                                                                                                                                                                                                        07      skills and behaviors than are ordinarily observed on
                                                                                                                           Alcohol and tobasto tax, total.___                         2,607           2,as                                      the job. The Service's pilot Assessment Center was
ice pi~iople. During fiscal year 1969, the Service        degree of success the program has enjoyed to date.                                                                                                         2.610             LM

 placed special emphasis on the cost of reporting and
                                                                                                                                  lovestigid......................                          921                                                 designed by personnel and training specialists, and
                                                                                                                                  Iiispectin-l-ral_ ...........                             434      -I's".5
                                                           Recruitment Resumed at Year-End                                        Inspectors- promises ----------                              9         4.
                                                                                                                                                                                                                                        '$"a     used by North-Atlantic Region managers to assess
the need to reduce the reporting burden where pos.                                                                                Othe                                                      41
                                                                                                                                                                                             774         .1             795
                                                             Contacts were maintained with campus recruit-                                                                                                                                      about 150 candidates from that region. Based upon
sible. Through this effort, the Service achieved a.                                                                                    total.............. .......
                                                                                                                           Appellate ---- -----------------------                     1,623
                                                          ment sources and seminars were held for academic                                                                                                                                      an appraisal of the costs and benefits involved, deci-
reduction of 9 percent in reporting cost. The net:        representatives in preparation for renewed hiring                       'Addietl.1111!                : :: :: :: -:: : -          "'                                           "7     sions will be reached on extended use of Assessment
dollar reduction in overall cost amounted to $1,187,-     authority which began to be restored toward the
                                                                                                                                                                                            745              M          748
                                                                                                                                                                                                                                                Centers within the Service.
000 thus permitting a redirection of manpower to          end of the year. In spite of the general cut in hiring,
                                                                                                                           Administraflon, District Office.
                                                                                                                               other---                                                     161          no
                                                                                                                                                                                                      1. .6
                                                                                                                                                                                                                      1,598            1.3
                                                                                                                           Reg* no                                                                                                              Service Establishes New Links With Universities
essential operations or to increased workloads. Con-      provision was made for continuing and expanding                  Regional Inspection----------_------ :                           683
                                                                                                                                                                                            782              7M59
siderable attention is also being directed to the mech-   special emphasis programs, such as employment of                                                                                                                                         In recognition of the fact that professors of
anization of many of our reporting systems with the       the blind and other handicapped or disadvantaged             n.a. Not awilable-Included in District Office above.                                                                     accounting and tax law have considerable influence
                                                                                                                     0 3 Includes iginal leave man-yeats for entire Service.
benefit of more accurate, timely, and less costly         personnel. The work-study program under which               at. Cant r.
                                                                                                                       1 includes     in of International Operation, National Computer Carter, a od IRS                                         in shaping the attitudes of their students toward tax
management information.                                   students work part-time was stimulated as a poten-           I Includes overseas employees hired locally (3 in 1969 and 3 in 1968).
                                                                                                                                                                                       .                                                        administration, the Service invited representative
56 / Annual Report / Chapter Eight                                                                                                                                                                                                                                        Management Activities / 57
accounting and tax law professors from 50 colleges         The Service again provided blind taxpayers, em-               (1) A Programer Reading and Training System          Training and Development of
and universities to meet with National Office execu-     ploym, and trainees braille copies of tax forms,            at the Detroit Data Center.-This is a self-develop-
tives to explore common areas of interest, such as       along with related instructions. The bulk of the            mental program where clerical employees are given
                                                                                                                                                                              Managers, Receives Renewed
tax administration problems, student intern co-op        copies produced were distributed to the Library of          the opportunity, through a Dat~ Center developed         Emphasis
programs, training programs and utilization of col-      Congress which fills requests from the public. Copies       home-study course, to gain entry into technical and
                                                         were also distributed to the Arkansas Enterprises for                                                                     A complete]), redesigned middle-management
lege professors for short. and long-term assignments                                                                 professional level positions.
                                                         the Blind and to regional libraries throughout the                                                                    course was offered to newly appointed managers.
within the Service. A number of mutual benefits are                                                                      (2) Assistance to Negro Colleges.-Nine field          Its object is to present contemporary management
expected to grow out of these meetings, and follow-      country.
                                                                                                                     offices have met with Negro colleges in their areas       approaches and theories and to explore current Serv-
up seminars are planned to keep the Service closely                                                                  and pointed out to college officials where curricula      ice management problems and areas of emphasis.
attuned to university developments. In addition,                                                                                                                               Key officials teach a substantial portion of the re-
                                                                                                                     need strengthening or where additional accounting
arrangements arc being made for universities to
                                                                                                                     courses were needed to qualify graduates for internal     vised course. Additionally, public administration and
administer and grade the Service's longstanding cor-
                                                                                                                     revenue agent positions.                                 social science research is also being used to provide
respondence accounting courses.                                                                                                                                               new insights into management problems. A Read-
                                                                                                                        (3) Intergroup Relations Seminars.-In recent           .
Service Intensifies Efforts for Handicapped                                                                          years the Service has run a series of Equal Employ-
                                                                                                                                                                              rngs in Management collection of articles was dis-
                                                                                                                                                                              t ri )uted to all Service managers, as well as the new
    Substantial accomplishments in employing handi-                                                                 ment Opportunity seminars for supervisors and             Management Training and Development Hand-
capped persons were made by the Service during the                                                                   managers. As part of this continuing effort, seminars    book. The Handbook for the first time systematizes
year, including the designation of 200'Service co-                                                                   were held at the Little Rock District Office and the     and puts into perspective the wide variety of train-
ordinators for the employment of the handicapped.                                                                    Southwest Service Center, designed to test some of      ing and other activities involved in developing
Related efforts included appointments of mentally                                                                   the assumptions that members of different races           Service managers at all levels.
retarded individuals to appropriate lower-grade posi-                                                               make about one another. The participants worked
tions. Service centers continued to employ deaf per-                                                                alternately as members of all black, all white, or all    Revenue Agent Training Restructured
sons as well as sonic mentally retarded people. The
                                                                                                                    Spanish-American teams and then as members of               The basic training for new revenue agents was
North-Atlantic Service Center continued as a pace-
                                                                                                                    mixed teams to better understand the attitudes and        revised during the year to include practical on-the-
maker in productively utilizing the mentally re-
                                                         Clifford Glotzbach, Assistant Director of Internal Reve-   assumptions of all of the participants. Insights were    job training. The curriculum provides initially for
stored. Recognition to the handicapped included a        nue Cleveland District, presents the Commissioner's
                                                                                                                    developed into how each participant could become         a few weeks of desk-side assistance to an experienced
Commissioner's Award for the late Paul Spence,           Award to William Birkhold and Mrs. Arthur Skall, offi.
                                                         cials of the Cleveland Red Cross Chapter who accepted      a better teani'member in a real work situation. The      agent auditing a case followed by periods of class-
t he Service's nominee as Outstanding Handicapped        the award on behalf of its Voluntary Braille Service                                                                room training and additional practical experience.
Federal Employee of the Year and one of the 10           Group No. 908. Twenty-six members of the Group             Service Center seminar has been filmed for the pur-
                                                                                                                    pose of developing an audiovisual supervisory            The trainee is introduced to the whole job sooner
National finalists for this Civil Service award. This    worked with complete dedication to produce 4,000
                                                         brailled masters (the transcription of 16 tax forms with   development aid for Service-wide use.                    than under the former curriculum and obtains a
 employee had the primary Service responsibility for      instructions and nine publications into braille) from                                                              base of practical experience to help him get more
the recent renovation and air conditioning of the        which copies were made for use by Service blind
                                                         employees.                                                 Employee-Management Cooperation Activity                 out of classroom sessions.
National Office headquarters building.                                                                              Continues Rapid Increase
                                                                                                                                                                             Systems Approach Applied to Training Programs
Hiring and Services of the Blind Expanded                Gains Achieved in Equal Employment Opportunity                 During the year the tempo of employee organi-
                                                                                                                                                                                 Considerable training time and attention was
    Special efforts were made on behalf of the blind,        Minorities made encouraging gains in all grades         zation activity increased. The Service became one
                                                                                                                                                                             devoted to examining the training curriculum and
 including successful utilization of blind persons as    from GS-5 to GS-16. Eight members of minority               of the most highly organized agencies in the Govern-
                                                                                                                                                                             insuring that the program continues to fit current
taxpayer service representatives. By the end of the      groups were in senior staff and managerial positions        ment with more than 90 percent of its eligible           performance expectations of Internal Revenue Serv-
year, 22 such employees had been trained and were         at GS-1 5 and above at year's end.                         employees being exclusively represented by four          ice jobs. Although the individual principles involved
employed in districts throughout the country. An-            Foremost in the year's equal employment activity        major employee organizations. Approximately             in this re-examination are not new and have been
other 50 to 75 will join them in the next 3-years,       was the revision of the Equal Employment Oppor-            51,500 employees are now covered under exclusive         used by the Service in the past, they are now being
 as the result of a special training program conducted    tunity Handbook and the issuance of a new action          recognition, an increase of more than 8,000 over         applied on a more systematic basis, or training sys-
for the Service by the Arkansas Enterprises for the       plan. The revision also implements a program of           the past year.                                           tems approach-similar to the approach currently
 Blind, under a $100,000 grant from the Department       equal opportunity for women, provides for assistance          There was also an increase in negotiation activity.   being used by universities and a number of other
                                                         to minority groups in findingsuitable housing if hous-                                                              agencies-to further tighten training programs. A
 of Health, Education, and Welfare. Braille masters                                                                  During the year the Service negotiated 10 more
                                                          ing acts as a barrier to employment, and places more                                                               number of Service training specialists, selected anal-
 for materials to train these employees were prepared                                                               collective bargaining agreements, for a total of 26
                                                          emphasis on advancement, training and promo-                                                                       ysts, and managers attended tr-aining systems work-
by women volunteers of the Cleveland Chapter of                                                                     since the beginning of the Employee-Management
                                                         tional opportunities.                                                                                               shops during the year. These workshops foster
 the American Red Cross, who received the Com-                                                                      Cooperation Program under Executive Order
                                                                                                                                                                             analysis of the total organizational setting in search
 missioner's Award in recognition of their outstand-         Many efforts have been made by operating               10988. There are now 18,000 employees covered            for solutions to human performance problems; they
 ing work. This was the first time the Commissioner's    officials to achieve equal employment opportunity.         by negotiated agreements. Nine other agreements          emphasize use of non-training solutions, such as job
Award had been granted to persons outside the            Three of the most significant accomplishments              to cover some 4,800 employees are in the process of      redesign, where analysis indicates that training
 Service.                                                 include:                                                  being negotiated.                                        would be a more expensive or less effective solution.
58 / Annual Report ~ Chapter Eight                                                                                                                                                                Management Activities / 59
    Service center training programs continued to            The Service also has developed a number of tax-
                                                          payer education seminars for the general public, par-      by September 1971. Proposed general locations are          of records were destroyed or sent to records center
 receive high priority attention because of their
                                                                                                                     Fresno, Calif.; Suffolk County,.Long Island, N.Y.;         for storage. Much needed space and equipment val-
 critical contribution to the efficiency of the auto-     ticularly for small businessmen. Other programs have
                                                                                                                     and Memphis, Tenn. Each of the new centers would           ued at $1.9 million were released for reuse by the
 matic data processing system. As Part of the systems     been developed in conjunction with bar associations,
                                                          certified public accountants association$, and local       comprise about 500,000 square feet and be able to          Service.
 approach, emphasis this year was placed on analyz-
                                                                                                                      accommodate a peak- week prime shift of about                A contributing factor in reducing records holdings
 ing service center processing operations to review       newspapers, to help these groups aid the general
                                                                                                                     4,100 people.                                              was the agreement negotiated with the General Scrv-
 specific tasks performed and evaluating and measur-      public. An increasing number of Service employees
ing performance during and after training sessions.       are teaching in local adult education programs.                                                                       ices Administration, and approved by the Bureau
                                                                                                                      Telecommunications Save Manpower and Money                of the Budget, to send tax returns to records centers
                                                             Taxpayer education in school systems is still the
Use of Sophisticated Equipment Improves                   largest of them programs. Materials are distributed           The Service continued to make ever-increasing use       approximately I year after processing. In the past,
Training Effectiveness, Cuts Costs                        free, upon request, to high schools, junior high           of the telephone and other telecommunications me-          these returns were kept in Service space for 3 years
                                                          schools, business schools, and other groups. In 1969,      dia as the most effective and economical means of          prior to retirement. These records are retrieved by
   Teaching machine programs were used in several
                                                          requests totaled 3.5 million general student texts,        communicating, both internally and with the public.        enforcement personnel when needed.
different courses, principally in Form 1040 process-
 ing operations taught in all seven service centers.      500,000 farm student texts, and 80,000 teacher's           Telecommunications systems were expanded or re-             More Forms and Form Letters Standardized
Savings in instructor and trainee time offset initial     guides.                                                    designed to provide operating officials with addi-
                                                                                                                     tional voice and message communicating facilities.            Both the public and Service are benefiting from
equipment and program development costs the first
                                                          Firearms Training Broadened                                   Continuing in-depth studies of the cost of tele-        continuing efforts to eliminate unnecessary forms and
year, and recurring savings are anticipated.
   Instructional television equipment is now being           As a result of the enactment of new firearms laws       phone calls made by major field offices in communi-        form letters. This year's net reduction of 478 public
installed in principal training sites in the field. The   it was necessary to develop training material for fire-    cating with the pubiic, as opposed to the cost of alter-   and internal-use forms main6ined the 5-year aver-
closed-circuit television system at the National Train-   arms instructor schools. Two schools were held in          native methods of communicating, produce addi-             age of a 3 percent per year reduction of Service forms
ing Center has been used routinely in technical skills    the National Office for training special investigator-     tional evidence of the benefits of expanded usage of       and form letters.
training, instructor training, and other situations       instructors with 60 special investigators in attend-       telecommunications facilities.                                The following table summarizes the results of this
where video-taping of trainee preformari can in-          ance. These training schools were designed to                                                                         year's forms management program:
                                                          prepare those attending to conduct similar training        Tax Forms Acquire Colorful New Look
crease learning effectiveness. This capability is
being extended to the field.                              sessions in the regions for all alcohol, tobacco, and          In January 1969 more than 30 million taxpayers         Forms and form lefters
                                                          firearms special investigators.                             received Federal income tax packages printed in two
Regional Training Center Added                                                                                                                                                                                           Cilso.1.8   N.~?      Elioni-*    Closing      N t
                                                                                                                      colors of ink. The basic reason for use of color was                    Prossribed by                 tory
                                                                                                                                                                                                                          loven-     dove      noted       inven-     change
   A training center was activated at Hofstra Uni-        Better Facilities Management                                an effort to minimize taxpayer error. Approximately                                                             oped                  to ry

versity to service the North-Atlantic Region as part      Benefits Employees and Taxpayers                            9 percent of all returns filed contain errors which in.         Total            ........                                           _I!L!!7       -478
of the Service's plan to establish a center in each                                                                   total require a significant expenditure to correct. It    National Office (used at headquar.
                                                                                                                                                                                  o.         c                     ---    5,844        473        233       6. Oso      +240
region. Satellite training sites will be used in Boston    New Returns Processing Space Acquired                      was hoped that the use of a strongly contrasting color,
and Buffalo when savings. can be achieved by con-             The Service in fiscal year 1 969 used 11.7 million      highlighting those areas having the greatest error                                . -.-             6,936        745     1,286        6,395       -541
                                                                                                                                                                                  t lcis Iffidles
                                                                                                                                                                                Dis~rlct .o ,=dl-1 dll-
ducting classes there. Regional Training Centers for                                                                  factor would aid the taxpayer. The significant words                        in.t.
                                                           square feet of space to house its offices, service cen-                                                                                                        1,047        166        458         755       -292
the Mid-Atlantic, Southeast, and Southwest Regions         ters, training centers, warehousing, and laboratories.     in those areas appeared in red with the balance of        S 41c.                             _:_       2
                                                                                                                                                                                                                          1,1108           3
                                                                                                                                                                                                                                       794 3      1
                                                                                                                                                                                                                                                  606          1
                                                                                                                                                                                                                                                            1,945       +137
                                                                                                                                                                                Data conte ..................                  10                   15           88      -22
are now in the planning stages.                            Fifty-five percent of this space is in Federally owned     the forms and instructions printed in blue. Approx-
                                                           buildings. The balance of 45 percent is leased by the     imately 25 million tax~aycrs received this red and
Taxpayer Education Emphasis Shifts to Adults
                                                           General Services Administration at an annual cost          blue version. Another five million in the area serviced   Joint Post Office-IRS Efforts Yield Better Mailout
     In the past, the Service's taxpayer education ef-                                                               by the North-Atlantic Service Center received              Operations
                                                          of $17.7 million. The use of leased space increased
 forts have centered largely on instilling an under-                                                                  a slightly different tax package. This version, in
                                                           by 2 percent over last year because the service centers                                                                 Continuing close cooperation and coordination
 standing of taxes in high school students; however,
                                                           required additional offsite space to handle their          addition to two colors on the Form 1040 had a ti~t
last year other approaches were expanded. During                                                                                                                                with the Post Office Department resulted in im-
                                                           workloads.                                                 color over the information areas and white for fill-in
 1969 the Service conducted a pilot institute for pov-                                                                                                                          proved postal operations, particularly during the tax
                                                              The service center expansion program initiated 3       spots.
 crty workers using some of the learning material de-                                                                                                                           package mailout and filing periods. Specifically,
                                                          years ago is progressing. The Southwest and South-             A scientifically selected sampling indicates that
 veloped for taxpayer service representative training.                                                                                                                             -the Post Office picked up approximately 44
                                                          cart Regional Service Centers have received addi-           color has reduced errors by 57 percent. This means
 Plans are to expand this effort during 1970 to help                                                                                                                                 percent of the tax packages from I-to-5 days
                                                           tional space, and contracts have been let for the ex-     the prevention of millions of errors which otherwise
soften the impact of tax form changes, particularly        tensions to three other centers. Estimated completion     would cost approximately $2 each to correct. Overall            earlier than usual, the taxpayer received his
 on taxpayers with small incomes. A comprehensive         dates for these are: North-Atlantic, January 1971;         taxpayer reaction to the colored forms was excellent.           tax package earlier, and some storage space re-
guide for regions has been developed that defines          Mid-Atlantic, July 1970; Central, December 1970.                                                                          quirements were eased;
 elements of the program with emphasis on reaching         Construction already has begun on the extensions to       Records Holdings Continue to Decrease                         -usage increased for two-way cartons in place
 broader segments of the public.                           the Midwest and Western Regional Service Centers.                                                                         of mail pouches for mailing tax packages, en-
                                                                                                                        Although more tax returns were filed, Service                abling the Post Office to keep several thousand
     Tax education institutes are presented annually          To meet pressing additional space needs generated      records holdings continue to decrease, due to an ac-
 for professional tax practitioners and others who help    by the increasing number of returns filed, the Service                                                                    mail pouches (normally tied up for days wait-
                                                                                                                     tive disposal program and use of Federal records                ing to be used for mailing the packages) in daily
 fill out tax returns.                                    intends to construct three additiorial service centers
                                                                                                                     centers. In calendar year 1968, 442,215 cubic feet              service;
60     Annual Report / Chapter Eight
                                                                                                                                                                                                                   Management Activities / 61
  -during the labeling and packaging operations,          This motor accident frequency rate represents one of       under the processing procedures in effect. Manage-           security inspectors investigate breaches of integrity
    postal employees at the service centers helped        the lowest rates ever recorded in the Service.             ment's actions to revise the processing procedures          involving actual or potential frauds on the revenue
     direct and assist in staging tax packages so they                                                               will result in additional revenue estimated at $14           by employees or through collusion between em-
    could be loaded into Post Office trucks quickly       Surveillance Maintained Over                               million annually.                                            ployces and taxpayers.
    and in correct delivery sequence;                                                                                                                                                Investigation was continued in the case of 26
                                                          Internal Operations                                        Integrity Safeguarded by Service Inspection
                                                                                                                                                                                 employees and former employees and one account-
  -equipment such as forklift trucks, truck trailers,                                                                Programs
    and typing machines, when not immediately             Integrity Vital to Public Confidence                                                                                   ant, all of whom were arrested in January 1968 on
    needed by the Service or the Post Office, was                                                                        Internal security for the Service is accomplished       charges of attempting to bribe an internal security
                                                             The success of the tax system depends upon the           by conducting background investigations on appli-          inspector. Twelve additional arrests have since been
    loaned to the other;                                  public's faith in the objectivity and the integrity of
  -misdirected mail averaged less than Ione-half                                                                      cants and by investigating complaints or allegations       made. These bribes were for the purpose of obtaining
                                                          the Internal Revenue Service as the impartial ad-           of misconduct or irregularities concerning Service         information contained in inspection files. or to cir-
    of I percent, as opposed to more than percent
                                                          ministrator of Federal tax laws. To insure that this        employees. Investigation of persons outside the Serv-      cumvent investigations relating to corrupt activities.
    the previous year.
                                                          faith is not violated the Service conducts continuing       ice are made when their; actions constitute an effort      During the year five persons pleaded guilty, 20 are
Motor Vehicle Fleet Increased                             inspections into questions of integrity, and the ade-       to corrupt Service personnel through bribery or other      awaiting trial, I I are pending grand jury action, one
                                                          quacy and effectiveness of operations.                     means.                                                      person died, and the grand jury returned a no true
   The Service fleet of law enforcement cars in-
                                                             Facts developed through audits and investigations           Since September 1, 1961, 650 Service personnel          bill on one of the 38 subjects.
creased by 2 10 to 1,460, primarily to carry out ad-
                                                          are reported to management officials, who have the         have reported what they believe to be attempts by              Tax examinations initiated in connection with this
ditional duties pursuant to the new Firearms Act          responsibility for taking corrective action. When
and the organized crime drive. An additional 1,776                                                                   taxpayers or their representatives to bribe them in an      investigation have resulted in deficiencies well in
                                                          evidence of a violation of a Federal criminal law is       attempt to gain an improper tax advantage. A total         excess of $1 million. The investigation is continuing
cars are leased from General Services Administration
                                                          disclosed pertinent data is furnished to the Depart-       of 162 individuals have been prosecuted since 1961          and it is anticipated that the total tax deficiencies
for administrative purposes. The Service has worked       ment of justice.
closely with GSA and employee unions to provide                                                                      for attempting to bribe Service personnel.                 involved will amount to over $2 million.
the quantity and quality of transportation employees      Internal Auditing Helps Management Maintain                    This program continues to show effective results.
                                                                                                                     Arrests or indictments for attempted bribery in tax        False Refund Schemes Detected
need to do their job.                                     Effective Programs
                                                                                                                     cases totaled 44 in fiscal year 1969 as opposed to 32           The complexities of the automatic data processing
Disabling Injury Rate Lowered Again                           All Service activities and functions are subject to    in fiscal year 1968. At the end of the year, 58 cases       system and the continued changes taking place
                                                          internal audit-as an integral part of the Service's                                                                    within the system have required new approaches in
   The disabling injury frequency rate of 2.4 during                                                                 were pending trial.
                                                          management control system. Major emphasis is                                                                           dealing with fraud. In one case involving the ADP
calendar year 1968 was the lowest in 16 years of                                                                         Attempts to bribe are not confined to any one
                                                           placed on activities most closely related to collection                                                               system a revenue officer initiated a multiple income
recordkeeping. This represents an 8 percent improve-                                                                 geographical area nor to any particular segment.of
                                                          of tax and enforcement of the tax laws.                                                                                tax refund scheme. Prior to apprehension he
ment over the 1967 experience. Thus, in the fourth                          .                                        our citizenry. Examples are as follows:
                                                              Data process ing activities at the seven regional                                                                  acquired over $31,000. The employee was prose-
year of the 6-year program of the President's Mis-
                                                          service centers are examined on a continuing basis                  A realtor in California offered' a revenue         cuted, convicted, and sentenced to prison. An anal-
sion SAFETY-70, designed to reduce the number
                                                          by teams of auditors stationed at the centers to per-           agent five acres of land to influence examina-         ysis of the characteristics involved in the scheme was
of injuries and costs by 34 percent by the end of
                                                          mit timely detection and correction of systemic and             tion of his returns. The subject of this investiga-    made and computer programs were developed as a
1970, the Service has already achieved a 31 percent
                                                           operational deficiencies. During 1969 the system for           tion received the most severe sentence ever            means of identifying similar schemes. These pro-
reduction.                                                 reporting internal audit findings on data processing           imposed as result of this type investigation. He       grams have resulted in the identificatioii of two
   The Cheyenne District extended its perfect record
                                                          activities was modified to further reduce the time              was sentenced to 15 years in prison with no            additional schemes.
to 14 years of activity without a disabling injury. The
                                                           between detection and correction.                              suspension provisions and fined $20,000 follow-            Investigation of one of the schemes disclosed the
unique performance of the Aberdeen District was
                                                              A new format for reporting the results of examina-         ing his conviction for attempted bribery.               perpetrator filed 112 returns at the seven service
noteworthy in completing 1968 without sustaining a         tions of the audit function was put into effect to pro-            A certified public accountant in New York
single automobile accident or personal injury of any                                                                                                                             centers during the past 3 years and received approxi-
                                                          vide management with ~more comprehensive data                  offered $5,000 to a revenue agent.                      mately $80,000 in refunds. He was prosecuted on
kind.                                                                                 )eness of the various pro-
                                                          for evaluating the effectiv                                         A widow in Florida offered a revenue agent         charges of false claims for refund and sentenced to
   Service-wide accident prevention efforts in 1968       grams and operations through the country.                      $2,600 regarding examination of her returns.           8 years in the penitentiary with 5 years probation to
averted 151 disabling injuries with an estimated              Management's actions to correct and resolve re-                An insurance consultant in Pennsylvania            commence upon completion of the prison sentence.
saving to the Government of $453,000. In the past         ported deficiencies and problems contribute sig-               offered $1,000 to a revenue agent.                         In a second refund scheme a former employee
4-years an estimated 382 injuries were averte and          nificantly to the efficiency and effectiveness of the              In Louisana, a stockbroker and an independ-       filed individual income tax returns using fictitious
$958,000 saved in costs for medical care, lost pro-        operations of the Service and to improved taxpayer            ent businessman, acting as intermediaries for an       names in obtaining refunds in excess of $20,000. She
duction time, and property damage.                        relations. Additional revenue and savings from cor-            alleged underworld figure who was the subject          was indicted May 8, 1969, on 26 counts of false
                                                          rected deficiencies in 1969 are estimated at $39               of a tax examination, offered a revenue agent          claims and 13 counts of forging and uttering. The
Record Motor Vehicle Safety. Rates Achieved
                                                          million.                                                       $10,000.       .                                       Intelligence Division participated in both of these
   Although the National total of motor vehicle ac-           Tests disclosed that about 18 percent of the claims            In Michigan, the owner of a supply com-            cases.
cidents increased during 1968, the Service accident       by taxpayers on their 1968 income tax returns for              pany offered a revenue agent $1,200.                       Recently, another fraudulent refund scheme was
rate remained the same as the previous year-7 ac-         excess Federal Insurance Contributions Act (Social                                                                    identified. Auditors and inspectors are working in
                                                                                                                     Major Schemes to Defraud Investigated
cidents per million miles driven. Only 659 accidents      Security) taxes were erroneous and that more than                                                                     cooperation with the Intelligence Division on this
were sustained during 93 million miles of driving.        90 percent of these errors would not be detected             Teams composed of internal auditors and internal         case, and computers have been used to identify

62 / Annual Report / Chapter Eight                                                                                                                                                                   Management Activities / 63
participants. Over $100,000 in fraudulent refunds          components of the Treasury Department are also                                              Advisory Groups Aid the Service                             Mr. Edward R. Lubin             Art Dealer, E. R. Lubin, Inc.,
                                                                                                                                                                                                                                                     New York, N.Y.
have been identified to date.                              part of the Service's internal security effort.                                                                                                         Mr. Allan McNab                 Art Comultant, La Pointe,
                                                              A tabulation of the types of investigations com-                                            Advisory Groups are appointed for the purpose of                                           Wis.
Inspection Program Results in Sizable Number of            pleted during the past 2 years and the related                                              suggesting ways in which the Service can improve            Prof. Charles FMontgomery       University of      Delaware,
Prosecutions and Convictions                               disciplinary actions are set forth as follows:                                                                                                                                            Newark, Del.
                                                                                                                                                       its operations and to furnish expert advise pertaining      Prof. Charles Seymour, Jr.      Yale University, New Haven,
   During the year there was considerable activity in                                                                                                  to Art and Fircanns matters. Two Advisory Groups                                              Conn.
the initiation Of PTOSCcutive action involving various     Investigations and disciplinary actions                                                                                                                 Mr. Eugene V. Thaw              Art dealer, E. V. Thaw Co.,
                                                                                                                                                       assisted the Service during the year.
                                                                                                                                                                                                                                                    New York, N.Y.
offensives. A total of 56 individuals were arrested or                       Typ..1 investigation and action                                              The Art Advisory Group consists of members rep-
indicted; 12 were employees or fomicr employees of                                                                                                                                                                    The Firearms Evaluation Group was established
                                                                                                                                                       resenting the three major segments of the Art               on November 15, 1968. Meetings were held on De-
the Service and 44 were taxpayers and tax                         Total investigations closed.. ............................       12,081
practitioners.                                                                   personnel Investigations                                              World-musrums, univenitics, and dealers. The                cember 10, 1968, and January 17 and 27, 1969, at
   At the end of the year, trial or indictment was         Number at uses closed. total .......... __ ... .... .........            9,920
                                                                                                                                                       Group provided advice on the valuation of works of          which advice was given conceming the development
pending involving 50 employees or former employees             Character and security investigations_ -----------                   6 022     4 232    art for Federal tax purposes at meetings held on            of standards to control the importation of firearms
                                                               Conduct investigations. - _ ~-------- _..........  .......            ' 505     ' .75
and-82 taxpayers. These prosecutions were initiated            Special N.Iri...... ................                                 3,393     1'"S     October 31-November 1, 1968, and March 13-14,               and ammunition. The membership of the Group was
on the basis of such charges as embezzlement, selling                                   ,,anagemen! officials as a result of
                                                               Actions taken by Service in                                                             1969. ne membership of the Group was as follows:            as follows;
                                                                                Panama. invest' gallons
confidential tax information, fraudulent refund            Disciplinary actions, total._.... __------------                                            Dr. Richard F. Bmwn         Director, Kimbell Founda-       Mr. Donald Flohr                Firearms Technician, H. P.
                                                                                                                          ------      534       4"
schemes, attempted bribery, solicitation of a bribe,           Separations, total            ---------- .............                                                                 tion, Fort Worth, Tex.                                          White Laboratory
                                                                                                                                      195 1    122                                                                 Mr. Harold Johnson
and conspiracy to defraud the Government of taxes                                                                                                      Mr. Anthony M. Clark        Director, Minneapolis Inati-                                    Ordnance Expert, Depart-
                                                                    Bribery                                                            25                                                                                                             ment of Defense
due. As a result of one investigation, bribery and                  Earbumlement or thft .
                                                                              "u"Ifea a' "'I"(sm:Wmn, to  ------nd~sar'jrap.rty.
                                                                                                                          ------        7                                             rule of Arts, Minneapolis,   Mr. Doinied D. Musgrave
                                                                    Failure at employ., to pay proper                                   9                                             Minn.                                                       Representative, Mauser Works
conspiracy indictments were returned involving a                    Fals, cation or distortion a, Gave-
                                                                                                                                                       Mr. Charles C. Cunningham   Director, Art Institute, of                                        of West Germany
                                                                    u at,-----------------------------------                           99                                                                          Mr. John Richards               Owner, Potomac Arms Co.
Service employee, a president of an electronic                                            out,., ryr;~;~I~
                                                                      nauthorized outside .1tivit                                       5         3                                   Chicago, Chicago, 111.
                                                                    Failure to discharge                                                                                                                           Mr. Jeptas Rogers               Administrative Assistant, In.
corporation, a president. and general manager of a                  Divulgence of confidential information.-----------                  5
                                                                                                                                        1              Mr. Louis Goldenberg        Art Dealer, Wildenstein &                                          ternational Association of
                                                                    Acceptance .11... a,I_  gratuities. ---- --------- ____            ,2
contracting firm, and a certified public accountant.                Pereenal and other         nduct-.. ................                4        .1                                   Co., New York, N.Y.                                             Chiefs of Police
                                                                                  id of                                                                Dr. Sherman E. Lee          Director, Cleveland Museum      Lt. Col. Joseph S. Smith        Deputy Director, Civilian
A number of the prosecutions involved charges of               S" p"'a" "'in nsy."'.P!y:::
                                                               Reprinumil.,varn                                                       311
                                                           Nordiaciplinary actions (including clearances, do"d without                                                                of Art, Cleveland, Ohio                                         Marksmanship Program
embezzlement. In. one case, a former revenue officer        .be., and th...                 ...... .....................           9,386      6, US
was indicted by a Federal grand jury on one count of                                Other Investigations

extortion and five counts of embezzlement. Investi-        Number of uses closed total               .......... -- ........
                                                              Applications far Zoon-'n'to-pnitice before the Internal
                                                                                                                                   2,161      2,U4

gation to date disclosed the former employee failed              Revenue Service-. ....... ------------------- ---
                                                              In .... to"
                                                               Federal . gairst          CPA's, and enrollees-.. _.. ......
to account for approximately $9,500 collected from                         claims............... ------ __... --------
                                                              Aftemptal arffiery......_ ...
various taxpayers.                                            Investigations forother Treasury 'Ill,-----------------------
                                                                                                   ureaus-------                    1,071

   Thirl persons were convicted during the                   I Include, r:algnetkim, rethriaments, or iithi,~ unuatimnS while employees were
year of various criminal offenses. Twenty-six of those     Under invest a !on or before a carristralive decision was made an disciplinary action
                                                           where investigation disclosed derogatory Information.
convicted were non-cmployces and 13 were em-
ployees or former employees. Thirty of the thirty-         Assistance Rendered to Other Government
nine defendants preferred to plead guilty rather than      Organizations
go to trial.
                                                              Internal Security conducted 1,053 investigations
                                                           for other Treasury components during the year. As
Investigations Completed                                   in prior years, considerable assistance was also fur-
   During the year, 8,950 investigations were com-         nished to the Secret Service in the protection of the
pleted compared to 12,081 last year, a decrease of         President and other persons. Due to the political
3,131. Police record checks were made on 3,137 in-         activity in the country this past year there was con-
dividuals considered for short-term temporary ap-          siderable demand in terms of inspection manpower
pointinents and on 1,787 persons hired in connection       involving protection details.
with economic and education opportunity programs.             The Service continued to' give assistance in the
This decrease in cases completed is a result of curtail-   development of a modem tax system to the Virgin
ment in hiring due to budgetary restrictions.              Islands, at the request of the territorial Governor.
   The Service also conducts investigations relating       An internal audit conducted in 1969 included a spe-
to background of certain applicants for enrollment         cial study that resulted in a recommendation to
 to practice before the Internal Revenue Service;          change filing requirements from a monthly to a
 charges against tax practitioners; and accidents in-      quarterly basis for excise, gross receipts, and with-
volving Service employees or property. Special             holding taxes. Since the assistance program was
investigations or studies requested by the Commis-         initiated, Virgin Islands tax revenues have increased
sioner, the Secretary of the Treasury or other             from $8.9 million in 1962 to $33.8 million in 1968.

64 / Annual Report / Chapter Eight
                                                                                                                                                                                                                                              Management Activities / 65
                                                                                                                                                         363--005 0-70----6
off icers

Organization of the Internal Revenue Service
Internal Revenue Regions and Districts
Service Reading Rooms
Principal Officers
Historical List of Commissioners





                                                j                                               z



                               d                                  hwl                      8
                                    L                                            3;

Internal Revenue Service
  7 Regions . 58 Districts

                                                                                      For ign Posts,
                                                                        Office of       nt:rnational Operations
                    1,11-1                                                     LONDON
                              .1 to I I        ~Vnbktt..' 0. C)                       MEXICO CITY
                           ccamh'w." - IftnjQ Ak"t.                                   OTTAWA
              0 NO I C."I" 4'a" (muti.I.J. 1. VO                                      SAO PAULO
              0 111 hu Cut. (Imet. Ind)                                               TOKYO
                          Internal Revenue Service Reading Rooms                                                      Principal Officers of the Internal Revenue Service
                (Locations of reading rooms same as mailing address unless otherwise indicated) -                                             As of June 30, 1969
NATIONAL OFFICE                                           NORTH-ATLANTIc REGION
Mail Address:                                             Mail Address:                                                                       NATIONAL OFFICERS
 Director, Public Information Division                     Regional Public Information Officer               OFFICE OF THE COMMISSIONER                     Operations ----------------- Clinton L. Walsh
 Internal Revenue Service                                  Room 1102                                                                                             National Computer Center,
                                                                                                    Commissioner -----------Randolph W. Thrower
  I I 11 Constitution Avenue NW.                           90 Church Street                                                                                        Martinsburg, W. Va ---- John E. Stewart
  Washington, D.C. 20224                                                                            Deputy Commissioner--------- William H. Smith
                                                            New York, N.Y. 10007                                                                            Systems ------------------Donald G. Elsberry
                                                                                                    Assistant to the Commissioner --- Edwin M. Perkins
CENTRAL REGION                                           SOUTHEAST REGION                           Assistant to the Commissioner ------ Roger V. Barth                       INSPECTION
Mail Address:                                            Mail Address:                              Chairman, Tax Forms Coordinating Com-
 Regional Public Information Officer                       Regional Public Information Officer      . mittee --------------------- James N. Kinsel        Assistant Commissioner ------Vernon D. Acree, Jr.
 Room 7106                                                 P.O. Box 926                                                                                   Executive Assistant ------------Fred 0. Robinette
                                                                                                    Assistant to the Deputy
 Federal Office Building                                   Atlanta, Ga. 30301                                                                               Division Directors:
                                                                                                       Commissioner ------------ Donald C. Dawkins
 550 Main Street                                         Location:                                  Director, Foreign Tax Assistance                           Internal Audit ------------ Francis 1. Geibel
 Cincinnati, Ohio 45202                                     Federal Office Building                                                                            Internal Security------ William T. McCarthy
                                                                                                      Staff ----------------------L. Harold Moss
                                                            275 Peachtree Street                                                                                       PLANNING AND RESEARCH
Mm-ATLANTIc REGIO14                                                                                                  ADMINISTRATION
Mail Address:                                            SOUTHWEST REGION                           Assistant Commissioner------- Edward F. Preston
                                                                                                                                                          Assistant Commissioner--------Albert W. Brisbin
  Regional Public Information Officer                    Mail Address:                                                                                      Division Dire6tors:
                                                                                                    Director, Program Staff---- Julius H. Lauderdale
  P.O. Box 12805                                          Regional Public Information Officer                                                                  Planning and Analysis ------ Marius Fariolctti
                                                                                                      Division Directors:
  Philadelphia, Pa.   19108                               1600 Patterson Street                         Facilities Management ------ Leo C. Inglesby           Research----------------James R. Turner
Location:                                                   Dallas, Tex. 75201                                                                                 Statistics -------------------- Vito Natrella
                                                                                                        Fiscal Management----- Gray W. Hume,        Jr.
  401   N. Broad Street                                                                                                                                        Systems Developm ent- Lancelot W. Armstrong
                                                         WESTERN REGION                                 Personnel---------------Albert J. Schaffer.
MIDWEST REGION                                           Mail Address:                                  Public Information------ Joseph S. Rosapepe
Mail Address:                                             Regional Public Information Officer           Training---------------- Stanley Goldberg
  Regional Public Information Officer                     Flood Building                                                                                  Assistant Commissioner-------- Harold T. Swartz
                                                                                                                       COMPLIANCE                         Deputy Assistant Commissioner
  17 N. Dearborn Street                                   870 Market Street
  Chicago, Ill. 60602                                     San Francisco, Calif. 94102               Assistant Commissioner -------- Donald W. Bacon                                    Richard J. Stakrm
                                                                                                    Deputy Assistant Commisioner---- Leon C. Green          Division Directors:
                                                                                                    Division Directors:                                       Income Tax ----------- John W. S. Littleton
                                                                                                         Alcohol, Tobacco, and                                Miscellaneous and Special Provisions Tax
                                                                                                             Firearms ---------------- Harold A. Serr                                      Linder Hamblen
                                                                                                         Appellate ----------------Arthur H. Klotz            Technical Publications and Services
                                                                                                         Audit ----------------- Singleton B. Wolfe                                        August F. Pohlig
                                                                                                         Collection --------------- Harold E. Snyder
                                                                                                          Intelligence -------------- William A. Kolar                OFFICE OF CHIEF COUNSEL
                                                                                                         Office of International                          Chief Counsel ---------------K. Martin Worthy
                                                                                                            Operations ----------- Clarence 1. Fox, Jr,   Technical Advisor to Chief Counsel
                                                                                                                    DATA PROCESSING                                                          Robert B. Jacoby
                                                                                                    Assistant Commissioner---------- Robert L. Jack       Special Assistant to Chief Counsel-W. Dean Mathis
                                                                                                    Deputy Assistant Commissioner --- Garrett DeMots      Special Assistant to Chief Counsel ----- Lester Stein
                                                                                                      Division Directors:                                 Associate Chief Counsel (Litigation)
                                                                                                         Management Information- -William E. Palmer                                         Richard M. Hahn
                                                                                                            IRS Data Center, Detroit,                       Technical Advisor to the Chief Counsel
                                                                                                              Mich ---------------Lawrence P. Doss                                            Paul E. Treusch

70 / Organization                                                                                                                                                                          Organization / 71
                                         NATIONAL OFFICES-Continued                                                                              REGIONAL AND DISTRICT OFFICES-Continued

      Division Directors:                                      Technical Advisor to Chief Counsel                                                                  Midwest Region
        Alcohol, Tobaceo, and Firearms Legal                                             Samuel R. McClurd          All Regional Offices at 35 East Wacker Drive, Chicago, 111. 60601, unless a different address is indicated
                                     John F. McCarren          Special Assistant to Chief Counsel                   Regional- Commissioner------------------------------------------------------- Alvin M. Kelley
         General Litigation ----J. Walter Feigenbaum                                           Arthur B. White      Assistant Regional Commissioners:                    District Directors:
         Enforcement ----------- William F. McAleer                                                                                                                        Aberdeen, S. Dak. 57401 ----- William C. Welsh
                                                               Division Directors:                                    Administration ----------- William F. Sullivan
        Refund Litigation -------- Robert A. Bridges
                                                                 interpretative ------------- John L. Withers          Alcohol, Tobacco, and Firearms                      Chicago, Ill. 60602 ------- Eugene C. Coyle, Jr.
        Tax Court----------------- John T. Rogers
                                                                 Legislation and Regulations- james F. Dring                                     William A. Collawan       Des Moines, Iowa 50309 ------- John F. Hanlon
    Associate Chief Counsel (Technical)
                                                                                                                      Appellate ---------------- Wallace T. Morris         Fargo,,N. Dak. 58102 ---- Frederick G. Kniskern
                                   Thomas McP. Davis         Operations and Planning------ William P. Crewe
                                                                                                                                                                           Milwaukee, Wis. 53202 ------ Walter S. Stumpf
                                                                                                                       Audit -----------------John W. Baudendist
                                                                                                                                                                           Omaha, Nebr. 68102 -------- Richard P. Vinal
                                                                                                                      Collection ------------------- Roger C. Beck         St. Louis, Mo. 63101 -------- Edwin P. Trainor
                                                                                                                      Data Processing ---------- Norman B. Bergeson        St. Paul, Minn. 55101 ------ George 0. Lcthert
                                      REGIONAL AND DISTRICT OFFICERS                                                  Intelligence --------------- William B. Mayes        Springfield, 111. 62704---------Jay G. Philpott
                                                  Central Region                                                    Director, Midwest Service Center, Kansas City, Mo. 64170-------------------------Arnold S. Dreyer
                                                                                                                    Regional Counsel----------------------------------------------------------- Frank C. Conley
    All Regional Offices at 550 Main Street, Cincinnati, Ohio 45202, unless a different address is indicated        Regional Inspector------------------------------------------------------ Gordon M. Anderson
    Regional Commissioner----------------------------------------------------- Charles G. Keebler
    Assistant Regional Commissioners:                       District Directors:                                                                                 North-Atlantic Region
      Administration------------Arthur J. Collinson           Cincinnati, Ohio 45202 ------- Paul A. Schuster       All Regional Offices at 90 Church Street, New York, N.Y. 10007, unless a different address is indicated
      Alcohol, Tobacco, and Firearms--- Rex D. Davis          Cleveland, Ohio 44199---- Frank S. Turbettjr.         Regional Commissioner -------------------------------------------------------- Harold R. All
I     Appellate -------------W. Franklin Hammack              Detroit, Mich. 48226 ----- Ambrose M. Stoepler        Assistant Regional Commisisoners:                        Augusta, Maine 04330---- Whitney L. Wheeler
      Audit------------------Michael A. DcGuirc               Indianapolis, Ind. 46204 -------- James E. Daly         Administration --------------John E. Foristall         Boston, Mass. 02203 ------ William E. Williams
      Collection -----------------William J. Grabo            Louisville, Ky. 40202 ----------Robert J. Dath          Alcohol, Tobacco, and Firearms- -Edward J. Fox         Brooklyn, N.Y. 11 201 -------Charles A. Church
      Data Processing----------Wayne S. Kegcrreis             Parkersburg, W. Va. 26101 ----- Hugh D. Jones           Appellate --------------- Stephen C. Volpone           Buffalo, N.Y; 14202 ------------ John E. Foley
      Intelligence ------------------ Harold B. Holt                                                                  Audit-------------------- William M. Wolf              Burlington, Vt. 05402-------- Fulton D. Fields
    Director, Central Service Center, Covington, Ky. 41019 ---------------------------- Everett L. Meek               Collection ---------------- Roger F. Shockcor          Hartford, Conn. 06115 ----Joseph J. Conley, Jr.
    Regional Counsel--------------------------------------------- 7 ------------ Clarence E. Price                    Data Processing-----------J. Orville Tuescher          Manhattan, N.Y. 10007
                                                                                                                      Intelligence ------------------Alan McBride                                  Edward J. Fitzgerald, Jr.
    Regional Inspector -------------------------------------------------------- William A. Costello
                                                                                                                    District Directors:                                      Portsmouth, N.H. 03801 ---- Frank W. Murphy
                                                                                                                      Albany, N.Y. 12 2 10 -------- Donald T. Hartley        Providence, R.I. 02903 -------- John J. O'Brien
                                                                                                                    Director, Nortb-Atlantic Service Center, Andover, Mass. 01812 --------------------Nor-man E. Morrill
                                                                                                                    Regional Counsel, 26 Federal Plaza, New York, N.Y. 10007------------------------ Marvin E. Hagen
                                                Mid-Atlantic Region                                                 Regional Inspector, 26 Federal Plaza, New York, N.Y. 10007 -----------------------Sidney M. Wolk
    All Regional Offices at 2 Penn Center Plaza, Philadelphia, Pa. 19102, unless a different address is indicated
    Regional Commissioner -------------------------------------------------------- Dean J. Barron                                                                 Southeast Region

    Assistant Regional Commissioners:                       District Directors:                                     All Regional Offices at 275 Peachtree Street, N.E., Atlanta, Ga., 30303, unless a different address is indicated
      Administration------------Americo P. Attorri            Baltimore, Md. 21202 ---------- Irving Machiz         Regional Commissioner --------------------------------------------------- William J. Bookholt
      Alcohol, Tobacco, and Firearms                          Newark, N.J. 07102 ------- Roland H. Nash, Jr.        Assistant Regional Commissioners:                        District Directors:
                                  Charles R. Peterson         Philadelphia, Pa. 19108 --- Seymour I. Friedman          Administration -----------Zachary T. Johnson             Atlanta, Ga. 30303 ----------- Aubrey C. Ross
      Appellate ------------------- Victor Cuniglio           Pittsburgh, Pa. 15222 -----------H. Alan Long            Alcohol, Tobacco, and Firearms                           Birmingham, Ala. 35203--Walter T. Coppinger
      Audit --------------------- Dwight L. James             Richmond, Va. 23240---------James P. Boyle                                             William N. Griffin         Columbia, S.C. 29201 ------Harold M. McLeod
      Collection --------------- William F. Culliney          Wilmington, Del. 19802----James H. Kennedy               Appellate -------------------Vance N. Bates              Greensboro, N.C. 27401 ---------John E. Wall
      Data Processing ----------- Anthony L. Carrea                                                                    Audit-------------------- Harold B. Bindseil             Jackson, Miss. 39202 ------ James G. Martin, Jr.
      Intelligence---------------Amerigo R. Manzi                                                                      Collection ----------------- William H. Loeb             Jacksonville, Fla. 32202 Andrew J. O'Donnell, Jr.
                                                                                                                       Data Processing -----------Daniel H. Hollums             Nashville, Tenn. 37203 ------James A. O'Hara
    Director, Mid-Atlantic Service Center, Philadelphia, Pa. 19155--------------------- Earl L. Torgerson
                                                                                                                       Intelligence ---------------Edmund J. Vitkus
    Regional Counsel ------------------------------------------------------------- Cecil H. Haas                    Director, Southeast Service Center, Chamblee, Ga. 30006 ---------------------------- Claude A. Kyle
    Regional Inspector, Bankers Securities Building, Walnut and juniper Streets, Philadelphia, Pa.                  Regional Counsel ------------------------------------------------------- Henry C. Stockell, Jr.
      19017-------------------------------------------------------------- Emanuel M. Schuster                       Regional Inspector------- ------------------------------------------------------ Earl L. Fuoss
    72 / Annual Report / Organization-Principal Officers                                                                                                             Annual Report / Organization- Principal Officers / 73
                            REGIONAL AND DISTRICT OFFICES-Continued
                                             Southwest Region
All Regional Offices at If 14 Commerce Street, Dallas, Tex. 75202, unless a different address is indicated
Regional Commissioner ------------------------------------------------------- B. Frank White                                          Historical List of Commissioners of Internal Revenue
Assistant Regional Commissioners:                        Austin, Tex. 78701 ------------R. L. Phinney
                                                         Cheyenne, Wyo. 82001 ------- Richard L. Hutt
                                                                                                                                Office of Commissioner of Internal Revenue created by Act of Congress, July 1, 1862
   Alcohol, Tobacco, and Firearms
                                 James G. Carroll        Dallas, Tex. 75201 --------- Ellis Campbell, Jr.
                                                         Denver, Colo. 80202 ------ Arthur A. Kennedy                                  Name                                        State                          F-no                 To
  Appellate ------------------- G. Clinton Witt
  Audit-----------------Lawrence M. Stewart              Little Rock, Ark. 72203 ------ Fred W. Johnson
  Collection-------------------Alfred N. Kay             New Orleans, La. 70130 ------- Chester A. Usry            George S. Boutwell ..............              Massachusetts ...............            July 17, 1862 Mar. 4, 1863
  Data Processing------------ George M. Oliver            Oklahoma City, Okla. 73102                              Joseph J. Lewis .................               Pennsylvania ................             Mar. 18,1863 June 30, 1865
  Intelligence ----------- William E. Beloate, Jr.                                  Clyde L. Bickerstaff           Wflliam Orton ..................               New York ..................               J uly I , 1865 Oct. 31, 1865
District Directors:                                      Wichita, Kans. 67202 ------- Harry F. Scribner            Edward A. Rollins ..............               New Hampshire .............               Nov. 1,1865 Mar. 10, 1869
  Albuquerque, N. Mex. 87 101 -William M - Coard                                                                   Columbus Delano ...............                Ohio .......................              Mar. 11, 1869 Oct. 31, 1870
Director, Southwest Service Center, Austin, Tex. 78740 ----------------------------- Ervin B. Osborn               Alfred Pleasonton ...............              New York ..................              Jan. 3, 1871 Aug. 8, 1871
Regional Counsel, 1025 Elm Street, Dallas, Tex. 75202 ----------------------------- William B. Riley              John W. Douglass ...............                Pennsylvania ................             Aug. 9, 1871 May 14, 1875
Regional Inspector, 1511 Bryan Street, Dallas, Tex. 75201 ----------------------- David 0. Lowry, Jr.              Daniel D. Pratt .................              Indiana ....................              May 15, 1875 July 31, 1876
                                                                                                                   Green B. Raum .................                Illinois .....................            Aug. 2,1876 Apr. 30, 1883
                                                                                                                  Walter Evans ...................                Kentucky ...................              May 21,1883 Mar. 19, 1885
                                              Western Region                                                      Joseph S. Miller ................               West Virginia ...............             Mar. 20,1885 Mar. 20, 1889
                                                                                                                  John W. Mason .................                ..... do .....................             Mar. 21, 1889 Apr. 18, 1893
All Regional Offices at 870 Market Street, San Francisco, Calif. 94102, unless a different address is indicated
                                                                                                                  Joseph S. Miller ................              ..... do .....................            Apr. 19,1893 Nov. 26, 1896
Regional Commissioner --------------------------------------------------- Homer 0. Croasmun
                                                                                                                  W. St. John Forman .............                Illinois .....................            Nov. 27,1896 Dec. 31, 1897
Assistant Regional Commissioners:                         Boise, Idaho 83701 ---------- Calvin E. Wright          Nathan B. Scott .................               West Virginia ...............            Jan. 1,1898 Feb. 28, 1899
  Administration--------------Joseph T. Davis             Helena, Mont. 59601 ---------Nelson L. Seeley           George W. Wilson ...............                Ohio .......................             Mar. 1,1899 Nov. 27, 1900
  Alcohol, Tobacco, and Firearms                          Honolulu, Hawaii 96813 -------- Evan S. Lloyd           John W. Yerkes .................                Kentucky ...................             Dec. 20,1900 Apr. 30, 1907
                              Brenton G. Thorne           Los Angeles, Calif. 90012 -----Frank S. Schmidt         John G. Capers .................                South Carolina ..............            June 5,1907 Aug. 31, 1909
  Appellate ------------- Gardiner B. Willmarth           Phoenix, Ariz. 85025--- George D. Patterson, Jr.        Royal E. Cabell .................               Virginia .....................           Sept. I , 1909 Apr. 27, 1913
  Audit ------------------ Raymond F. Harless             Portland, Oreg. 97204 ------Arthur G. Erickson          William H. Osborn ...... : .......              North Carolina ..............            Apr. 28, 1913 Sept. 25, 1917
  Collection ---------------- Charles D. Moran            Reno, Nev. 89502----------- Warren A. Bates             Daniel C. Roper ................                South Carolina ..............            Sept. 26, 1917 Mar. 31, 1920
  Data Processing------------ Willard L. Pierson          Salt Lake City, Utah 841 10 ----Roland V. Wise          William M. Williams ............                Alabama ...................              Apr. 1,1920 Apr. 11, 1921
  Intelligence---------------Herman F. Kuehl              San Francisco, Calif. 94102 --- Joseph M. Cullen        David H. Blair ..................               North Carolina.. . ...........           May 27, 1921 May 31, 1929
District Directors:                                       Seattle, Wash. 98121 ---------- Neal S. Warren          Robert H. Lucas ................                Kentucky ...................             June 1, 1929 Aug. 15, 1930
  Anchorage, Alaska 99501 ------Lewis J. Conrad                                                                   David Burnet ...................                Ohio .......................             Aug. 20,1930 May 15, 1933
Director, Western Service Center, Ogden, Utah 84405 ------------------------------ Robert H. Terry                Guy T. Helvering ...............                Kansas .....................             June 6, 1933 Oct. 8, 1943
Regional Counsel, 447 Sutter Street, San Francisco, Calif. 94018 -----------------Richard C. Schwartz             Robert E. Hannegan ............                 Missouri ....................            Oct. 9,1943. Jan. 22, 1944
Regional Inspector, 1076 Mission Street, San Francisco, Calif. 94103 -------------------- Henry A. Feltz          Joseph D. Nunan, Jr ............                New York .................               Mar. 1,1944 June 30, 1947
                                                                                                                  George J. Schoeneman ...........                Rhode Island ...............             July 1,1947 July 31, 1951
                                                                                                                  John B. Dunlap .................               Texas ......................              Aug. 1, 1951 Nov. 18, 1952
                                                                                                                  T. Coleman Andrews ............                 Virginia ....................            Feb. 4,1953 Oct. 31, 1955
                                                                                                                  Russell C. Harrington ............             Rhode Island ...............              Dec. 5, 1955 Sept. 30, 1958
                                                                                                                  Dana Latham ..................                  California ..................            Nov. 5, 1958 . Jan. 20, 1961
                                                                                                                  Mortimer M. Caplin .............               Virginia ....................             Feb. 7,1961 July 10, 1964
                                                                                                                  Sheldon S. Cohen ...............               Maryland ..................               Jan. 25,1965 Jan. 20, 1969
                                                                                                                  Randolph W. Thrower ...........                Georgia ....................              Apr. 1, 1969 .............

                                                                                                                     In addition, the following were Acting Commissioners during    Pressly R. Baldridge, of Iowa, from May 16 to June 5, 1933;
                                                                                                                  periods of time when there was no Commissioner holding the        Harold N. Graves, of Illinois, from Jan. 23 to Feb. 29, 1944;
                                                                                                                  office: John W. Douglass, of Pennsylvania, from Nov. 1 1870,      John S. Graham, of North Carolina, from Nov. 19, 1952, to
                                                                                                                              2, 1871; Henry C. Rogers, of Pennsylvania: from       Jan. 19, 1953; Justin F. Winkle, of New York, from Jan. 20
                                                                                                                             to May 10, 1883, and from May I to June 4, 1907;       to Feb. 3, 1953; 0. Gordon Delk, of Virginia, from Nov. I to
                                                                                                                  J~~-'Y-aj`~ Knox, of Minnesota, from May I I to May 20, 1 8B3;    Dec. 4, 1955, and from Oct. I to Nov. 4, 1958; Charles 1. Fox,
                                                                                                                  Robert Williams, Jr., of Ohio, from Nov. 28 to Dec. 19, 900;      of Utah, from Jan. 21 to Feb. 6, 1961; Bertrand M. Harding,
                                                                                                                  Millard F. West, of Kentucky, from Apr. 12 to May 26, i921;       of Texas, from July 11, 1%4 to Jan. 24, 1965; and William H.
                                                                                                                  H. F. Mira, of Washington, from Aug. 16 to Aug. 19, 1930;         Smith of Virginia, from Jan. 21 to Mar. 31, 1969.

74 / Annual Report / Organization-Principal Officers                                                                                                                                                                      Organization / 75

. appendix

 Taxpayer Publications
 Tax Forms Activity
 Selected Regulations Published
 Supreme Court Decisions
 Actions of Lower Courts
 Statistics of Income Reports Published
APPENDIX                                                  affect U.S. citizens living in foreign countries. Ap-      New Free Taxpayer Information                              Zone. It discusses in detail the numerous rules and
                                                           Proximately 770,000 copies of this booklet                                                                           requirements for the exemption.
Taxpayer Publications                                                                                       were
                                                          printed for free distribution through Internal Reve-                                                                     Tle following is a list of additional publications
                                                          nue Service offices and U.S. Embassies and con-                Tax -Information on Mutual Fund Distributions,         distributed free of charge:
    The 1969 edition of Your Federal Income Tax,          sulates in all parts of the world.                          Publication No. 564, was developed to assist the
Publication No. 17, again contained a wealth of in-                                                                                                                             Publication
                                                               The Farmer's Tax Guide, Publication No. 225, is        growing numbers of mutual fund shareholders. It              Number                         Title
formation needed by taxpayers when preparing re-          a 64-page booklet in which the tax problems of              explains and illustrates how they should treat the        308       Farmers Gas Tax Credit
turns. Among the features are a table showing how         farmers are explained in everyday terms. As in prior                                                                  349       Federal Use Tax on Trucks, Truck-Tractors and
                                                                                                                      various types of distributions by mutual funds and
to claim additional withholding allowances on the         years, the 1969 edition features a tax calendar to                                                                                 Buses
                                                                                                                      contains precise information on how shareholders
 basis of itemized deductions, information on the                                                                                                                               378                 Gas Tax Credit or Refund for Nonhighway
                                                          remind farmers of their tax obligations throughout          should report the amounts they receive.                                and
new income tax surcharge, the new procedures for
                                             c                                                                                                                                  463                        sees
                                                                                                                                                                                          Travel, Entertnunrie.1, and Gift Expenses
                                                          the year. Completed samples of an income tax re-               Questions and Answers on Retirement Plans for
payment of estimated tax, and instructions for                                                                        the Sell-Employed, Publication No. 566, is directed       501       Your Exemptions and Exemptions for Dependents
                                                          turn and the accompanying schedules that farmers                                                                      502       Deduction for Medical and Dental Expenses
treatment of interest on certain industrial develop-
                                                          normally use refer the reader to sections of the book-      to both the tax practitioner and to the taxpayer. It      503       Child Care and Disabled Dependent Care
ment bonds. This 160-page booklet includes such                                                                                                                                 504       Income Tax Deduction for Alimony Payments
                                                          let where the various entries are explained. There are      provides answers to questions often asked about the
taxpayer aids as a comprehensive index and a com-                                                                     rather complex provisions of the Self-Employed In-        505       Tax Withholding and Declaration of Estimated Tax
pleted tax return with entries keyed through page          illustrations of depreciation, farm income, and ex-                                                                  506       Computing Your Tax Under the Income Averaging
                                                          pense records, and discussions of income, employ-           dividuals Tax Retirement Act of 1962. Where pos-                       Method
references to explanations of the law and examples                                                                   sible, the answers arc keyed to the applicable sections    507       Tax Information on Scholarships and Fellowships
of its application to actual situations. It is revised     ment, and self-employment taxes, with examples                                                                       508      Tax Information on Educational Expenses
                                                                                                                     of the Income Tax Regulations or to the Revenue            509      Tax Calendar and Checklist for 1969
each year to include the latest changes in the Federal    showing how the provisions apply to specific situa-
                                                                                                                     Rulings dealing with the subject matter.                   510       Information on Excise Taxes for 1969
tax laws, regulations, and official rulings.               tions. Slightly more than 1 million free copies were                                                                 511      Sales and Other Dispositions of Depreciable Property
                                                                                                                         Tax Advice on Civil Service Disability Retirement
    Approximately 913,000 copies of the 1969 edition       distributed by Internal Revenue Service offices and       Payments, Publication No. 567, provides tax as-            512      Credit Sales by Dealers in Personal Property
                                                                                                                                                                                513      Tax Information for Visitors to the United States
 of Your Federal Income Tax were sold at 60 cents a        extension agents of the Department of Agriculture.        sistance to former Federal employees who retired           514      Foreign Tax Credit for U.S. Citizens and Resident
 copy by the Government Printing Office and local              Tax Guide for Small Business, Publication No.         under the disability retirement provisions of the                       Aliens
                                                           334, provides answers to many tax questions con-                                                                     515       Withholding of Tax on Nonresident Aliens and For-
 Internal Revenue Service offices. The Service used                                                                  Civil Service Retirement law. It explains and il-                       eign Corporations
 an additional 160,000 copies in various educational       ceming sole proprictorships, partnerships, and cor-       lustrates the tax treatment of the retirement benefits     516      Tax Information for U.S. Government Civilian Em-
 programs.                                                 porations. It explains in everyday language how           received before these retirees attain "retirement age"                  ploy-s Stationed Abroad
                                                                                                                                                                                517      Social Security for CJergymen and Religious Workers
    The Teaching Taxes Program, used in approxi-           Federal income, excise, social security, and withhold-     (which may be wholly or partially excludable from         518      Foreign Scholars and Educational and Cultural Ex.
 mately 25,000 high schools and colleges during            ing taxes apply, and gives examples of typical situa-     gross income as sick pay) and the treatment of the                      change Visitors
                                                                                                                                                                                519      United States Tax Guide for Aliens
 1969, is based on three publications. The first is the    tions. A checklist of activities subject to Federal       post-retirement age payments (which generally will
                                                                                                                                                                                520      Tax Information for American Scholars Abroad
Teachers Guide, Publication No. 19, which con-             taxes shows the forms to be filed and the pages on        be reported under the "3-year rule"). The pamphlet        521      Moving Expenses-Tax Information for Employees
                                                           which each situation is discussed. A tax calendar         was developed in cooperation with the U.S. Civil                        and Employers
 tains answers to the tax problems appearing in                                                                                                                                 522      Adjustments to Income for Sick Pay
                                                           for businessmen reminds readers of the actions they       Service Commission and was mailed to all disability
the student text, information on the 50 most fre-                                                                   retirees.                                                   523      Tax Information on Selling Your Home
quent tax questions, a wall chart of individual in-        must take during the year to comply with the Federal                                                                524      Retirement Income and Retirement Income Credit
                                                                                                                        Federal Tax Information for Civil Service Re-          525      Taxable Income and Nontaxable Income
come tax return forms, and other teaching aids. The        tax laws. Approximately 256,000 copies of this 160-                                                                 526       Income Tax Deduction for Contributions
                                                                                                                    tirees, Publication No. 568, explains and illustrates
student text, Understanding Taxes, is published in         page booklet were sold during the year at 60 cents                                                                  527      Rental Income and Royalty Income
                                                                                                                     the rules under which Civil Service nondisability re-     528       Information on Filing Your Tax Return
 • 28-page general edition, Publication No. 21, and        a copy by the Government Printing Office and In-
                                                                                                                    tirees must report their retirement annuity payments.      529      Other "Page 2" Miscellaneous Deductions
• 36-page farni edition, Publication No. 22. Both          ternal Revenue Service. Anothtr 80,000 were               It was developed in cooperation with the U.S. Civil       530      Tax Information on Deductions for Homeowners
editions present illustrated step-by-step explanations     printed for internal use by the Service.                                                                            531      Reporting Your Tips for Federal Tax Purposes
                                                                                                                    Service Commission, which is distributing copies to        532      Tax Information for Students and Parents
of the preparation of typical income tax returns, an-          Tobacco Tax Guide, publication No. 464, is a         all nondisability retirees.                                533       Information on Self-Employed Tax
swers to practical problems, and supplementary             compilation of basic reference material prepared to          Questions Asked by U.S. Taxpayers A broad, Pub-        534      Depreciation, Investment Credit, Amortization,
                                                                                                                                                                                            D ple 'on
 questions and problems. Introductory chapters dis-        assist manufactures of taxable tobacco products and       lication No. 569, is a 12-page pamphlet that an-          535                 it
                                                                                                                                                                                        TaxeInformation on Business Expenses
cuss civic responsibility, U.S. tax history, and the       others concerned to comply with Federal tobacco tax      swers the questions most frequently asked by U.S.          536      Losses From Operating a Business
                                                           laws and regulations. This document may be pur-          citizens and residents living abroad. Among other          537      Installment and Deferred-Payment Sales         .
 Federal budget. The last eight pages of Publication                                                                                                                           538     Tax Information on Accounting Periods and Methods
 No. 22 are devoted to farm tax situations. Of the         chased from the Government Printing Office, Wash-        subjects, it covers the special filing requirements,       539      Withholding Taxes From Your Employee's Wages
3,960,000 students who participated in the 1969            ington, D.C. 20402.                                      foreign earned income exclusions, withholding tax          540      Tax Information on Repairs, Replacements, and
                                                                                                                    rules, and scholarship and fellowship rules applicable                  Improvements
Teaching Taxes Program, 3,493,000 used the gen-                Questions and Answers-Gun Control Act of                                                                        541      Tax Information on Partnership Income and Losses
 eral text and 467,000 used the farm edition. A total       1968, publication No. 650, contains the most often      to these taxpayers.                                        542      Corporations and the Federal Income Tax
                                                                                                                        Tax Guide for U.S. Citizens Employed in U.S.           543     Tax Information on the Sale of a Business
of 84,000 Teachers Guides were distributed.                requested items of information concerning the Gun                                                                   544     Sales and Exchanges of Assets
    Tax Guide for U.S. Citizens Abroad, Publication        Control Act of 1968. This booklet, which includes        Possessions, Publication No. 570, explains the special     545      Income Tax Deduction for Interest Expense
                                                           coverage and explanation of the major provisions of      "possession-exemption" applicable to individuals           546     Income Tax Deduction for Taxes
No. 54, explains the conditions under which income
                                                                                                                                                                               547     Tax Information on Disasters, Casualty Losses, and
 earned abroad may bc partially or fully tax exempt.       the act, is available from the Government Printing       who are employees or are self-employed in posses-
 It also discusses other special tax provisions that       Office at a cost of 15 cents.                            sions of the United States or in the Panama Canal          548     Tax Information on Deduction for Bad Debts

78 / Annual Report / Appendix                                                                                                                                                                    Annual Report / Appendix / 79
    Publication                                                     The following forms were eliminated:                              tion tax, in respect of a withholding from the pro-         "dominant, controlling, or impelling" reason for the
                                                                  Form Number                              Title                      ceeds from a sale of foreign securities.                    accumulation, as the Sixth Circuit held, sustained
    549      Condemnations of Private Property for Public Use
    550      Tax Information on Investment Income and Expenses    Publication 14____. Circular H-Household          Employer's                                                                    the Government's position. The Court in resolving
    551      Tax Information on Costs or Other Basis of Assets                          Social Security Tax G;side                    Alcohol and Tobacco Regulations
                                                                                                                                                                                                  this several-sided split among the circuits sustained a
    552      Recordkeeping Requirements and a Guide to Tax        942A ------------ Copy-Ernployer~s Quarterly Tax Re-
                Publications                                                             turn for Household Employees                      Treasury Decision 6963, issued July 24, 1968,          Iong-established administrative position.
    553      Highlights of 1968 Changes in the Tax Law               001A-F --------- Exemp fion, or Reduced Rate Certificate          made a number of liberalizing changes in the Beer              The treatment of employer-paid scholarships was
    554     Tax Benefits for Older Americans                       I
                                                                  .040-ES             Amended Declaration of Estimated In-             Regulations. For example, it provided for the estab-
                                                                      (Amended)          c... Tax                                                                                                considered by the Supreme Court in Bingler v, John-
    555      Community Property and the Federal Income Tax                                                                             lishrrent of experimental breweries, eliminated re-
    556     Appeal Rights and Claims for Refund                    1040A----------- U.S. Individual Income Tax Return                                                                            son el al., 37 U.S.L. Week 4365 (U.S. Apr. 23,
    557     How to Apply for Exemption for an Organization         1120-ES--------- Declaration of Estimated Income Tax for            strictions on the storage of untaxpaid bottled beer,       1969). In that case a corporation granted selected
    558     Tax Information for Sponsors of Contints and Sport-                         Corporations                                   and provided an extension of time for taking monthly
                                                                   1120-ES            Amended Declaration of Estimated In-                                                                       employees "educational leave" and monthly stipends,
               ing Events
                                                                      (Amended)         come Tax-Corporations                          inventories.                                              ranging from 70 to 90 percent of their prior salaries
    559     Federal Tax Guide for Survivors, Executors, and
               Acirninistrators                                   2031 ------------ Waiver Certificate to Elect Social Secur.             Treasury Decision 7002, issued February 1, 1969,       plus "adders" depending on the size of their families,
    560     Retirement Plans for Self-Employed Individuals                              ity Coverage for Use by Ministers, Cer.        amended a number of regulations issued under chap-        for the purpose of studying for doctoral degrees. To
    561     Valuation of Donated Property                                               tain Members of Religious Orden, and
                                                                                        Christian Science Practitioners                ter 51 of the Internal Revenue Code to give effect        qualify for a gmnt, the employee had to obligate
                                                                                                                                       to Public Law 90-630, discussed on page 36. Pur-          himself to return to the employer for a substantial
    Tax Forms Activity                                                                                                                 suant thereto, payment of the tax on distilled spirits
                                                                  Selected Regulations Published                                                                                                 period of time after completion of the "educational
       The following new forms were issued:                                                                                            imported in bulk may now be deferred until the spir-      leave." The Commissioner relied on regulations sec-
    Form Number                               Title               Income Tax Regulations                                               its are removed from the domestic distilled spirits       tion 1. 1 17-4 (c) which provides that- amounts rep-
    W-2 (RR) ------- Railmad Employee's Wage and Tax                                                                                   plant at which they are bottled.                          resenting "compensation for past, present, or future
                          Statement                                  Income tax regulations under various sections of
    990 (SF) --------- Return of Organization Exempt From In-     the Internal Revenue Code were amended or added                         Treasury Decisions 7007 and 7008, both published       employment services," and amounts "paid * * *
                         come Tax Section 501 (c) (other than     by the following Treasury Decisions:                                 on March 1, 1969, amended various regulations is-         to * * * an individual to enable him to pursue
                          section 501(c)(3)) of the Internal                                                                           sued pursuant to chapters 51, 52, and 53 of the Code
                                                                     Treasury Decision 6965, relating to depletion for                                                                           studies or research primarily for the benefit of the
                          Revenue Code
    990-A (SF) ------ Return of Organization Exempt From          certain clays and cutoff point for all minerals.                     with respect to the filing of special tax returns and     grantor," are not excludable as scholarships. - How-
                          Income Tax Section 501 (c) (3) of the                                                                        of claims on Form 843 relating to special taxes.          ever, the Third Circuit held the above referred-to
                          Internal Revenue Code                       Treasury Decision 6972, relating to unemploy-
                                                                  merit benefit trusts.                                                   Treasury Decision 7014, issued on June 4, 1969,        regulation to be invalid and the stipends received by
    1040-FY--------- Fiscal Yew Surcharge Computation U.S.
                          Individual Income Tax                       Treasury Decision 6981, defining when                            liberalized the requirements placed on wholesale          the employees to be scholarships excludable from
    Schedule B         Fiscal Yew-Supplemental Schedule of                                                                            liquor dealers as to records to be maintained and          income under section 117 of the 1954 Code. This
      (1040-FY)           Income and Retirement Income Credit                                                    services
                                                                  are performed by a controlled foreign corporation
                                                                                                                                      changed the basis for reports by such dealers from         created a conflict with the Fifth Circuit which had
    1040-ES            U.S. Individual Worksheet For Compu-       for or on behalf of a related person.
      Worksh'et           tation of Estimated Tax                                                                                      monthly to semiannually.                                  explicitly sustained the regulation. The Supreme
                                                                      Treasury Decision 6982, relating to integration of
    1040-ES            U.S. Nonresident Alien Individual Work-                                                                                                                                   Court overruled the Third Circuit by holding the
      Worksheet           sheet for Computation of Estimated      qualified plans with Social Security Act.                           Firearms Regulations
                          Income Tax                                  Treasury Decision 6984, relating to options ac-                                                                            regulations section to be valid and the stipends to
    1040NR-FY------ U.S. Nonresident Alien Individual Fiscal                                                                             Regulations, 26 CFR Part 178, Commerce in Fire-        be includable in income.
                                                                  quired in connection with loans.                                    arms and Ammunition, which became effective De-
                          Year Tax Computation                                                                                                                                                       In United States v. Skelly Oil Company, 37
    1041-FY--------- Fiscal Year Tax Surcharge Computation           Treasury Decision 6985, relating to the medical
                                                                                                                                      cember 16, 1968, implemented the provisions of             U.S.L. Week 4351 (U.S. Apr. 21, 1969), an issue of
                           (For U.S. Fiduciary Income Tax         expense deduction.
                          Return)                                                                                                     Title I, State Firearms Control Assistance, of the Gun     first impression and of considerable administs-ative
                       Gains and Losses From Sales or Ex-             Treasury Decision 6991, relating to the deduction               Control Act of 1968, and Title VII, Unlawful Pos-
    Schedule D                                                                                                                                                                                  importance was favorably decided for the Gov-
      (1041)              changes of Property                     for interest on installment payments.                               session or Receipt of Firearms, of the Omnibus
    ScheduleE (1041)- Beneficiary's Shan of Income, Deduc-                                                                                                                                       ernment by the Supreme Court. The taxpayer, a
                                                                      Treasury Decision 6998, relating to the allocation              Crime Control and Safe Streets Act of 1968, as
                          tions, and Credits                                                                                                                                                     producer of natural gas, repaid to its customers over-
    1120-FY--------- Corporation Fiscal Year Tax Computa-         of income and deductions among taxpayers.                           amended by Title III of the Gun Control Act of            charges for prior years due to State set rate charges
                          tion Schedule                               Treasury Decision 6999, relating to the definition              1968.
    221OF----------- Statement Relating to Underpayment of                                                                                                                                      having been held to be excessive. In the year of re-
                          Estimated Tax by Farmers and Fisher-    of group-term life insurance.                                                                                                 payment the taxpayer claimed as a deduction under
                          men                                     Excise Tax Regulations                                              Supreme Court Decisions                                   section 1341 of the 1954 Code the full amount of
    4363 ------- - --- Notice of Acquisition of Stock Pursuant
                          to Conversion of an Original or New                                                                                                                                   the repayment without adjustment for depletion
                          Japanese Debt Obligation
                                                                    Treasury Decision 7011, relating to the excise tax                Civil Cases
                                                                                                                                                                                                deductions that had been taken in the years the
    4410 ------------ Interest Equalization Tax Quarterly Re-     on the use of certain highway motor vehicles.                          On January 13, 1969, the Supreme Court decided         overcharges had been included in income. The
                          nirn of Tax Withheld by Participating
I                         Firm                                    Employment Tax Regulations                                           United States v. Donruss Company, 393 U.S. 297           Court, in holding that the deduction for repayment
    4461 ------------ Sponsor Application Approval of Matter                                                                           (1969), reversing and remanding 384 F. 2d 292            be reduced by the amount of depletion deductions
                          or Prototype Plan                          Treasury Decision 7001, relating to the treatment
                                                                                                                                       (6th Cir. 1967), which involved the degree of "pur-      taken thereon in prior years, prevented the taxpayer
    4462 ------------ Employer Application Determination as       of tips for purposes of the social security taxes and
                          to Qualification of Pension Annuity,    income tax withholding.                                             pose" necessary for application of the accumulated        from receiving a double benefit or windfall.
                           or Profit-sharing Plan and Trust                                                                           earnings tax. The Court, in deciding the issue of
    4466 ------------ Corporation Application for Quick Re-                                                                                                                                         The case of United States v. Estate of Joseph P.
                          fund of Overpayment of Estimated        Temporary Regulations                                               whether avoidance of shareholder tax was "one" of         Grace, et al., 37 U.S.L. Week 4-486 (U.S. June 2,
                          Tax                                                                                                         the purposes of the accumulation, as contended by
    4469 ------------ Computation of Overpayment of Hospi-          Treasury Decision 6994, relating to procedures                                                                              1969), reversing 393 F. 2d 939 (Ct. Cl. 1968), in-
                          tal Insurance Benefits Tax              applicable, in connection with the interest equaliza-               the Government, or whether avoidance must be the          volved the application of the reciprocal trust doctrine
    80 / Annual Report / Appendix                                                                                                                                                                                Annual Report / Appendix / 81

                                                                                                                                        963-005 0-70-7
   for estate tax purposes. The Supreme Court held that      Criminal Cases                                              hold that "the task is too complex, and the margin          introduction of damaging evidence against him ob-
   the application of the doctrine is neither dependent           In Taglianetti v. United States, 89 S. Ct. 1099        for error too great, to rely wholly on the in camera        tained as a result of such eavesdropping, does not
   upon a finding that each trust was created as a quid         1969), defendant was convicted in U.S. District          judgment of the trial court."                             -have standing to object to the use of such evidence
  pro quo for the other; nor that the creation of the         Court on three counts of income tax evasion. Fol-             In Alderman 'v. United States, 89 S. Ct. 961             against him. Fourth Amendment rights are per-
   trusts was prompted by a tax-avoidance motive. The         lowing appeal to the First Circuit, the case Was             1969), defendants were held entitled to inspect           sonal eights which, like some other constitutional
  Court further held that the application of the doc-         remanded to the trial court to determine whether           bugging products for themselves. After the convic-          rights, may not be vicariously asserted. In an excep-
  trine requires only that the trusts be interrelated, and    or not, upon examination of facts relating to a dis-       tions of defendants had been affirmed, and while            tion to this holding, the Court noted that a home-
  that the arrangement, to the extent of mutual value,        closure by the Government that certain of defend-          their cases were pending before the Supreme Court,          owner has standing to object to unlawfully
  leaves the scttlors in approximately the same eco-          ant's business telephone conversations had been            it was revealed that the United States had engaged          overheard conversations on his property, regardless
  nomic position as the), would have been in had they        monitored as part of a general surveillance of the          in electronic surveillance which might have violated        of whether he was present at the time of the con-
  created trusts naming themselves as life beneficiaries      activities of his employer, defendant's conviction        their Fourth Amendment rights and tainted their              versations or participated in them.
  instead. The decision effqctively overrules such cases     should stand or a new trial should be ordered. TIC         convictions. A remand to the district court being                The effect of the Court's 1968 decisions in the
  as McLain v. Jarecki, 232 F. 2d 211 (7th Cir.              conviction was upheld by the trial court, with de-         necessary in each case for adjudication in the first        wagering tax and firearms areas (Marchetti v.
  1956); Newberry's Estate v. Commissioner, 201 F.            fendant appealing the determination of that court         instance, the question before the Supreme Court              United States, 390 U.S. 39, Grosso v. United States,
  2d 874 (3d Cir. 1953) ; and In re Lueders' Estate,          that no evidence or leads affecting defendant's trial     related to the standards and procedures to be fol-           390 U.S. 62, and Haynes v. United States, 390 U.S.
                                                              had been generated by electronic surveillance. The        lowed by the district court in determining whether          85), in which a proper claim of constitutional privi-
  164 F. 2d 128 (3d Cit. 1947) ; thereby resolving the
                                                             first Circuit subsequently affirmed the conviction         any of the Government's evidence supporting these           lege against self-incrimination was held to be a full
  conflict of opinion in favor of the Government's
                                                              [398 F. 2d 558 ( I st Cir. 1968)]. It is noted that in    convictions was the product of illegal surveillance          defense against a criminal prosecution, on the wager-
                                                             the district court on remand, the Government pur-          to which any of the defendants were entitled to             ing tax forfeiture area remains unsettled with the con-
      Certiorari was granted by the Supreme Court in                                                                    object. In filing a motion to modify the order re-           flicting positions of the Sixth and Seventh Circuits
                                                             ported to turn over to defendant all of his own
 two cases originating in the Tax Court and, in both,                                                                   manding the case to the district court for further           unresolved. The Court granted the Government's
 the Court vacated and remanded the decision on               conversations which had been overheard by means
                                                              of unlawful electronic surveillance. Before the Su-       proceedings, the United States urged that in order           petition for certiorari from the Seventh Circuit
 the issue involved to the Appellate Courts for con-                                                                    to protect innocent third parties participating or          in United States v. United States Coin and Cur-
                                                             preme Court, defendant argued that he was en-
sideration in the light of other opinions. In Com-           titled to examine additional surveillance records          referred to in irrelevant conversations overheard by        rency in the Amount of $8,674.00, (Angelini, Claim-
 missioner v. Shaw-Walker Co., 393 U.S. 479                   because neither the Government nor the district           the Government, surveillance records should first be        ant) 393 U.S. 949 reported below at 393 F. 2d 499
  (1969), at the request of the Commissioner, the            court was able to determine with certainty which          subject to in camera inspection by the trial judge,           (7th Cir. 1968), and the case was argued before the
  case was remanded to the Sixth Circuit for further         conversations defendant had been a party to. In            who would then turn over to the defendants and              Court. However, by order of the Court on May 26,
 consideration in the light of the Supreme Court's           fact, the district court examined all the records in       their counsel only those materials "arguably rele-           1969, the case was restored to the calendar for rear-
 reversal of a prior decision by the Sixth Circuit on        camera to ascertain if the Government had cor-             vant" to their prosecution. It was the position of the      gument in the October term 1969. The petition for
 the very point in issue in United States v. Donruss         rectly identified defendant's voice and had turned         Supreme Court that a defendant with standing to             certiorari filed by the claimant in United States v.
 Co., 393 U.S. 297 (1969). Another case was re-              over to defendant each conversation in which he            object to evidence gathered against him as the result        O ne 1965 Buick (6th Cir. 1968), 392 F. 2d 672 has *
 manded to the 10th Circuit, pursuant to the tax-             had participated. The Supreme Court held that             of illegal electronic surveillance is his own best judge    not been acted on by the Court.
                                                                                                                       as to what portions of the overheard conversations               The Court also considered the effect of Marchetti,
 payer's request with the Commissioner's concur-             nothing in Alderman v. United States, Ivanov v.
                                                                                                                        might have contributed to evidence against him.             Grosso, and Haynes in the marihuana, firearm, and
 rence, for reconsideration in view.of the chan ed    ,9      United States, or Butenko v. United States, 89
                                                                                                                        Thus, he should be permitted to examine the record          liquor areas.
 legal climate in State law as the result of a State         S. Ct. 961 (1969), required an adversary proceed-
                                                                                                                       of the illegal surveillance without any prior in                 On May 19, 1969, the Court decided Lear), v.
 Supreme Court decision. Collins, Jr. v. Commis-             ing and full disclosure for resolution of every issue
                                                                                                                       camera relevance inspection by the trial judge. Dis-         United States, 395 U.S. 6, and UnitedStatesv. Cov-
 sioner, 393 U.S. 215 ( 1968), vacating and remand-           raised by an electronic surveillance. On the contrary,   closure would be limited to the transcripts of a             ington, 395 U.S. 57, holding that a proper claim of
 ing 388 F. 2d 353 (10th Cis. 1968), affirming 46            an adversary proceeding and disclosure were re-           defendant's own conversations and of those which             the constitutional privilege against self-incrimination
T. C. 461 (1966). [Subsequently, the 10th Circuit            quired in those cases not for lack of confidence in       took place on his premises. The task of gleaning             provides a full defense to prosecution for transport-
 vacated its prior affirmance of the Tax Court's deci-       the integrity of Government counsel or the trial          relevant data from the bulk of material obtained            ing, concealing, or obtaining marihuana without
sion on the basis of the Oklahoma State Supreme              judge, but only because the in camera procedures          by surveillance cannot be entrusted entirely to the         having paid the transfer tax.
Court's contrary determination regarding the wife's          at issue there would have been an inadequate means        trial judge, the Court emphasized. "An apparently                However, following the decision-, in Lear), and
 property interests under State law in a similar State       to safeguard a defendant's Fourth Amendment               innocent phrase, a chance remark * * * or even              Covington the Court denied certiorari in the case
 tax case. Collins v. Commissioner, 412 F. 2d 211,           rights. Here the defendant was entitled to see a tran-    the manner of speaking or using words may have              of Wilson v. United States, 395 U.S. 923, in which
 69-2 USTC 9471 (1 Oth Cir. 1969) (CCH). Signifi-            script of his own conversations and nothing else. He      special significance to one who knows the more              the Fifth Circuit had sustained a conviction of pos-
cantly, the 10th Circuit's recent opinion treats a           had no right to rummage in Government files. The          intimate facts of an accused's life. And yet that in-       session of an unregistered still. Wilson was admittedly
 husband's transfer of stock to his wife in Oklahoma,        trial court was asked only to identify those instances    formation may be wholly colorless and devoid of             prohibited under State law from carrying on the ac-
 pursuant to a property . settlement incident to a           of surveillance which defendant had standing to           meaning to one less well acquainted with all rele-          tivity of distilling. He claimed Federal registration
 divorce, as a nontaxable division of property con-          challenge under the, Fourth Amendment exclu-              vant circumstances." The Court further held that a          would incriminate him under State law. The Gov-
sidered to be jointly owned under State law rather           sionary rule to double-check the accuracy of the          codefendant or coconspirator whose Fourth Amend-            emment's position was that the liquor statutes are
than a taxable transfer of property by the husband           Government's voice identifications. Under the cir-        ment rights were not violated by an illegal eaves-          not aimed at a "highly selective group inherently
 in discharge of his legal marital obligation.]              cumstances presented, the Supreme Court could not         dropping, but who might well be aggrieved by the            suspect of criminal activity" but rather are for the
82 / Annual.Report           Appendix                                                                                                                                                               Annual Report / Appendix / 83
sole purpose of assuring collection of this important      ous appellate courts in several other tax cases. In the    the plan is adopted and the stock issued-and that          residence under the nonrecognition provisions of
source of revenue.                                         Second Circuit, the Commissioner won a two-fold            the stock cannot qualify under a later complying           section 1034.
   In the fireaqw area in the case of Varitinos v.         victory in one case. Borge v. Commissioner (Danica         plan. In Childs, it was held there was not a written          Lastly, further litigation is expected with regard
 United States, 395 U.S. 976, the Court denied certi-      Enterprises, Inc. v. Commissioner), 405 F. 2d 673          plan where the corporate resolution recited solely        to two companion cases decided by the Ninth Cir-
orari in a First Circuit case which sustained a convic-     (2d Cir. 1968), cert. denied, 395 U.S. 933 (1969).        the offer of a sale of stock to the taxpayer and the       cuit: Estate of Stauffer v. Commissioner, 403 F. 2d
tion for receipt and possession of a firearm               Therein, the Court considered proper the Commis-           minutes of a shareholder's meeting recited his ac-        611 (9th Cir. 1968) and Associated Machine v.
transferred in violation of 26 U.S.C. 5814, where          sioner's allocation, pursuant to section 482, of an        ceptance. Eger v. Commissioner, 393 F. 2d 243 (2d          Commissioner, 403 F. 2d 622 (9th Cir. 1968) and
defendant asserted a Haynes type plea of self-             entertainer's compensation to him individually rather      Cir. 1968), where corporate resolutions were held          an adverse decision by the Sixth Circuit (Commis-
incrimination.                                             than allowing it to be included in the income of his       to be a sufficient written plan, was distinguished on      sioner v. Turner, et al., 410 F. 2d 952 (6th Cis.
   In a case construing the Federal officer removal        wholly owned corporation as reported. It further          the grounds that the corporate resolution there spe.        1969). In Stauffer and Associated Machine, the
statute (28 U.S.C. 1442 (a) ( I)), relating to re-         allowed only limited farm loss deductions to the cor-      cifically referred to the stock as section 1244 stock.     Ninth Circuit, contrary to the Commissioner's posi-
moval of cases against Federal officers from State         poration, as would have been appropriate in the in-           The Commissioner also made substantial gains            tion that an 'T" reorganization under section 368
courts to Federal courts, the Court in Willingham          dividual's situation under the provision of section        in litigation before the Sixth Circuit in several im-      was only applicable to the reorganization of a single
et al v. Morgan, 395 U.S. 402, reversed the decision       270 of the Code, by applying section 269 on the the-       portant tax controversies. In Commissioner v. Wil-        corporation, held that a multi-corporation reorga-
of the Court of Appeals for the 10th Circuit holding       ory that the latter is applicable to any situation in     son, - F. 2d -, 69-2 USTC 9458 (6th Gir. 1969),            nization could, and did, qualify as a "I"'; and, in
that the statute is not "narrow" or "limited" but "at      which a taxpayer obtains a deduction which he              the Court joined with the Fifth Circuit's rationale        Turner, the Sixth Circuit held there was a net gift
the very least is broad enough to cover all cases whert    would not otherwise have been allowed but for the         expressed in Commissioner v. Dodd, el al., - F. 2d          of the value of given stock less the gift tax where a
Federal officers can raise a colorable defense arising     incorporation. The Commissioner's allocation under        - 69-1 USTC 9362 (5th Cir. 1969), in reversing a            mother transferred her stock to her children with the
out of their duty to enforce Federal law."                section 482 was likewise sustained in the Seventh          Tax Court decision adverse to the Commissioner.            condition that the latter pay the gift tax on the trans-
                                                           Circuit where insurance commissions were deflected        The Tax Court was held to be erroneous in allow-           fer. The Commissioner had contended in that case
Actions of Lower Courts                                    to two controlled corporations established as insur-      ing, in years prior to the taxable years to which re-       that there was a sale of the stock to the extent the
                                                           ance brokers by their parent (a finance company)          cently added section 217 is applicable a taxpayer a        gift tax exceeded her basis although it was~ a gift to
Civil Cases                                                which performed the services of selling and servicing      deduction for unrcimbursed moving expenses in.            the extent the stock's fair market value exceeded the
   In addition to Collins, discussed in Supreme Court      insurance policies for an independent insurance com-      curred by an employee being transferred from one           gift tax.
cases, supra, the I Oth Circuit rendered two other         pany. It is notable that the allocation of the             office to another by his employer.                            In a case involving labeling of wine under the
significant decisions in favor of the Commissioner.        commissions to the finance company was permitted              The Sixth Circuit was also instrumental in              Federal Alcohol Administration Act (27 U.S.C.
It reversed the Tax Court and held that the "tax           despite the fact that State law forbids finance com-      thwarting two recently developed tax schemes. In           205) Miller v. Kennedy et al., unreported (D.C. Dis-
benefit theory" applied to the gain on the sale of         panics from receiving any income other than interest      First National Industries Inc. v. Commissioner 404         trict of Columbia) the Court held that the Secretary
property held for rent by a corporation which had         from loans. Local Finance Corporation v. Commis-                                                                       or his delegate was authorized to distinguish for
                                                             .                                                        F. 2d 1182 (6th Cis. 1968) cert. denied, 394 U.S.
 been expensed by the corporation at the time of pur-      sioner, 407 F. 2d 629 (7th Cir. 1969), affirming 48        1014 (1969), the Court struck down a controlled           labeling purposes between artificially carbonated
chase-resulting in its treatment as recognized ordi-      T.C. 773 (1967). The Eighth Circuit also agreed             corporation's utilization of a tax exempt Foundation      wine and naturally fermented sparkling wine.
 nary income to the corporation even though said sale     with the Commissioner's restrictive position that           and an elaborate transmittal of the sales,proceeds        Naturally fermented sparkling wine is taxed under
was made pursuant to a plan of liquidation adopted        stock of a farmer's cooperative, in order for it to         scheme through several interrelated subsidiaries          the Intemal Revenue Code of 1954 at a higher rate
 under section 337. Commissioner v. Anders - F.           qualify and retain its tax exemption under section          thereof in an attempt to avoid a capital gain tax         than artificially carbonated wine.
 2d -, 69-2 USTC 9478 (10th Cir. 1969) (~CH),              521, must be substantially owned by active produc-                                                                       The Third Division of the Customs Court in
                                                                                                                      upoh the disposition of certain investment stock. It
reversing 48 T.C. 815 (1967). The Court also re-          ers who market their products and purchase their           held that the disposition was, in effect, a sale to the    Schieffelin & Co. et al. v. United States, unreported,
versed, at the Commissioner's urging, a Tax Court         supplies and equipment through the association on           Foundation and concluded that the "donated" stock         held that the Irish and British treaties with the
decision which had held that reimbursement by an           a "current" basis. Cooperative Grain & Supply Co.                                                                    United States providing for nondiscriminatory tax
                                                                                                                      was accepted by the Foundation subject to the tax-
employer for an employee's meals and lodging while        v. Commissioner, 407 F. 2d 629 (8th Cir. 1969).                                                                       treatment were not violated by taxing bottled im-
                                                                                                                      payer's debt (equal to the sales price of the invest-
awaiting permanent quarters at a new post of duty              In addition to the foregoing, both the Third           ment stock) despite the lack of a formal assumption       ported distilled spirits under section 5001 (a) (1) of
was not includible in the employee's gross income.          (Childs v. Commissioner, 408 F. 2d 531 (3d Cir.          thereof by the Foundation. In Commissioner v.              the Internal Revenue Code of 1954 on a "wine
Commissioner v. Starr, 399 F. 2d 675 (10th Cir.            1969) and Fifth (Spillers v. Commisisoner, 407 F.          Baertschi, ei al., 412 F. 2d 494 (6th Cir. 1969), the     gallon" basis. Previous decisions of the Court of
 1968), reversing 46 T.C. 743 (1966). In doing so,         2d 530 (5th Cir. 1969) Circuits reaffirmed the             Court held a Tax Court approved plan of keeping           Customs and Patent Appeals had held the same pro-
it rejected the Tax Court's distinction of, and fol-       Commissioner's position that there must be a strict,       a transaction open, rather than closed, by providing,     visions not to violate the General Agreement on
lowed, its prior opinion in United States v. Woodall,      technical adherence to a written plan, complying           in the sale contract involving a residence, for a delay   Tariff and Trade. The Customs Court also held in
255 F. 2d 370 ( I Oth Cir. 1958) and noted that John       with the statutory provisions if a taxpayer seeks to      in the final payment and limiting the seller's legal       the case that Schieffelin was not required to show
E. Cavanaugh, 36 T.C. 300 (1961), on which the             have stock treated as section 1244 stock. In Spillers,     recourse in the event of default solely to the property   compliance with section 6423 of the Intemal Reve-
Tax Court had relied, had been expressly overruled         the Court held corporate resolutions making no            itself rather than to the purchaser individually, was      nue Code of 1954 (relating to proof of bearing the
in England v. United States, 345 F. 2d 414 (7th Cir.       mention of the period in which the stock was to be         to no avail since the transaction was closed at the       ultimate burden of the tax) as a condition precedent
 1965), and was not followed by the Court of Claims       offered and not limiting the maximum dollar                date the purchaser could have obtained possession.         to the bringing of the action in the Customs Court.
in Ritter v. United States, 393 F. 2d 823 (Ct. Cl.         amount of stock which could be offered did not            A contrary holding would have rendered meaning.                The case of In re Hancock Trucking, Incorpor-
 1968), cert. denied 393 U.S. 844 (1968).                  qualify the stock for section 1244 purposes. It noted     less the 18-month statutory limitation for replace-        ated, 407 F. 2d 635 (7th Cir. 1969) involves a
   The Government was similarly successful in vari-       that the 1244 requirement must be met at the time          ment of a former residence by a newly constructed          reorganization proceeding under chapter X of the

84 / Annual. Report / Appendix                                                                                                                                                                   Annual Report / Appendix / 85
        Bankruptcy Act. The amended plan of rrorganiza-            Grosso, supra; (2) that the evidence supporting the       computed, thereby rendering the assessment exces-           notice of lien against real property with the Register
        tion in this case provided that tax claimants, includ-     tax assessment was illegally obtained because it was      sive and arbitrary. Secondly, the court found that          of Deeds of the State notwithstanding the Michigan
        ing the United States would receive payment of their      seized in a raid which was unlawful because it "was        the assessment was based upon records obtained              requirement of a description of the real property
       claims in full, 10 percent in cash within 6 months          acquired under circumstances which the highest            during an illegal search and seizure of the taxpayer's      which was later held invalid by the Supreme Court
        from confirmation and the balance in 78 equal              Court has now declared to be in violation of funda-       business premises, and held that an assessment based        in United States v. Union Central Life Insurance
       monthly installments. The Government objected to            mental constitutional rights;" and (3) that the trial     entirely or in substantial part on illegally obtained       Company, 368 U.S. 291 (1961 ). The district court
       the plan since it provided for payment of general           court had no right to sell the taxpayer's farm prop-       evidence is invalid. The Second Circuit did not de-        reasoned that Union Central was pro-pective only
       creditors prior to full payment to the United States,      erty free of his wife's contingent dower interest.         termine whether equity jurisdiction otherwise exists        and that the Service must first attempt to file with
       which is contrary to the provisions of section 3466 of         The Fourth Circuit held for the Government on          in this case. However, the court indicated that the         the Register of Deeds before filing with the clerk of
       the Revised Statutes. Also, it was asserted that sec-      each of the three issues. It stated that the Grosso and    taxpayer's argument, that his legal remedy was in-          the district court even though the State has not val-
       tion 199 establishes a first priority in payment for       Marchetti decisions did not invalidate the wagering        adequate because his burden of proof in a refund            idly designated an office for filing notices of Federal
       claims of the United States for taxes and that the         tax and did not invalidate the search warrant used to      action created a conflict between his privilege against     tax lien. On May 10, 1969, the United States filed a
       priority thus conferred is superior to all other claims    obtain the evidence of the wagering tax liability and      self-incrimination and his right to contest the seizure     petition for writ of certiorari.
       against the estate, even to existing and perfected         further that the wife's inchoate dower interest is         of his property, was sufficiently meritorious to war-           In the case of Gefen v. United States, 400 F. 2d
       hens which might otherwise be prior. It was main-          subject to termination by the sale of the taxpayer's       rant a conclusion that collection activity may, in fact,    476 (5th Cir. 1968), cert. Denied 393 U.S. 1119
       tained a plan cannot be confirmed and reorganiza-          property pursuant to the order of the district court       result in irreparable injury to him. The court re-           ( 1969), the Fifth Circuit, in deciding the case, rec-
       tion can be prevented unless payment in full is            under section 7403(c), 1954 Code. The taxpayer's           manded the case for a complete hearing to develop           ognized that in civil actions by the Government to
       provided for, except upon the acceptance of a lesser       petition for certiorari, filed on December 13, 1968,       the facts.                                                  enforce or recover Federal taxes, it has been held
       amount by the Secretary of the Treasury certified to       is pending.                                                    The Court of Appeals in Bauer v. Foley, 404 F.          that the taxpayer is entitled as a matter of right under
       the court. Notwithstanding the timely notice of re-           The Court of Appeals for the Ninth Circuit in           2d 1215 (2d Cir. 1968) held that where the tax-             the Seventh Amendment to a jury trial with respect
       jection, the district court judge stated that for         Slonehill v. United States, 405 F. 2d 738 (9th Cir.         payer alleges forgery or duress in signing a joint re-      to his personal liability for taxes, penalties, and in-
      equitable reasons he was approving the amended              1968), cert. denied June 16, 1969, affirmed the dis-       turn she is entitled to a hearing on the merits in an       terest, but not with respect to the establishment of
      plan. The district court was affirmed by the Court of       trict court which had denied taxpayers' motion to          injunction suit to enjoin the Government from seiz-         tax liens against the taxpayer's property or the sale
      Appeals for the Seventh Circuit.                           suppress certain records and documents obtained by          ing or selling her property. The district court had         of the property to satisfy such liens. This case in-
           The thrust of the Seventh Circuit's opinion is that   U.S. revenue agents from the Philippine National            denied the taxpayer's motion for an injunction and          volved a situation where suit was instituted in the
      section 199 does not require prompt full payment of         Bureau of Investigation (NBI). This motion to sup-         granted the Government's motion to dismiss. The             United States District Court to reduce the assessment
      the tax claim and that R.S. 3466 does not apply to          press was filed in the foreclosure action commenced        district court had found that the taxpayer-s had not        against the taxpayer to judgment and to foreclose
      chapter X cases. This is in conflict with the Fifth         by the Government in 1965 to enforce Federal tax           established that under no circumstances could the           the Federal tax lien against his property. The tax-
      Circuit which has held that R.S. 3466 applies to
      nontax matters in chapter X proceedings and is also
                                                                 liens. The records and documents obtained from the
                                                                  NBI had been seized by it in raids on the taxpayers'
                                                                                                                             Government ultimately prevail so as to remove the
                                                                                                                             prohibition against injunctive relief under section
                                                                                                                                                                                         payer demanded a jury trial. The district court
                                                                                                                                                                                         denied that request and ultimately entered judgment
      in conflict with the Third Circuit which has held          premises in 1962. Some of the records were seized           7421 (a) of the 1954 Code. The Second Circuit               in favor of the United States, which was affirmed by
      that R.S. 3466 applies to tax claims in these              in raids on the taxpayers' residences and subsequently      reversed the district court and remanded the case           the court of appeals.
      proceedings.                                               such raids were held to be illegal searches and seizures    for a hearing on the merits of whether the signature            A number of decisions involving the enforcement
           In Washington v. United States, 402 F. 2d 3 (4th      in violation of the Philippine Constitution by the          of the taxpayer was forged on any of the returns in         of civil summonses were rendered by the various
1;    Cir. 1968) the facts are as follows: Revenue agents        Supreme Court of the Philippines. The taxpayers in          question or whether she signed the returns under            Circuit Courts of Appeals' Some of these decisions
      obtained a search warrant and raided the taxpayer's         their motion to suppress argued that the use of such       duress. Thus, the court was of the opinion that it          are worthy of comment here. As regards one impor-
      farm and there discovered the taxpayer conducting          evidence in the foreclosure action in the Federal           was complying with the test of Enochs v. Williams           tant issue, the Fifth Circuit consolidated four appeals
      a gambling operation. Evidence seized during the           district court would be in violation of the Fourth          Packing Co., 370 U.S. 1 (1962) since it held that           for briefing and argument and in one opinion,
          id was used to compute a wagering tax. In the dis-     Amendment to the U.S. Constitution. The district            if the returns were forged or signed under duress she       Roberts v. United States, 397 F. 2d 968 (5th Cir.
      trict court the taxpayer conceded that the search          court denied the motion to suppress based on its find-      could not possibly be liable for the tax.                   1968), held that the Service is required to pay wit.
      warrant was properly issued and executed and ad-           ings that there was no instigation or unlawful par-             The court also held that the taxpayers under a          ness and mileage fees to taxpayers and third-party
      mittcd that he was liable for the wagering tax. The        ticipation by the U.S. Government agents in the raids       joint assessment are each entitled to a separate notice     witnesses who have been summoned to appear and
      district court sustained the assessment (with a slight     conducted by the Philippine officials.                      and demand. Since a separate notice was not given,         testify before Service agents pursuant to summons
          cluction) and ordered that the taxpayer's farm be          In Pizzarello v. United States, 408 F. 2d 579 (2d       the court held the lien was invalid. On rehearing at        issued under section 7602 of the 1954 Code. Enforce-
     sold at public auction; the proceeds of the sale to be      Cir. 1969), the Second Circuit reversed a district         the request of the Government, the Second Circuit            merit proceedings had been instituted by the Govern-
      used first to satisfy a mortgage lien, second to pay the   court order dismissing for lack of jurisdiction tax-        limited its opinion requiring separate notice and          ment seeking compliance with summonses issued
     present value of the wife's contingent dower in-            payer's suit to enjoin collection of a jeopardy assess-     demand to the situation where the signature on a            against two taxpayers whose tax liabilities were
      terest, and third to satisfy the tax lien. (The issue of   ment for wagering excise taxes. Applying the test          joint return is forged or signed under duress. Bauer        under investigation and against two others as wit-
      liability for fraud penalty or delinquency penalty was     of Enochs v. Williams Packing Co., 370 U.S. 1               v. Foley, 408 F. 2d 1331 (2d Cir. 1969).                   nesses. In each case, the persons summoned objected
     present in the district court case but was later aban-       (1962), the court of appeals concluded that the                The Sixth Circuit in United States v. Estate of         to the summons and refused to appear asserting non-
      doned by the Government on appeal.)                        Government could not ultimately prevail on the             Donnelly, 406 F. 2d 1065 (6th Cir. 1969) affirmed,          payment of witness or mileage fees or the guarantee
           On appeal the taxpayer contended: (1 ) that his       merits for two reasons. First, the court held that there    per curiam, without opinion the decision of the dis-       or assurance of payment. The Government asserted
     liability for the wagering tax was extinguished by the      was insufficient factual foundation in the record to       trict court. The lower court had held that in 1950          that neither a witness nor taxpayer is entitled to the
      Supreme Court 1968 decisions in Marchetti and              support the method by which the tax liability was          the Internal Revenue Service was file a         fees since there is no statute authorizing such pay-
     86 / Annual Report / Appendix                                                                                                                                                                       Annual Report / Appendix / 87
 ment. The trial court ordered the witnesses to comply     and their production should not be compelled. The          the workpapcrs and asserting his privilege against        carried on along the entire coastline of the United
 with the summonses and held that upon compliance          court of appeals vacated the district court's order        self-incrimination. In a proceeding to enforce the        States, resolution of the issue is of considerable ad-
 the witnesses were to receive a, fee pursuant to          grantingthe Government's petition for enforcement          summonses the court examined the workpapers in            ministrative importance. This case is presently pend-
 § 503 (b), Title 5, United States Code. The trial         and remanded the matter for a hearing and determi-         camera and found that they were accountant's work-       ing before the Supreme Court.
 court also found that neither taxpayer whose tax          nation of the taxpayer's Fourth Amendment claim            papers and were the property of the accountant. The         The expenditures of the survivor corporation
 liability was under investigation was entitled to fees     (relating to the tainted information) to assure that      district court further found that the taxpayer did       of a reorganization in appraising the value of dis-
 and ordered compliance without payment of the             the court's process would not be abused if enforce-        not acquire "rightful possession" of the workpapers       senting shareholders' stock in the merged corpora-
fees by the Government.                                    ment of the summons is granted.                            from the accountant because both knew that the ac-       tion were held to be currently deductible by the
    The Government conceded that 5 U.S.C., section             In Howfield, Inc. v. United States, 429 F. 2d 624      countant was under a "moral, if not legal, obfiga-       Seventh Circuit in Hilton Hotels Corporation v.
503 (b) (2 ) does not make a distinction between tax-       (9th Cir. 1969), the Ninth Circuit decided jurisdic-      tion" to deliver them to the Government, and              United States, 69-1 USTC 9336 (7th Cir. 1969).
payers and third-party witnesses but asserted that         tional issues raised in two related cases consolidated     therefore rejected the taxpayer's claim of the pri-      The Court rejected the Government's argument that
section 503 (b) (2) is inapplicable since that section     on appeal. Shortly after the taxpayer instituted an        vilege against self-incrimination.                        the expenses were incident to a corporate reorganiza-
provides that a "witness is entitled to the fees and       action for return of illegally seized property and its        The issue of proper tax classification of lawyers     tion and were capital in nature and therefore non-
allowances allowed by statute for witnesses in the         suppression as evidence, the Government returned           in United States v. Empey, 406 F. 2d 157 (10th           deductible capital outlays. This decision created a
courts of the United States when- * * * (2) he             the documents in question, and all copies, and             Cir. 1969), and doctors in United States v. ONeill,      conflict among the circuits. The filing of a petition
is subpoenaed to and appears at a hearing * * *."          moved to dismiss the action for failure to state a         69-1 USTC 9372 (6th Cir. 1969), and United               for a writ of certiorari has been recently authorized
It was contended that the word "hearing" has gen-          claim on which relief could be granted. The district       States v. Kurzner, 69-1 USTC 9428 (5th Cir.              by the Solicitor General.
erally been interpreted to mean proceedings which          court granted the motion, holding that a preindict-        1969), under the laws of Colorado, Ohio and                 A petition for a writ of certiorari has been filed by
are adjudicatory or quasijudical in nature whereas         ment action which seeks solely suppressive relief is       Florida, respectively, was decided in favor of the       the Government in the case of United States v. Davis,
summons proceedings are investigatory or inquisi-          premature. The Ninth Circuit approved the dis-             taxpayers. The Government's arguments that these         408 F. 2d 1139 (6th Cir. 1969). The Court rejected
torial. The court rejected this contention and held        missal of the action as premature and held that the        organizations were properly classified as partner-       the strict net effect test in determining wheth~r a
the word applies to any sort of proceeding at which        dismissal order was not appealable. Simultaneously         ships, rather than corporations, were rejected, and      corporate distribution to the taxpayer in redemption
testimony is taken.                                        with the taxpayer's suppression action, the Govern-        regulations section 301.7 701-2, as amended by T.D.      of preferred stock was emcmially equivalent to a
    In another summons case, United States v. Ben-         ment had filed a petition to enforce the summonses         6797 on February 2, 1965, and more particularly         dividend within the meaning of section 302(b) (I )
ford, Fred T. Mackey (Intervenor), 046 F. 2d 1192          issued to the taxpayer for its corporate records, in-     subparagraph (h) of the regulations, was held to         of the 1954 Code. The Government contended that,
 (7th Cir. 1969), the Seventh Circut reversed the          cluding documents which were the subject of the            be invalid. The resolution of this issue may affect     since there is a pro rate distribution with the tax-
order denying the taxpayer's motion to intervene in        suppression action. After dismissal of the suppression    professionals throughout the country.                    payer ending up in substantially the same position
a third-party summons enforcement proceeding               action, the taxpayer counterclaimed in the enforce-           Pending before the Court of Claims in Litton          after the redemption as he would have occupied had
calling for the production of corporate records. The       ment proceeding for injunctive relief and to have         Industries, Inc. v. United States, Ct. Cls. No. 14-69,   a dividend been declared, the distribution constitutes
district court had denied intervention on the grounds      section 7602 of the 1954 Code declared unconstitu-         is the issue of whether the taxpayer, upon repur-        payment of a dividend. The Sixth Circuit applied
that the taxpayer had shown no proprietary or other        tional by a three-judge district court. The court of      chase of its own convertible debentures at a premi-       the flexible net effect test and carried over the pur-
special interest in the records sought and that his        appeals affirmed the district court order dismissing       um, is entitled to deduct as premium expense the        pose for the issuance of stock as a valid business pur-
being the taxpayer whose liability was under scrutiny      the counterclaim and denying the application for a        portion of the premium attributable to the value of       pose for redemption, thus conflicting with Ballenger
was not, by itself, a sufficient basis for intervention.   three-judgc district court on the ground that there       the privilege to'convert the debentures into shares      v. United States, 301 F. 2d 192 (4th Cir. 1962), and
The Seventh Circuit concluded, that the Supreme            was no basis for equitable relief since the taxpayer       of its own common stock. While this issue is also        Berenbaurn v. Commissioner, 369 F. 2d 337 (10th
Court's opinion in Reisman v. Caplin, 375 U.S. 440         had an adequate remedy at law by defending against        present in other pending cases, its appearance in         Cir. 1966).
 (1 964), did not expressly or impliedly limit the tax-    the summons enforcement petition. It may be noted         Litton presents by far the most dramatic example             Two important circuit court decisions were ren-
payer's right to intervene in enforcement proceed-         that the district court decided the summons enforce-      in view of the magnitude of the amount involved          dered in the life insurance area. In both Franklin
ings to situations where a legally protected interest      ment proceeding on the merits in favor of the Gov-        and the percentage of the premium to the face value      Life Insurance Co. v. United States, 399 F. 2d 757
in the records could be shown.                             ernment, finding no illegality in the Service's in-       of the debentures.                                        (7th Cir. 1968), certiorari denied 393 U.S. 1118
    Also, in the case of United States v. Bank of Com-     vestigatory activity in this case. An appeal to the           TheFifth Circuitin UnitelStatesv. W.M. Webb,           (1969), and Jefferson Standard Life Insurance Co.
merce, Arthur Meister (Intervenor), 405 F. 2d 931          Ninth Circuit from the order enforcing the sum-           Inc., et al., 402 F. 2d 956 (5th Cir. 1968), decided     v. United States, 408 F. 2d 842 (4th Cir. 1969),
 (3d Cir. 1969), the Third Circuit held that pursuant      monses is presently pending.                             adversely to the Government the issue of whether          petition for certiorari pending, the Courts held that
to Reisman v. Caplin, 375 U.S. 440 (1964) that                Further, in United States v. Zakutansky, 401 F.        menhaden fishermen are employers of the boat own.         (I ) in computing taxable investment income, de-
the taxpayer had standing to intervene and raise           2d 68 (7th Cir. 1968), cert. denied 393 U.S. 1021         ers for purposes of the employment taxes. The Gov-       ferred and uncollected premiums and due and un-
objections to enforcement of summonses served upon          (1969), the Seventh Circuit affirmed an order di-       ernment has been litigating the issue of whether          paid premiums, including the "loading" related to
a bank calling for production of certain of the bank's     recting an accountant to produce workpapers he            shrimp fishermen were employees of the boat own-         such premiums, are includable in the assets of a life
records relating to transactions with the taxpayer.        used in preparing the taxpayer's returns. After two       ers for a number of years, within the jurisdiction of    insurance company under section 805 (b) (4) of the
The taxpayer had alleged that the information              summonses were issued to the accountant and prior        the Fifth Circuit, with only several successes in the      1954 Code and (2) "loading" on deferred and un-
which brought the Service's attention to the bank          to service of a third summons, the accountant trans-      district courts and no success in the Court of Appeals   collected premimus is not deductible in computing
records was the product of an unlawful search and          ferred physical possession of the workpapcrs to the       for the Fifth Circuit. However, the Court of Claims      gain or loss from operations under section 809 of
seizure; that such information was thereby "tainted"       taxpayer. A summons was then issued to the tax-          and the First Circuit have decided fishing boat cases     the 1954 Code. These Circuit Court decisions up-
and, therefore, the bank records were also "tainted"       payer who refused to comply, claiming ownership of       for the Government. Since the fishing industry is         holding the Government's position. are significant

88 / Annual Report / Appendix                                                                                                                                                                  Annual Report / Appendix / 89
since they involve important interpretations of the              The Courts of Appeal in the Seventh Circuit and        Revenue Service agents, who solicit information                mitted. Here, if the Federal agents had not been act-
Life Insurance Company Tax Act of 1959.                       the Fourth Circuit handed down conflicting decisions      from a taxpayer under investigation, need not give             ing in their official capacities, defendant would have
                                                              regarding the rctruactivity of the Haynes case. In        the Mirando-Escobedo warnings unless the inter-                had the right to threaten and use reasonable force to
Criminal Cases                                                                                                         'View amounts to "custodial interrogation" arc:
                                                              United States v. Miller, 406 F. 2d 1100 (4th Cir.                                                                        prevent the "theft" of his property. Thus, defend-
     The lower courts declined to extend the self-            1969) the Fourth Circuit gave retroactive effect to       United States v. Mackiewicz, 401 F. 2d 219 (2d                 ant's actions were criminal only because he threat-
  incrimination defense, established in Marchetti,           Haynes by allowing defendants to withdraw guilty           Cir. 1968), certiorari denied 393 U.S. 923; United             ened Federal officers acting in an official capacity.
 Grosso, and Haynes discussed in Supreme Court                pleas and plead the privilege against self-incrimina-     States v. Bagdasian, 398 F. 2d 971 (4th Cir. 1968) ;              Racetrack winners lost at a tax fraud scheme in
 Cases, supra, with respect to wagering and firearms          tion, while the Seventh Circuit in Gi!lespie v. United    Taglianetti v. United States, 398 F. 2d 558 (Ist Cir.          United States v. Haimowitz, 404 F. 2d 38 (2d Cit.
 into the liquor tax area.                                   States, 409 F. 2d 511 (7th Cir. 1969) denied a peti-       1968), affirmed per curiam on other grounds 89 S.              1968), as the use of straw men to cash in winning
    In Schoeffit v. United States, 403 F. 2d 991 (5th         tion to vacate sentence based on a plea of guilty for     Ct. 1099 (1969) ; United States v. Sq~eri, 398 F, 2d           tickets constituted fraud. Section 7206(2) of the
 Cir. 1968) the court held that the defendant could          possession of an unregistered firearm.                     785 (2d Cir. 1968) ; United States v. Marcus, 401              Internal Revenue Code [26 U.S.C. 7206(2)1 in
 not raise the self-incrimination issue with respect to          The inspection of a retail liquor dealer's premises    F. 2d 563 (2d Cir. 1968), certiorari denied 89 S. Ct.         substance makes it an offense to aid, assist in, or pro-
  charges relating to possession of unstamped con-            pursuant to statutory authorization without a search      633 (1969); Spahr et al. v. United States, 69-1               cure the preparation or presentation of fraudulent
 taincrs since he was not required to pay the tax or         warTant was upheld by the Second Circuit in United         USTC 9315 (9th Cir. 1969); United States v.                   or false information in connection with material
 affix the stamps. In other cases relating to possession     States v. Colonnade Catering Corporation, 410 F.           White, 293 F. Supp. 692 (E.D. Pa. 1968); United               matters required to be reported under the Internal
 of unregistered stills and carrying on the business of a     2d 197 (2d Cir. 1969). The district court had             States v. Charamella, 294 F. Supp. 280 (D. Del.               Revenue laws. The essence of the charges against
 distiller without having registered and given bond          gr-.Lnted a motion to suppress the evidence stating        1968); and United States v. Cymbala, 69-2 USTC                the defendants was that they conspired to deprive
 the self-incrimination issue was squarely raised but        that under the holding of the Supreme Court in             9457 (E.D. N.Y. 1969).                                        the Government of material information concerning
  the courts declined to allow the defense. The courts       Camera v. Municipal Court, 389 U.S. 523 (1967)                The Solicitor General authorized an appeal to the           their parimutuel twin double winnings at certain
 took the position that, unlike the statutes relating to     and See v. Seattle, 389 U.S. 541 (1967) a search           Seventh Circuit under Title VIII of the Omnibus               raceways by paying other individuals to cash their
 wagering and firearms, the liquor taxes were not            warTant was required. The circuit court stated that        Crime Control Act of 1968 in the cases of United              winning tickets, thus preventing their own names
  aimed at a group inherently suspect of criminal ac-        the specific and limited authority under the statute       States v. Dickerson, 291 F. Supp. 633 (N.D. Ill.              and the amounts of their winnings from appearing
 tivity but rather were solely for the purpose of assur-     made a warTant unnecessary. The defendant in this          1968); and United States v. Lackey, - F. Supp.                on Internal Revenue Service information return,
 ing collection of the revenue. Anderson el al. v.           case has filed a petition for certiorari.                           Ind. 1968). Motions to suppress had been    -(N.D     Form 1099, which is filed by the racetrack pur-
  United States, 403 F. 2d 207 (5th Cir. 1968); Wil-             The great weight of judicial authority continues       granted in each instance for failure on the part of the       suant to 26 U.S.C. 6041 (a). Defendants' main
 son v. United States, 409 F. 2d 604 (5th Cir. 1969)         to hold that absent "custodial interrogation" as de-      special agent to give the Miranda warning. See also            contention appeared to be that because the persons
 certiorari denied 395 U.S. 923; Williams v. United          fined in Miranda v. Arizona, 384 U.S. 436, 444             United States v. Habig, - F. Supp. - (S.D. Ind.               to whom the proceeds of the winning tickets were           I
 States, 297 F. Supp. 103 (Eastern District, N.C.             (1966), agents of the Internal Revenue Service are        1968), which is similarly on appeal to the Seventh            paid gave their correct names and addresses to the
  1969).                                                     not required to advise a taxpayer under investigation      Circuit.                                                      racetrack, the Government was in no way de-
    The Haynes decision has continued to have a              as to his Sixth Amendment right to counsel. Accord-           In a case involving an assault upon a Federal              frauded or deprived of information it was entitled
 serious impact on prosecutions arising under the Na-        ingly, and aside from the issue of misrepresentation,      officer, United States v. Rybicki, 403 F. 2d 599 (6th         to receive. This argument, however, misconstrued
 tional Firearms Act prior to the amendment of such          fraud or coercion, where one is legally free to reject     Cit. 1968), defendant was convicted under 26                  the thrust of the charges against defendants and the
 act by the Gun Control Act of 1968. There have so           the Government's invitation to appear and partici-        U.S.C. 7212 (a) of obstructing, by threats of force,           purpose of sections 6041 and 7206(2). It is indis-
 far been no adverse decisions involving the self-in-        pate in an interview, is free to walk out of an inter-    two officers of the Internal Revenue Service who               putable that section 6041 is intended to help the
crimination issue under the amended act. Persons             view at any time, is free to ask investigating agents     were then engaged in the performance of their du-              Government locate and check upon recipients of
 charged with failure to comply with the making and          to leave his premises, is not physically in custody       ties, seeking to collect from him income tax owed by           income and amounts they receive. The evidence at
transfer provisions of the act (prior to amendment)          through arrest or otherwise, and whose freedom of          him to the United States. The Sixth Circuit reversed          the trial showed that defendants were in fact the
successfully raised the self-incrimination plea as a         action is in no sense curtailed, the requirements enun-    and remanded the case for a new trial, holding that           winners and true recipients of the payments made
bar to prosecution. DePugh v. United States, 401             ciated in Escobedo v. Illinois, 378 U.S. 478 (1964)       the failure of the district judge to instruct the jury         by the racetracks and that their scheme of causing
 F. 2d 346 (8th Cit. 1968); Lauchli v. UnitedStates,         and Miranda, supra, do not apply. The Fifth, Eighth       that a necessary element of the crime was the knowl-           the track to record another person as the winner was
402 F. 2d 455 (8th C ir. 1968). However, efforts by          and 10th Circuits have now joined the so-far unani-       edge on defendant's part that the persons he ob-              calculated to defeat the Government in its tax col-
defendants charged with possessing unlawfully made           mous parade of circuits which have embraced this           structed were Government agents engaged in their              lection. In these circumstances it was clear that the
firearms to plead self-incrimination were unsuccess-        position. Agoranos v. United States, 69-1 USTC             official duties was prejudicial error. As the court           Government had been defrauded within the mean-
ful. Reed v. United States, 401 F. 2d 756 (8th Cit.         9316 (5th Cit. 1969); United States v. Jernigan,           noted, all the recent cases have held that scienter-          ing of section 7206(2). To the extent that United
 1968) ; Mower v. United States, 402 F. 2d 982 (8th          411 F. 2d 471 (5th Cir. 1969); Cohen v. United            i.e., knowledge of the official character of the Fed-         States v. Blumberg, 258 F. Supp. 885 (D. Del.
Cit. 1968); and Lewis v. United States, 408 F. 2d           States, 405 F. 2d 34 (8th Cir. 1968), cert. den. 89        eral employee-is not an essential element of the               1966), cited by defendants, was inconsistent with
 121 0 (1 Oth Cir. 1969). The courts held in these           S. Ct. 1274 (1969); Muse v. United States, 405            crime of assault under 18 U.S.C. I 11. See, for ex-           this opinion, the Second Circuit specifically disa-
cases that the transferee was under no statutory re-         F. 2d 40 (8th Cir. 1968), certiorari denied               ample, Burke v. United States, 400 F. 2d 866 (5th             greed with it. See also United States v. Green, 69-2
quirement which would incriminate him. Also in                (1969); Ping v. United States, 407 F. 2d 157 (8th        Cit. 1968), certiorari denied 37 LW 3449 (1969).              USTC 9469 (S.D. N.Y. 1969).
 Varitimos v. United States, 404 F. 2d 1030 (Ist Cir.       Cir. 1969) ; Hensley v. United States, 406 F. 2d           However, the Sixth Circuit distinguished these cases               The number of circuit courts which have adopted
 1969, certiorari denied 395 U.S. 976, conviction of        481 (10th Cit. 1968). Only the Third and District          from the instant situation on the ground that the             the American Law Institute's Model Penal Code
a transferee of possession of a firearm transferred in      of Columbia Circuits have yet to rule upon this            offenses there involved would have been crimes re-            test for determining criminal responsibility has in-
violation of 26 U.S.C. 5814 was sustained.                  issuc. Other recent decisions holding that Internal        gardless of the person against whom they were com-            creased to six; with the addition of the Fifth and
90 / Annual Report / Appendix
                                                                                                                                                                                                      Annual Report / Appendix / 91
 Sixth Circuits. Blake v. United States, 407 F. 2d 908           It is further worthy of note that the Second and      U.S. Business Tax Returns, 1966, Preliminary (27   Corporation Income Tax Returns, 1965 (354 pp.,
  (5th Cir. 1969) ; United States v. Smith, 404 F. 2d         Fifth Circuits in Kauler and Koran, supra, have            pp., 250).                                         $3.25).
  720 (6th Cir. 1968). Section 4.01 of the American           perpetuated the propriety of moftitoring telephone       Corporation Income Tax Returns, 1964 (394 pp.,     Corporation Income Tax Returns, 1966, Prclimi-
 Law Institute's Model Penal Code provides in parC            conversations with the consent of one party. In cit-       $3).                                               nary (33 pp., 350).
 as follows: " (I ) A person is not responsible for           ing Rathbun v. United States, 355 U.S. 107 (1957),
 criminal conduct if at the time of such conduct as          the Second Circuit held that Kaufcr's claim that
 a result of mental disease or defect he lacks sub-           his Fourth Amendment rights were violated when
 stantial capacity either to appreciate the criminality       an Internal Revenue Service agent listened on an
  (wrongfulness) of his conduct or to conforin his            extension telephone to his conversation with another
 conduct to the requirements of law. (2) * * *."              agent was without merit. Particularly pertinent was
     The relationship between the right to consult with       the court's observation that "the logic of the Rath-
 counsel as guaranteed by the Sixth Amendment and             bun case, that 'each party to a telephone conversa-
 a psychiatrist's examination confronted the Second           tion takes the risk that the other party may have an
 Circuit in United States v. Driscoll, 399 F. 2d 135          extension telephone and may allow another to over-
  (2d Cir. 1968). Error was found in the admission            hear the conversation,' 355 U.S, at I 11, is in no way
 of a psychiatrist's testimony concerning a court or-         undermined by the decision in Katz, where a con-
 dered examination, pursuant to section 4244 of the          versation was overheard with the use of electronic
 Criminal Code, to determine a defendant's compe-             attachments and without the consent of either of
 tcnce to stand trial for willfully failing to file income    the parties."
 tax returns. The court pointed out that the cxamina-            Action on wagering tax judicial forfeiture cases
 tion was ordered to determine the competence                 pending in the lower courts has generally been sus-
 question only, but that the psychiatrist was allowed         pended awaiting resolution by the Supreme Court
 to offer his opinion at trial that the defendant was        of the conflicting opinions of the Sixth Circuit and
 legally sane at the time of the alleged offenses. Only       the Seventh Circuit in the light of Grosso and Mar-
 if, the court decided, a defendant is given notice of        chetti. The Supreme Court has granted certiorari
 the use to which such an examination may be put,             in Angelini which held that such forfeitures were
 and is afforded the right to consult with counsel            barred and the petition for certiorari filed in One
 prior to the time of the examination, may such tcsti-        1965) Buick which held that such forfeitures are not
 mony be introduced at trial.                                 barred, is pending before the Court.
     In the area of electronic eavesdropping, three              The question as to the status of property ad-
 circuit courts have held that Katz v. United States,         ministratively forfeited by reason of involvement in
 389 U.S. 347 (1967), has no application to evidence          wagering tax violations has also been raised. The
 obtained from a conversation between defendant               Sixth Circuit in United States v. Filing, 410 F. 2d
 and an informer that the authorities were able to            459 (6th Cir. 1969) held that the district court did
record by means of an electronic device concealed             not have jurisdiction to order the return of property
 on the person of or carried by the informer. Holt v.         which had been administratively forfeited in ac-
 United States, 404 F. 2d 914 (10th Cir. 1968),               cordance, with statutory procedures. The court held
 certiorari denied 89 S. Ct. 872 (1969); United               that Congress had provided an adequate remedy in
States v. Kaufer, 406 F. 2d 550 (2d Cir. 1969),
                                                              26 U.S.C., section 7325, and that a person who did
 affirmed 89 S. Ct. 1223 (attempted bribery of IRS
                                                              not timely seek a judicial determination in lieu of
agent]; Koran v. United States, 4 CrL 2401 (5th
                                                              administrative action could not thereafter judicially
 Cir. 1969). This position is premised on the concept
                                                             challenge the administrative forfeiture.
that the risk a person takes in confiding in a po-
tential informer is far different from the risk that an
unknown third party will intercept and record a              Statistics of Income Reports
conversation without the knowledge of any of the             Published
participants, as had occurred in Katz, supra. The
 Seventh Circuit (reaffirtning en banc) has ruled            Individual Income Tax Rctums, 1966 (248 pp.,
contrary to the foregoing in the belief that Katz,              $2.50).
supra, has drained On Lee v. United States, 343              Individual Income Tax Returns, 1967, Preliminary
 U.S. 747 (1952), of its vitality by doing away with            (29 pp., 300).
the Fourth Amendment trespass doctrine. United               Zip Code Area Data for Individual Income Tax Re-
States v. White, 405 F. 2d 838 (7th Cir. 1969),                turns, 1966, Supplemental Report (96 pp., $1.).
certiorari granted 37 LW 3379.                               U.S. Business Tax Returns, 1965 (391 pp., $4).
92 / Annual Report / Appendix                                                                                                                                                          Annual Report / Appendix / 93

 All yearly data are on a fiscal year basis, unless otherwise specified.
 For example, data headed "1969" pertain to the fiscal year ended
 June 30, 1969, and "July I" inventory items underthis heading reflect
 inventories as of July 1, 1968.
     In many tables and charts, figures have been rounded and may not
 add to the totals which are based on unrounded figures.
     In ernal revenue districts are listed in this section by the names of
 headquarters cities. Each district is identical with the boundaries of
 the State in which the headquarters city is located except for the
 States recapitulated at the bottom of tables 1, 5, 6, and 14. A map of
the districts appears on page 69.
    Statistical Tables
I   Collections, Refunds, and Returns Filed
     1. Internal revenue collections by sources and by internal revenue regions,
           districts, States, and other areas/98
     2. :nt :rnal revenue collections by sources and by quarters/105
     3. nt nal revenue collections by sources, fiscal years 1968-69/106
     4. Internal revenue collections by principal sources, fiscal years 1940-
     5. Internal revenue refunds including interest/ 111
     6. Number of returns filed, by internal revenue regions, districts, States
           and other areas/112
     7. Internal revenue collections, cost, employees, and U.S. population, 1940
           through 1969/113
     8. Internal revenue tax on manufactured products from Puerto Rico/113

    Alcohol and Tobacco Taxes
     9. Establishments qualified to engage in the production, distribution, stor-
          age, or use of alcohol and alcoholic liquors/113
    10. Establishments qualified to engage in the production or exportation of
          cigars and cigareftes/1 14
    11. Pennits relating to distilled spirits under Chapter 51, IR Code/114
    12. Permits for operations relating to alcoholic beverages under the Federal
          Alcohol Administration Act/114
    13. Permits relating to tobacco under chapter 52, IR Code/114
    14. Label activity under Federal Alcohol Administration Act/1 14

    Stamp Taxes
    15. Number of occupational tax stamps issued, by class of tax and by
          internal revenue regions, districts, and States/115


    Appellate Division
    16. Receipt and disposition of cases not before the Tax Court (nondocketed
    17. Receipt and disposition of income, estate, and gift tax cases petitioned
          to the Tax Court (docketed cases)/1 19

    Office of the Chief Counsel
    18. Processing of income, estate, and gift tax cases in the Tax Court/120
    19. Receipt and disposal of Tax Court cases in courts of appeals and in
          Supreme Court/120
    20. Receipt and disposal of suits filed by taxpayers in Federal courts and
          actions by the United States for recovery of erroneous refunds/121
    21. Decisions of courts of appeals and Supreme Court in civil tax cases/ 121
    22. Receipt and disposal of collections, injunction, summons, and disclosure
    23. Receipt and disposal of insolvency and debtor proceedings/121
    24. Receipt and disposal of miscellaneous court cases, lien cases not in
              rt, noncourt general litigation cases and appeal cases/121
    25. Caseload report/121

    Cost of Administration
    26. Obligations incurred by the Internal Revenue Service/122
    27. Obligations incurred by the Internal Revenue Service, by appropriation
          and activity/ 123
    28. Quantity and cost statistics for printing/ 124

                                                                           Annual Report / Statistical Tables / 97
       . -00,, 0-70-8
Table I.-Internal revenue collections by sources and by internal revenue regions, districts, States, and other areas                                                                                                                 Table I.-Internal revenue collections by sources and by internal revenue
                                                                                                                                                                                                                                                                                                                                                     regions, districts, States, and                                                                                       other
11, Ilm'"unds of dollars. See table 3, P. 106. to, is, iab,s ,it Further breakdown of national totals by soacesl                                                                                                                        areas-Continued
                                                                                                                                                                                                                                    lin thousands of dollws. See table 3. F. 106, for tax rates and further breakdown of national totals by sources)
                                                                                                                                        ladhidual income           ad employalgint lame,

                                                                                                                                                                                                                                                                                                                                                                                                                   Alcohol take~~
           Internal rev.rum regions, districts.
                I                                                                                                                           MeI
                                                                                                                                            ~ ".                 in -              , Railroad                                                                                                                                                 EsC 1
                                                                      A                   C'rp':'' 1' .
                                                                                          "Ic or ,.n               '.pa             turphisumun,
                                                                                                                                      and i
                                                                                                                                     "'O's -
                                                                                                                                     of ""
                                                                                                                                       taaa                                                                                               interrul revenue begions. itistricts, states,
                  late, and other areas I                                                                                                                .1th
                                                                                                                                                           'I               ,a
                                                                                                                                                                           and       inerrant               mpl.y-cut
                                                                                                                                                                                                           iOc,,n,.                                                                                                                                 s
                                                                                                                                                                                                                                                                                                                                            taxex, t ofit                                                                  istilled spirits taxes
                                                                   collections                                                                                       it                                                                                and othe ardo, i                                         Estate               Gift    (sum at
(Star tea represented by single districts                                                                                                                      aiI
                                                                                                                                                               lanco                                                                                                                                             tax                 tax
   indicated in P... otheses; I.I.Is for                                                                                                                                                                                            (States .Presented by Isingle district, indicated in                                                            .
                                                                                                                                                                                                                                                                                                                                              I0 26, TO           Let I
                                                                                                                                                                                                                                                                the, States shown at
   other States shown at but[.. of table)                                                                              (3)                                                               (6                                           pa;enth
                                                                                                                                                                                                                                      NO                 t                                                                                       37
                                                                                                                                                                                                                                                                                                                                            3I: In' 38:
                                                                         (1)                      (2)                                                                                                                                                                                                                                                                                                   0
                                                                                                                                                                                                                                                                                                                                                                                                     Let,blind                                   Feel,.    Do-
                                                                                                                                                                                                                                          tom Or w iIlld 113 11                                                                              And 50)                                Total                 11Ccted           armielfiel           cation I national'       Dan,,,,

        U,ftwd istia.a. t1tail ----- -------------                 i"M1.560                Mail Ms              130,10al              23.972,1111         19. 947 1stax;                 933.1..              .0.010                                                                                                                                                                 (1              GO ( ..C

sheInh-pareill. R spen. ..          ............     ..             .399.4iss              12.30a.211           ..012.131                                                                 sr's.9                                                                                                                                                                                          2)                 13)                  (M)
                                                                                                                                                                                                                                                                                                                                                                                                                                                  0 1)         (11)
     Albany                                                           as"o,                                                                                   1.346,311
                                                                                                                                                                2                         f 3,111
                                                                                                                                                                                            4                     7 G
                                                                                                                                                                                                                 2 : 116
                                F                                     1 1.311                                                                                               41                    11                                         U.1t.d N-uni,              ..... .   ..                                           193,373      15.UZ.787        4,554.141
                  ......                                                                                                                                                                                                                                                                                                                                                        a-un"th                  'is - 'a                           sI   a1 111      13,111          1,141
    Boston-                       )
                                na,                                    4755.432              1. 112: 815
                                                                                                474 743           3.947,538              90
                                                                                                                                         10 71 2 1
                                                                                                                                       "07 1 52 1                o' : 1                       4639                   0a
                                                                                                                                                                                                                19,348             liberth A11111tie R.91...... ... ....                                                                                                                                                                                                       -
    Brooklyn --- ........ (see (c) below) ---------                 3.790.844                    41.740
                                                                                                86                3,139.947                    7
                                                                                                                                            1.4 1             2 14
                                                                                                                                                              I~IGS                        1'20                     281                                                                                                                                                            473.005               M 717                          301       2.016        a.7.
                                                                         f fill.
                                                                    3.41 141                          110
                                                                                                      5IF7        2,421 213
                                                                                                                     1, 3 3               4
                                                                                                                                         502 1   3                 OCR
                                                                                                                                                                    11.                                                                 Albany,.              see (C) below) -----                                21. 573        2 076 ''   '1 '~ 4`
                                                                                                                                                                                                                                                                                                                                               9 .41              "I: "1
                                                                                                                                                                                                                                                                                                                                                                    I 281                                                                                                        .7
    8 flabo_ ........... (see (C) below) .. ..::::::                                                                                                                                          2095              !":78                                                          ....                                                                                                    239                                                                      238                1
        toAgain ........... (Vermont) .....                            2                         2.                                                           122.732
                                                                                                                                                                 9 9                       1,173                    all                 Aug usta             (Mamd). ~ ..... ---                                III G7~1,1           afaf
                                                                                                                                                                                                                                                                                                                                lli. 111     Ila 111
                                                                                                                                                                                                                                                                                                                                               1: 3"              I T2: 13
                                                                                                                                                                                                                                                                                                                                                                     T               1,0
                                                                                                                                             9: 131
                                                                                                                                             7 361        1                                                                              Boston               Ma.Ooh.sCtt,)                                       05:
      ,!I                   (Cimmutudd)_ .........                  3,478.040at              8. 647,935
                                                                                                   1             2.50.422                                     83       09                     871               11.282                                                                                                                                                             162,669                91.460                   6a' V
                                                                                                                                                                                                                                                                                                                                                                                                                                       879             1
                                                                                                                                                                                                                                                                                                                                                                                                                                                     7 31         3
    Nixon                       1                                                                     IN.
                                                                                                411: 311        13,82 :,Iol                89
                                                                                                                                       2. 2111 83 3
                                                                                                                                                  4              D
                                                                                                                                                              424:472                     43: 77                                         B
                                                                                                                                                                                                                                        B-kly.-              1See (C) w1ow) ....                                fill, 981        8,948           95.229        6!L029
                                                                                                                                                                                                                                                                                                                                                                  213                5,941               .... ..                    5:316              59        56
    Portsmouth-                                                         447: 6SZ                 6                    6 74                                    28 369                             6                     15               Rd1aIC,, r .                offI 1w)_                                     13 ' 1,
                                                                                                                                                                                                                                                                                                                       111          '.
                                                                                                                                                                                                                                                                                                                                 1. 111              703       38,41
                                  N,   H..Psh,,;j
                                ( S 'wf') below)              ::                                                     71
                                (Rhode Island) ----                          300                176,626                676                      06
                                                                                                                                          131,486             541,17
                                                                                                                                                          15,411.                                                                       Ha ' Inalf                                                                  6:                            F:732
                                                                                                                                                                                                                                                                                                                                                 8'                 al
                                                                                                                                                                                                                                                                                                                                                                     l                   33
                                                                                                                                                                                                                                                                                                                                                                                       ...                                                                       'GZ~
    Providence. . . .......                                                                                                                                                                    20                3.576
                                                       : :: _ :                              :,-I .7.                      387
                                                                                                                141..1- '. 253         4,021,727                    IISi?                .39.a.                                         kit l lfidr,L,
                                                                                                                                                                                                                                            ~r0               Connecticut) -------                              1 .917          1 9,242         136,524        67.978
     Allientil Bass-           ......       ....                                                                                                                                                                     ,
                                                                                                                                                                                                                12,111                                                                                                                                                              64,366                                                          -279          13
                                                                                                                                                                                                                                                                                                                                                                                                                                                                 317                71
                              (Maitland add    ,)   C.               5,425,303                  482 '234                                                                                                                                PurfaillItalian  :1 I
                                                                                                                                                                                                                                                            (1,, (C) below)-                                     06 1
    Baltimore ------                                                                                               AM 642                 673,024          3. 681 ~ 866                    5 111.
                                                                                                                                                                                           1 645                11 , 1 07
                                                                                                                                                                                                                24 '
                                                                                                                                                                                                                IT                                                                                                F I~ 7L,          7C      1. 111 1,7
                                                                                                                                                                                                                                                                                                                                                  2: 1        217.111
                                                                                                                                                                                                                                                                                                                                                                  27a              116,851
                                                                                                                                                                                                                                                                                                                                                                                       1                 183..,' 1 7              11
                                                                                                                                                                                                                                                                                                                                                                                                                                          8          929         412
    Newark ............. (New J-d( , . .' 1-.- - -
                                               '                     1 : 111: II I
                                                                              W                 0~~ 7al
                                                                                                4 11~ .          4 I12 1 71
                                                                                                                   F T,:,~.            1 :G. 1 : 1.
                                                                                                                                          16 6             3. 39QL Og5                                                 86                                                                                                                                                                5               ...                           219              4         21
                                                                                                                                                 142                                                                                   ProWdure.                 h ad
                                                                                                                                                                                                                                                             IN dw e 1ilsods..                                   22.344          2.2110         13,8G5
    Philadelphia-                                                                                                                                          3.914 5                                ,                                                                                                                                                              10,681                  83              ....
                                                                                                                         100              529,015                                                                                      B,
                                                                                                                                                                                                                                   albol-11.1b, Int.q uen - R ...... ...... .....                               472.467        0.2cus       2.2M.1112
    Pittsburgh ....                                                  4: ~2     30                    5: 48804    3:                                        2,605:                          ' 47
                                                                                                                                                                                          12 : 510                  .41                                                                                                                                       .91.1                - -111                          1             14
                                                                                                                                                                                                                                                                                                                                                                                                                                  1 7G:611 2
                                                                                                                                                                                                                                                                                                                                                                                                                                         2.          .22
                                                                                                                                                                                                                                                                                                                                                                                                                                                 1~2:111       I.acd              112
                                                                                                                                                                                                                                                             Ivaryland and D.C.)
                                                                                                                                                                                                                                                               4                                                      241
                                                                                                                                                                                                                                                                                                                 It :,36         1
                                                                                                                                                                                                                                                                                                                               13: 7          391.30a
    Richmond                                                         2              Go
                                                                                    95            375
                                                                                                  61                 "S:
                                                                                                                     87S                                              96
                                                                                                                                                                      71                  69,594                 9.071
                                                                                                                                                                                                                 3                                                                                                                                            2914 52'             2GO.785                                                                        271              to
                                                                                                                                                                                                                                       Newark .........          ev, Jus.                                        11 1                 1
    W mington-- . 1: ~: ~ ~ - I=a,vj::  )                            1. 318, 593
                                                                         29                    628.466              647,901             4' N IT
                                                                                                                                        IV                    1'
                                                                                                                                                               23:37                                            xpt~gacs
                                                                                                                                                                                                                     171                                                                                                                      433. 64         232: 96              135.576               ....      ..             133 1,g,
                                                                                                                                                                                                                                                                                                                                                                                                                                   89:                A'd
                                                                                                                                                                                                                                                                                                                                                                                                                                                  1 : 1,3
                                                                                                                                       alff"....                                                7                                      Phil a delphia. .                  r,
                                                                                                                                                                                                                                                             "I (II 'low)-::::                                                                Stal. 744
i.mthwa.t Framiam.. ...              ------                               al
                                                                   11,sub,351if2             1.111.115A         M1,111,fars                                I.Sai                          22.9.8                                                             L, (. hot..)                                        24;
                                                                                                                                                                                                                                                                                                                 51 go           N.687                         134                                                                                               G11
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   ..          21:1
                                                                                                                                                                                                                                       Pitsbtugh _                                                                      4
              a       :::: (Seat h
    Atlanta .............. (GO 'gla)_ .....                          2.61 : 7                  523,50            1,9C5.283              428.497
                                                                                                                                          5                      5~
                                                                                                                                                           1.163 all                          4                 10,880                                                                                                         15.126         358,601                1 20
                                                                                                                                                                                                                                                                                                                                                                70: ' ' '            " :a al
                                                                                                                                                                                                                                                                                                                                                                                     x1a                                          44.834          1,547          430                  3
                                                                     1,332 600                                                                 fall           77                             13.
                                                                                                                                                                                           1., 1                                         ,,
                                                                                                                                                                                                                                       RIFh..nd -----        (Vurfitia) ---                                      12 :02 I
                                                                                                                                                                                                                                                                                                                      1 11          45a
                                                                                                                                                                                                                                                                                                                               f4 431            ':
                                                                                                                                                                                                                                                                                                                                              11 0 11             1,3ab                  4,13(il
        On OR                  (AIL       1                                                       182                                                                                                                                                                                                                                                                                                                              41 It,'             1            7               3
                                        Cambes)...                                                                                      IN                    598,352                                                                  W.-jr.-               (Delaware)                                          28              2:                 754                46
    C.1hrob.                                                                                            1 ~
                                                                                                  112; 4N           77 ' 053
                                                                                                                       ~: 207               I:1165                                           138                 ' :8 5 9
                                                                                                                                                                                                                 1 "3                                                                                                                                                                                                                                              3G          as, 0
                                            P,) s).                                                                                                                                                                                                  ......... ...... ............. -                           "'ba,          as.",        a.62's.."
    Greensts,                                                           I
                                                                        li ': ..
                                                                     4, T 617                           La.
                                                                                                  13 : 712           12 7 2
                                                                                                                     9,:8                      1G07              7.163                                          13 : 34                                                                                                                                         94..'1               60.872 3            2 .9da                     5
                                                                                                                                                                                                                                                                                                                                                                                                                                        l             1          11,               A
                                                                                                                           1                                                                                                                                 ~                                                   44, 56 1
                                                                                                                                                                                                                                                                                                                 1               5,6 10       135.792
                               ( " 22p                                                             N2              4
                                                                                                                  "'                    116                   332
                                                                                                                                                              " 3a                              17.'             2 991                                                                                                                                           10,880               6.04                                                            37         117           221
                                                                                                                                                                                                                                       B                       Alabama)         -
                                                                                                                                                                                                                                                               G"rgial` .- ---- - ~
   Jacksonville ---------- (Florida)........                        31:816281.64
                                                                              1                   537                       48                                701: 07                         1 35191
                                                                                                                                                                                              I:N               183.,825                                                                                           1: .
                                                                                                                                                                                                                                                                                                                   ' 41          1 FI5
                                                                                                                                                                                                                                                                                                                                2 : "1              ,~
                                                                                                                                                                                                                                                                                                                                               11 111              1.818               1.630
                                                                                                                                                                                                                                                                                                                                                                                          ~7               1 ~. 25                               . .....          46             26
                                                                                                                                                                                                                                       Colombia ....         (South Camliw~:.:_
   N.,   life ........... (Tennessee). .                                        32
                                                                                 1                    945
                                                                                                  34 '1'          1
                                                                                                                  ": 1"', 44 ,
                                                                                                                        1 ,                 98:7 9 9
                                                                                                                                        , 3'" M            1 33 53                                             93.737                                                        na                                  GIL'92                        19'
                                                                                                                                                                                                                                      Greensb oro-.          (N orth C arol                                                                                                                                                                                                      44
...... IisR..I-- ~ -- ------ ...... ....                           32.1101".                         a
                                                                                             7.2417,304                 a
                                                                                                                21I.L11:61s2   5       1.,1631 1710*
                                                                                                                                             7:6          11:41a:M
                                                                                                                                                           3                              62.0611                      1"                                                                                               '2      9.576       1.186:385                   402
                                                                                                                                                                                                                                                                                                                                                                         ..               FIG                                                                     21
    Cin                                                             14            113
                                                                                  .08           113 8            3 .72                                     " 141 1531113                   1
                                                                                                                                                                                          '3: 17               13:20                                                                                                                                                    247                05
                                                                                                                                                                                                                                        Inksonviiii,    ..           M is )
                                                                                                                                                                                                                                                                     T    ess'a
                                                                                                                                                                                                                                                                    fFmrsdd1pp                                                                                                                                                                                    53            21
    Cl                                                        7: 1! ' :
                                                                              1                 504 342 2        5.180.953                808,931             324                             "1                23 535                                                                                            7 71
                                                                                                                                                                                                                                                                                                                H':1'1          11, 9 1F
                                                                                                                                                                                                                                                                                                                                    1 9       115, T'2
                                                                                                                                                                                                                                                                                                                                               3' . 74            5     40            0 1
                                                                                                                                                                                                                                                                                                                                                                                     31: 9               28.379                        32
                                                                                                                                                                                                                                                                                                                                                                                                                                   3. 161             356
                                                                                                                                                                                                                                       Nd,h,illd. -      .- . (                                                                                                                                                                                                    2
                                                                                                                                                                                                                                                                                                                                                                                                                                                                 3526             5
    Detroit .....         ... (Michigan).. . . . ........             3.111,133   7 1        1     , .2,
                                                                                             3: 17: 231          2 :1 7 4 : 1 11
                                                                                                                  1 27 ~ 2 72          1. 51 3:~ 3 7
                                                                                                                                          11 1 1 4 1       F l1 Sit.
                                                                                                                                                           1: G7.: 1 11                    ,
                                                                                                                                                                                          12:                  31. 76
                                                                                                                                                                                                                11 11                                                         )-- - .. -                         33,269           3,158        43.311             If: 0418           2     92133                                  20.82
                                                                                                                                                                                                                                    ..".I IN- Fix------ --- ----------                                                                                                                                                                                                          34
          " to
     1"1j,1i1J1d.Hx::          I( 1~1.1,i',.nc                        I
                                                                      1:4,1. 92. ,              6a                                                                                            63
                                                                                                                                                                                              132                      9                                                                                        323.519        45,23'
                                                                                                                                                                                                                                                                                                                                1           SJU 110
                                                                                                                                                                                                                                                                                                                                             189:608        a,11s : 1aS
                                                                                                                                                                                                                                                                                                                                                               159 773         a.3 TS.296
                                                                                                                                                                                                                                                                                                                                                                                  I                   242. Z54             1.119.122
                                                                                                                                                                                                                     14               CaricbmullL . .                                                                                                                                                                                            10JU         2.093            in
    LA                                                                      ":                   82 141
                                                                                                111:'                 121.&1 7
                                                                                                                  1. ~ I~    '            10: 131032         11 110
                                                                                                                                                             3                            23,01 0
                                                                                                                                                                                               52                1: 7                                          "" (itI 1:11wi,
                                                                                                                                                                                                                                                               (~w ( d b .                                       (31: 831          1.926                                                                                      128,991
                                                                                                                                                                                                                                      Clevelan d -                                                                                                                                                                                                 1. 429       309              2
subs PA'F I!shut&.                                                                                                                                                                                                                                                                                                     856     17,573
                        ---- (West V! fgfima).:                    ads,131 13B                         94                                  140                 70 280                                                    20
                                                                                                                                                                                                                          "           Detroit                                                                                                  725.278        119,933               30 784
                                                                                                                                                                                                                                                                                                                                                                                   103: 633            9T.472                   5.690                  82       531
    - "IRINfoun._ ----------                                              flift.1117
                                                                                '                23~j5o
                                                                                             5.321 22           20.4111S 509
                                                                                                                     185~579           1 .Us. 213         15.7611.333
                                                                                                                                                                 *                                                                                             ( MicIsigar).             ...                     95,389           8,853     2, 5GG. 138       236 jS
                                                                                                                                                                                                                                                                                                                                                                7                  31 3: 11
                                                                                                                                                                                                                                                                                                                                                                                   111                141,712
                                                                                                                                                                                                              202.0211                                                                                                                                                                                                         'Full                  521       345
                              (South Dakota                                                                                             1"68,313
                                                                                                                                            I                116.385                                   2                               = 'Ile  a Polis         (Indiana )                                        43,806         4,620          xlll~ -1       33 111 '                I,11
    Ab ribeen                                                             1 1 1 : 711
                                                                          ' 4                                                                                                                                          809                                                                                                                                                                                                          73
                                                                                                                                                                                                                                                                                                                                                                                                                              ~11: 131            1 :7141                           a
                                                                                                                                                                                                       a        41 '3,13   ,                                   (We,
                                                                                                                                                                                                                                                               (Kentucky). .                                     23. 143         L~
                                                                                                                                                                                                                                                                                                                                  311       1,212 111
                                                                                                                                                                                                                                                                                                                                                17: 1"          4 211
                                                                                                                                                                                                                                                                                                                                                              131:~5'               4: 48
                                                                                                                                                                                                                                                                                                                                                                                  621 111
     Chi"                      (
                               (So. (b) below  )                    l2,                      2,719,490            8,652,365                   1,311
                                                                                                                                                  397        7, 74
                                                                                                                                                           1,114.0761                    12N,                                                                                                                                                                                                                                  21
                                                                                                                                                                                                                                                                                                                                                                                                                                4                               117                 9
                                                                                                                                                                                                                                       Parkersburg-                   tVugI-Y_. .. .                             16,498             29
                                  how.) ... .... .......              F 44 2. 28a'9            7 :,
                                                                                               217 351            1 , 131:4
                                                                                                                       7G 913             3679                                                                   IF                                                                                                                                                                                                               .456               976         45                40
                                                                                                                                                                                                                                   M.d.- ................. .. ...                                              416.66S  518    52.414G      1,UG.412          7
     Far           -- --- -- (North Dakota)- - -                          20 84                                                               6: 54 5           111:064                       ...
                                                                                                                                                                                               3S                    : 762                                                                                                         12                                                                                        a. .1sl              .."s.        .,,a                 is
                                                                                                                                                                                                                                        h                      (South Dakota) --                                   3,                            1
                                                                                                                                                                                                                                                                                                                                              1151 : 14
      eupiki...........         (Wisconsin)                                   1
                                                                         .353:665   2              OG.27520                06
                                                                                                                  Z 364,03 1              111
                                                                                                                                          213:1 21            1,858 78                      , 556                 2:17''.2                                                                                                                                                                                                                                      754      ......
                                                                                                                                                                                                                                      C edc --- ------- (So. ) below)                                           161,731        21,302                999      1,57:~Io
    odwh ..... .. ..            (Nebraska).                           1 131 : 81
                                                                          782 7                   141               79~3. 21 f                402               536:3925                  54'o
                                                                                                                                                                                          43 135                 3                                                                                                                                                                as *'
                                                                                                                                                                                                                                                                                                                                                                                  F:I. J7I                 3
                                                                                                                                                                                                                                                                                                                                                                                                           - 41
                                                                                                                                                                                                                                                                                                                                                                                                         "'t"                     67, 40            4j2          65
                                                                                                                                                                                                                                      Des       bles ..... .. flow st --,                                             111
                                                                                                                                                                                                                                                                                                                      ,IT       1, 11 7          1
                                                                                                                                                                                                                                                                                                                                               24: 124
    S . Louis.... ..            (Finfacial). .. .         -           4:           so                  1..        3.                      it
                                                                                                                                          1~1'~: 7.           2.111.1a4                                         IT 37.1                                                                                                                                            471
                                                                                                                                                                                                                                                                                                                                                                    I                  170                                                                        Ga
                                                                                                                     at 3"                                                                                        I:                  Far go-                 (N orth Dak ota)::                                                   16
    St. Paul ........
     SP                         (Minumanta).....                      3 111 7 41
                                                                      2:      .: ,                       '4
                                                                                                  '110~415F       I,30'~Va                        5
                                                                                                                                                 440          1,862,377                   52, 3AM5                                                                                                                                                                 04                         93       3. 133
                                                                                                                                                                                                                                      Milwaukee-------- (Wexionsin)-_                                           48                            229.602
                                (San M be]..)-                            07       94             360,460         1,338.052               356. as 20          8.973.224                    2,336                  5,972                                                                                                                                       150,760                    5, 1
                                                                                                                                                                                                                                                                                                                                                                                            000            01                     '37                    7       654
                                                                                                                                                                                                                                      O rrah...                  N
                                                                                                                                                                                                                                                              ~, dtulaxka)., ....... ...                            5 G
                                                                                                                                                                                                                                                                                                                21 1IIT             1 39
                                                                                                                                                                                                                                                                                                                                 3: ''          70. Got;
        rang"'d                                                                                                                                                 ass ..i                   asi's.                13                                                                                                                                               7,646                         03     .- ..
                                                                                                                                                                238,503                        10                    :1314                                    (MIO ,.. rifl                                     67,729         1 8.278
                                                                                                                                                                                                                                                                                                                                 0            364.054         127,333                                                             2;) la
                                                                        367, VG
                                                                              o                        6
                                                                                                   29, 0 1      ".321:1541                  ': 08
                                                                                                                                         .12 I'                                                                                                                                                                                                                                     31:
                                                                                                                                                                                                                                                                                                                                                                                     "                                                              ~d.          I"
                                                                                                                                                                                                                                                                                                                                                                                                                                                                44 1
                                                                                                                                                                                                                                           " '
                                                                                                                                                                                                                                           P~u! _-                                                              42,758             .776        121,068         50,252
    A                                                                4. 111
                                                                         4~:                                                                                                               3,194                14.180                Springfield _ .                                                                                                                                   ...                                        1:11111          372          195
                                                                                                                  " '! ' : N
                                                                                                                     I I      O           '1 ' NT
                                                                                                                                             7 O              '.'82 101
                                                                                                                                                                  7 1:6                                                                                         Son 'js"bt lowi~~:
                                                                                                                                                                                                                                                                       b                                        39,129           1.17         331.117         293,349                1. 144
                                                                                                                                                                                                                                                                                                                                                                                  21- 2 '
                  _:                                                           50              14' 351                                                                                                                                                                                                                                                                             45.867                 8,9,3                   15
                                                                                                                                                                                                                                                                                                                                                                                                                                 2GI.5911             ,
                                                                                                                                                                                                                                                 R.91-------         __Next. .                       ,f        as 77               .1.1
                                (See M 1,1111)
                                (                                    3~ 41,16. Oil0                      7
                                                                                                   150: 3963      2.633.30926             7451~207
                                                                                                                                               65,            1,856,75821                      5
                                                                                                                                                                                          11.874                13~441'7'                                                                                                                                                                                                            ..a,                                         97
                                                                                                                                                                                                                                      Albuque                   14           C.                                  8, 620
    D                             C.                                 1,111
                                                                     F      '~3                1                        I
                                                                                                                       71:                                                                   771                                                                                                                                                                                        112                                          11,
                                                                                                                                                                                                                                      A      n                LSed M bOIDW)..                                   78, W2              150
                                                                                                                                                                                                                                                                                                                               13.9 go          7
    Little R.k-. .              CR k  eas _: :                          65      "
                                                                               17.                .1~1213'
                                                                                                  ..       1      I. "
                                                                                                                     52 '2"               M Ito
                                                                                                                                           16'                 351145
                                                                                                                                                              ""' a'                         3 1                 2     12                                                                                                                                         15.81'5           2G, 378                                                                     .31               2G
                                                                                                                                                                                                                                      Cheyenne                IWyoMing)- . . . . ....                             3,670             296        11 1 1
                                                                                                                                                                                                                                                                                                                                              lou: 1~~                 31
                                                                                                                                                                                                                                                                                                                                                                  'a I~l
    how Orleans.                (1+X'9-.)_                             .639,895                251,329            1,290.9750  7           364.703              918,715                                                                                               if) b e low) ----------
                                                                                                                                                                                                                                      Da                        See (                                           79,936          9,874
    Oklahoma City. .            (Oklaw.
                                (                                    1.598 24
                                                                       185:                    205,790
                                                                                                1         11      1, 055. 729             284. 1962            765,955
                                                                                                                                                               590 276                      9"
                                                                                                                                                                                          50"88                      4 5
                                                                                                                                                                                                                 G : V3'                                                                                                                                                                   220       ' :.:             :    '" '        91                       9~
                                  K A.,)....                                  1
                                                                            089              '.afs77.3               951.249                   9
                                                                                                                                          3D5, 2                                             28                  4 is
                                                                                                                                                                                                               aus 1 083                                                                                        27.482          2,746         154.877             52.750                    142       ---
       ~Iblt..... ..
Ar......                                                                                                                                                                                                                               Little Rock--- ... ~A' 1kdnVTs);_. _ - .
                                                                                                                                                                                          M a,                                                                                                                  1 3 3 29
                                                                                                                                                                                                                                                                                                                2 8: 4           1
                                                                                                                                                                                                                                                                                                                                2 : 11         271:17
                                                                                                                                                                                                                                       New Dries .......   (Louisiana)........ -::                                                                                                                                                                               5~
                                                                                                                                                                                                                                                                                                                                                                                                                                                                111                5
                                                                                                     :"'                                                  is 11 a.                                                    466                                                                                                                          093            1 1: 1"          13,0sal                                        I a. 611
             I                                                              0%
                                                                       .'.32:"'                                                                                                                                                             t
                                                                                                                                                                                                                                       Oklahoma City ----- (Oklahoma)                                                                                                                                                                                    1      11 8              1.
                                                                                                                                           72 033             "     '
                                                                                                                                                             237:3'78                             3
                                                                                                                                                                                                  1                   706
                                                                                                                                                                                                                      9                                     K                   ...                                 20
                                                                                                                                                                                                                                                                                                                31,830           1.971
                                                                                                                                                                                                                                                                                                                                   102        301.12
                                                                                                                                                                                                                                                                                                                                               , 7                  1 :7~'
                                                                                                                                                                                                                                                                                                                                                                       111          " 6
    Boise.                      (Idaho)..                                     2
                                                                        379,633                       2"
                                                                                                   5S.37                  4"
                                                                                                                       MI,M6                                                                                                           Ann , d
                                                                                                                                           80:813                                                     IT               27                                           .... . ........                             28.142          2,591                  1                               6495                                        1.5971                       4'
    H                            Montana)                                273.164
                                                                         6                                             226.600                                   144,643                                                                                                                                                                                                                                                                                                          141
                                                                                                                                                                                                                                                                          ---     -------       ........       115.1il          C.311          2,016
     ..    .                     Hawai i)---                                                      81!             7,   4 , 746
                                                                                                                       412                  91 . 363               ~:34,
                                                                                                                                                                 311 111                                                                                                                                                                                            I
                                                                                                                                                                                                                                                                                                                                                              liala,lalf          .7,401
                                                                                                                                                                                                                                                                                                                                                                                       1              02.343                     2 4.550         7,095       2.06G                3
                                                                                                                                                                                                                                      IT rise, of-
                                                                                                                                                                                                                                      Amhirag~ . --
                                                                                                                                                                                                                                    ......                   ------                      ------ ----               294                                                                   06
     Los Angeles........                                                 2G 62
                                                                     9. 460:433              1,362,308   38           51G. 43           1,75 .178             5,65                         F6.11                     1 14
                                                                                                                                                                                                                313 :N2
                                                                                                                                                                                                                  F' "'                                                                                                                                                                                   89
                                                                                                                                                                                                                                                                    (Idaho) ....
                                                                                                                                                                                                                                                                    IN                   ...                    if
                                                                                                                                                                                                                                                                                                                 4.147               4893         4. 65I
                                                                                                                                                                                                                                                                                                                                                      U               U
                                                                                                                                                                                                                                                                                                                                                                      "                  24
      Phoenix. .                   SV
                               far A below)                             717.348                  68.338              6211,008 1            191,324
                                                                                                                                              9 G               42
                                                                                                                                                                 ,         121               133                                                                                                                                                                                                                                                                 24
                                                                                                                                                                                                                                       Hal                         (Ha     ;a).                      ...                                          3.333            1,036
     Portland ...... ..... (Oregon) .. .... - ..                     1.288,326  5                45
                                                                                               209,%4             1.028 997               26      7.             7 ':
                                                                                                                                                                   7                       3.993                 1:317
                                                                                                                                                                                                                 1 G,
                                                                        3 :4                         ~IG
                                                                                                       IDII          284:52                   5
                                                                                                                                              2:283              187.875                       2                    3                                                                                             '38
                                                                                                                                                                                                                                                                                                               17:111           2,                                                  2,66a
                                                                                                                                                                                                                                                                                                                                                                                       M               2,50  2
     New                       IN O.d,).                                                                                                                                                                                               Ph
                                                                                                                                                                                                                                       Los Angela . .....     .                                                                                                                                                                                                   D
     Salt Lake City, .
     S                                                                                                   98          361.09 3 7             83,219
                                                                                                                                            9                   275. 157                       3               221,711                                             (S ue (3) b e l ow ) ...       .....       231,738          19,452         39a: "'
                                                                                                                                                                                                                                                                                                                                               " 503               ,: 5 ?
                                                                                                                                                                                                                                                                                                                                                              11 ~ G' I            90 f.04            4 D. 028                        ..
                               (Utah                                     ' al 1
                                                                        43 1 135                                                                                                                                                          wrax...... .                                                                                                                                                                                           1.1141         Ass               16
                                                                                                 71: 112          5: 594 411           1. 177. 851            4.322.609                   71,426                                                                    (A,,, . w),. . .        ~                                                                   , 1, 1 2l
                                                                                                                                                                                                                                                                                                                                                                      a                                     1o
                                                                                                                                                                                                                                                                                                                                                                                                        " S6 l
                               (See a) tallov).
                               (                                     7.317.012                    FG                                                                                                             L 526
                                                                                                                                                                                                                  1                 Portland .........                                                                                                                              " 141                                  ...                                   '7                1
                                                                                                                                                                                                                                                                  . (a a g o') .....             ' ::~*          I
                                                                                                                                                                                                                                                                                                                 R 11 G"        2:"'
                                                                                                                                                                                                                                                                                                                                1 211l        3   1 1
                                                                                                                                                                                                                                                                                                                                                3:7 13
'no'. us                           Washington). . .                  2,472.322                 3       714           979~ 987             470.783              FONI21
                                                                                                                                                                as    '~                     174                    Gal             He..,                                                                                                                                              654
                                                                                                                                                                                                                1                                                                                                  9:704           863         10,221               1
                                                                                                                                                                                                                                                                                                                                                                   01                     7
                             A.1. ...                                                            .'sary                                    971.9                                                                                                                                                                                                                                                                                                                 77
                                                                                                                                                                                                                                                                                                                                                                                                                                                                  4     .. ..... 5
                                                                                                                                                                                                                                    Salt Let, I Fit Y, .
                                                                                                                                                                                                                                    San F'die's.
                                                                                                                                                                 121,11,                                        3,577
                                                                                                                                                                                                                    "'                                             (Unh)-                                          4,548           531         14.662               34
      Puerto RICO      . . .                                                 622                       253             13:1, 3                                    11
     Dan                                                                 4
                                                                         '1a:111                 34,311                4f1.7.1 3G   ..... 113: `13 l
                                                                                                                                           1 M                   323,412                                                                                           (See (a) below) ... .. ..
                                                                                                                                                                                                                                                                   I                                           172.227         11. 575       660.407          310 074            223,694              37.481                 178.895             6.573          743
                                                                                                                                                                                                                                 choe rl e-,.
                                                                                                                                                                                                                                    Sea 1.                                                                                                                                                                                                                                         i
Jorlistributed                                                                                                                                                                                                                                                       Washington)                                37.190          5.937         132.495          67,577             23.659              20,744                   2,627               105          170
                                                                                                                                                                                                                               0 op of I....                                                                                                                                                                                                                                      14
      Foil Mx deposits and dmoshall le.dipt                              7ad 7 ~8
                                                                         411:7 31                  2,
                                                                                                  341.117               GG;. 722           .....                  88,496                          7 74
                                                                                                                                                                                                  "1                  "1            I,...I
                                                                                                                       755, 829           755, M                                                                                                                                                                                     sirs     9G."'s          Mials               1 .1.
                 .blecabal? 0, and xCcs-. FICA Cb!dhs 7                                           .969                                                                                                                                  dItd Ru:~~....                                                                                                                                                                           Ta...
                                                                                                                    -1,31                                     _j19
                                                                                                                                                                 7:3                                                                                                                                                  ISI            107      84 .7 7 3       73.944              73,904
                                                                                                                                                                                                                                                                                                                                                                               ....                                              72,549
     T% nsfietred to Government of G,- . .                             -9.304                   ......                                                                                                                                                                                                                                                                                                                                      1: 15C
                                                                                                                  -817, 76                                         576            ----                                                                                                                              4,7D9            579       2,071              ....              -
    Withheld laxelol Federal employees. . .........                  -817,576            ............. ~j                                                                                                                                                                                                                                                                                                                             ... ......                .... ....
                                                                                                                                                                                                                               U    Idi,il"Itunt
                                                                                                                                                                                                                                        '    "eil:_      -                    ........                          I
                                                                                                                                                                                                                                       Federal lax deposits and depositary receipts 6..                                                        30,312              ..   . .    ... .. . ...         ......... ..                                                        ........
                                                                               Total s for States not s how, abooe                                                                                                                      Cloth's
                                                                                                                                                                                                                                      Gasoline.      lubricating         U,     add    I,.-       FICA                        ------
                                                                                                                                                                                                                                       Transferred 1, G...frurent at Guam:_ ::
                                                                                                                                                                                                                                                                           '                        :                         ::::
                                (a) Uilornial..                     16,777,444 1            12. 240 700
                                                                                                0 79:           13                     2: 11 7
                                                                                                                                        1 %9:                                                                 ..a 711
                                                                                                                                                                                                               SI~ as
                                                                                                                                                                                                               1 'as                                                                                                                                                          q 7::::::::
                                                                                                                                                                                                                                       Wrthh.hd taxes Cl Federal mrpl,n......                       ...
                                  Of 11                                 24': 2a,
                                                                        21 1                 3.         11       1:"a :417
                                                                                                                    .. "                       814..          7:1137    2                 3       Gila
                                     an.                                                                                                                                                                                                                                                                   - -----    - -     -- -
                                        ""1' -                       3:
                                                                    31                       D,199:7241
                                                                                                     42         2.1: ~IIJI: 11          1 76
                                                                                                                                       4: Dal: 61.11
                                                                                                                                                   1              2 as                        7
                                (it) Ohio "L                        12,407.061               2,407                                                            ' '47' 2"
                                                                                                                                                              7:    1: 6                                       36.741,                                                                                                         Trials I., Star I of h owu diam,
                                (1) P.Awqtv                         11.110.924                1: 1 71 1 7         1: 341 131
                                                                                                                  S 44 372              1 :111, 1             G. 51a. 113                 25 . 169
                                                                                                                                                                                          62 23 7              2
                                                                                                                                                                                                               4 991
                                                                     7,615,532                   180:04                4,                  56.1.7             3,832,889                   15: 058                7:627                                                                                                                                                                              "
                                                                                                                                                                                                                                                                   (a)                                        113: 165                                                              7
                                                                                                                                                                                                                                                                                                                                                                                    1 21             17, 11 1
                                                                                                                                                                                                                                                                                                                                                                                                      3 3f ,                            G        1 711
                                                                                                                                                                                                                                                                                                                                                                                                                                                 3:75,       1. 111,
                                                                                                                                                                                                                                                                                                                     9                                          ' B6I
                                                                                                                                                                                                                                                                                                                                                              dCG: 931           4
                                                                                                                                                                                                                                                                                                                                                                                 31 :2.1                                                                     1: 05
     See lootmates do p. 108.                                                                                                                                                                                                                                         I N I, York                             515.320                                        367,665             2
                                                                                                                                                                                                                                                                                                                                                                                 243,547             8
                                                                                                                                                                                                                                                                    of '
                                                                                                                                                                                                                                                                   ~d Ohio.                                    145.687                                        20,:6
                                                                                                                                                                                                                                                                                                                                                              17? 711               1 I a
                                                                                                                                                                                                                                                                                                                                                                                   Lt : 1 l 1        1
                                                                                                                                                                                                                                                                        Pours., adix                           176.452                                                                                                                                          ..
                                                                                                                                                                                                                                                                                                                                                                                                                                                             1,U34           317
                                                                                                                                                                                                                                                                   (1) Texas .. ...........
                                                                                                                                                                                                                                                                               I                               158.029                                        86.786              2U,598
                                                                                                                                                                                                                                                                                                                                                                  G2                                                                                           222            65

98 / Annual Report / Statistical Tables                                                                                                                                                                                                be Imismue, no I, jo~.
                                                                                                                                                                                                                                                                                                                                                              Annual Report / Statistical Tables / 99
Table 1-Internal revenue collections by sources and by internal revenue regions, districts, States, and other                                                                                                                Table I.-Internal revenue collections by sources and by Internal revenue regions, districts, States, and
    areas-Continued                                                                                                                                                                                                           areas-Continued                                                                                         other
11, thousands of dollars. See table 3. 1, IOG. for tax isle, and further breakdown Of national totaly by sourcesl                                                                                                             He thousands at dollar,, So. table 3. P. 106, for tax rat., 'ad further breakdown .1 national totals by sourcesl
                                                                                                                         Alcohol lum-Cmitmad

Interest                     . &
           a.... a region,, didi~id                                                                                                                                                                                                                                                                                                                                     Tube- a...                                                     Total stamp
                         a                "H :c"' anit mh`
                                               ~    nifiesuir,                     me,, -111N, .1c., leles                                                                 Bee, taxes                                                    truternal reveme, legions, districts, States, and other areas I                                                                                                                                taxes an
                                                                                                                                                                                                                                                                                                                                                                                                                      , xx
(States r     mas lot
              esented by I          d                                                  f= d i,
                                                                                ~ F. aan              Gxma,Hc                                                     I reported     GooseStie          Occ.fre.                                                                                                                       Total            I       11,:,ell       I        litair, I
                                                                 "ll,                                                                                                                                                       ( states                                                                                                                                                                          Other                            . her
   in P.-th
          'p,     :   Is or      In., States       shown &I      Total                                                     I      I
                                                                                                                                  .            I :taj
                                                                                                                                               t                 collected by                                                  .the'     .Presented by single districts indicated in partrithasses       ;   totals   for
   bell.. at table)                                                               Customs)                                                                        customs)                                                               States showriat bottom of table)                                                                                                                                                                   Ad
                                                                                                                                                                                                       sea 11
                                                                                                                                                                                                                                                                                                                                   (26)                          27) a               (28)                       (29)
                                                                                                                                                 2)                 (23)                (24)                                                                                                                                                                                                                                                 (30)
                                                                                      (19)                                                                                                          I (25)
                                                                                                                                                                                                                                     twill" st -1 t1ted-
      -11.d Suss... to.'....... ................                  a7.2- 1             19.70              1-116                        as                               G,203                              a.-
                                                                                                                                                                                                                             Nw,th-A suit. iscielion                                                                                          sa                               12                                                                       254
                                                                                                                                                                                                                                  Albany ----------- .............. (Sea (c) below). --------------                                           17
                                                                     4 17
                                                                  33-207                .4 - 0.                  410                   7             25
                                                                                                                                                1 1:'G,      ------- ....               11 , 550                 75                                                                                                                                                                              17
                                                                                                                                                                                                                                                                                                                                                                                                11,   ........
    Albany. . . .                                                                                                                                                                                                                 Augusta ......................... Mim,)_ ~ - _ _ .                                                          38                                                 37   .........
                                                                            b    .........                                                                                                                       55
    August ...............                                                                                                                                                                                                        Boston-------------------------- M-ach ... Iw. :::                                 -----                    317                (:1)                             2
                           ... i""                                  ..   .3
                                                                         112                                      463                  4         .2. 10f.    .     ..... li~i_              874                    9                                                                                                                                                                                                          36
                                                                                                                                                                                                                                                                                                                                                                                                                               1                             20
     BQ,W,.                 S,                                                                                                                                                                                                    .... ~n
                                                                                                                                                                                                                                  Brooke                                 ----- See (a) below). .................
                                                                                                                                                                                            202                 127                                                                                                                                                                                                                                           4
     Brookly- ............ ( ae ~ c~ beow                 ....      3,799                                      1 585
                                                                                                              15: 711                                3                                                          11                                                                 (San (s) below ----------------                                      ................
     Buflalo.... ----------- (San     c    brilaw)..                                                                                   2        22: 2.                                  21: "7                      3             Diarlmigton ----------                                                                                                                                                         0                                           37
                                                                                                                                                                                                                                                                                    Vermont) ------------------------ ------------
    Burlington. ........ - (,V:rmant)--------   -                 IS, 5,42       .. .....                                             42
                                                                                                                                       1                                                                                          H an
                                                                                                                                                                                                                                  Martford ------------
                                                                                                                                                    7666                                                                                                                            Connecticut).....................                                                                                  .........
    Hartford. . ~ ........... I aftectiCut) ---                     1,816                                                                                                                                         J                       Ihattan -------------               __ (11, H mPybu;j::::: ... :::: .....
                                                                                                                                                                                                                                                                                   (,..(c),b kil,                                          628                            111                    20                          417
     Marmattan,::::                       I below).                 8, 526       ----- 7,OG1          1: 45E                           9          2.554                2,373                                                      Par shoirth ..........                                                                                                                                                                                                1
                                                                                                                                       1             2
                                                                                                                                                 10,597                                                           N.                                                                                                                                                                                                                                         22
                                 a I land)
     P i nuou
     Port           :::::::(New 'Hampshire). . . . .                                  ........ ......                                                                                                                             Play' deuce ------ _ .............                   h de Island) ....................
                                                                                                                                                       8                                                                                                                                                                                                                                  ..... ..... .. ....                                    (1)
      a,.d,hce------ ..... (Hand                                                 ............                                                                                                                               Afild-Attainflo isaw,xises.. -------------- --------- --------------------
                                                                                                                                                                                                                                                                                        0                                             sma .443                   41S..I           24.983   ------------ ii,
                                                                                                                                                                     3.             al..'sys,                   311
                                                                                                                                                                                                                 48                                                                                                                                                                                                                                           1
Mid-111fle ar.9i.n.                   - ,x;6::::: :::::
                                      0      G C                  .1a"                  2.152                                      1,
                                                                                                                                  141                                                                                             N          rk                ...... : ...... ~Alllfi~nd a,)_ .1-C.) ---------------
                                                                                                                                                                                                                                                                                       aw           nd                                        26        ...... ...... _. ................
                                                                   9 111                1,112       UT 1 37                                     .,794
                                                                                                                                                3  1 13      ....... 1 1             31: ,74
                                                                                                                                                                                          712                                                                                                                                                                                                             26
   N     rk                                      ) -----                                                                                                                                                                                                                                                 ----------------                 , 34                 1.)
                                                                                                                                                                                                                 20                                                                                                                                                                    11                 22                                                 1
                 ......... (Me. I... cy) .....                                                                                                                                                                                    Philadelphia -----               -------- ~111 (e) b Imv ~:::                        ----            23 028           ------ -------5-
                                                                                                                 4 1                1
                                                                                                                                    2           36 ,316      ---- __ ::::               3G 20                   113                                                                        (a) be                                                                                 23,02
                           (So ('~ 1 oyv~:
                           (1,: 11 hallw                            2. 4 . 2                                                                                                                                                      P~xburgh ----------------------                   See           -                                         529                          1
                                                                                                                                  126 1           ,: 03,
                                                                                                                                                23 114                ---                 3:750                    5                                                                                                                                                                  529
   Pittsburgh .                                                                                                                                                                                                                   Richmond,: : ::: :::: :: ~ : :~ :: ::: :: (      1111l-------_------------                                                     476,406
                                                                                                     1,358                                                                                  9                     81                                                                                                                                                               1.420 ............
   Richmond... ......... (Virginia)............                     1,494        ..... _::::                                                                                                                                      Wflarringla                                       Delaware) ----------------------- -------- 111 ~ 1. 1 .
                                                                                                                                    I                  I                                                                                                                                                                                                ................ ................ ......
     winniml ......... (Delaware) .......... :::                        I        ......                                                                                                                                     S,,xah,- Itygion. ------------------
               ...............................                      4.133        .......1'iU- ------2_2;71_                       7.0           21.4se                            U.369                         ..11                                                                                                                                                                             ------ "i
Sauxth...a sliestwe                                                                                                                                                                                                              Atlanta             ------- -------------                                                        1-14"315 923                ........
                                                                                                                                                                                                                                                                                                                                                              1'131.478               923 - .............
                                                                                                                                   74            3.922         ----------3         3,856                          66
    Atlanta. .... ......... (Georgia) ............                    915                : ----        841                                                                                                                        Birmingh in ----------------
                                                                                                                                                                                                                                 Colundi                  ............           (",rgl,)
                                                                                                                                                                                                                                                                                    Alah.m.5-:                      ......                 928
                                                                       66                   63 .                                    3
                                                                                                                                  126               122                -
                                                                                                                                                             ......... 30 . .....                               1 91                                                                                                                                                               1,928          V)                                                         31
    Boroughs                                                                                                                                                                                                                                                                                                                             2 is                 1.
                                                                                                       342                                          1 00                                                          00                                                                                                                                                               2.184 ............
    Golmm bia.m'::::-:- (Aular"'                                       ,3
                                                                      468                       -                                                                                                                                 Greembor;....------------------ (N-l lh " l-----  S. U th Care
                                                                                                                                                                                                                                                                                   (MI.,ssfal "'11rus)_                            1,131, 8747                   131,312
                                                                                                          3                       150                                                                           its                                                                                                                                                                    51                ~li'                                                 19
    Greensboro ............ (North Carolina                                                                                                                                                                                      Jackson -----------             -----------
                                                                                                                                    3                 1"                                                          63
                                                                                                                                                                                                                131              Jacksonville -------                                                                                                                                                                                                        20
                                                                                                                                                                                                                                                                 .......         ~F mids)------_------ ---------                                              .... - w,                -- ii .054     -- - ... *...
                                (1kuida`i~'lf`                 2, 5332           ------          -----        94                    2
                                                                                                                                  423                 1
                                                                                                                                                24,9353      ...... ..... .......
                                                                                                                                                                     279       -N-512                                                                                                                                                                                                                                                                        19
                                                                                                                                                                                                                                  Nashville ----_------ ...... :::: Tennessee) ......................                                       136         ................                   4.1 3
                                                                                                                                                        26                                                        21                                                                                                                                                                                             31
                                                                                                                                                                                                                                                                                                                                                                                                               1 1'
    Nashville ............. (I nae,,,n)-               ......         2          ....... 1 . ... ...... 1 ~ 0 ___                                                                                                                .- Is I . .......................................................                                   473,M                       41a.Ml
                                                                                        2. ass         3.gaa                      736          111, ent,              .11                                       1
...-A R ...... . . .. . . .. ..... ... . . .. . .. . ......                                                                                                                                                                                                                      (S:n (it) b.1
                                                                                                                                                                                                                                 Cincinnati _.. ------ ........... Is a (it ) b e w
                                                                                                                                  159                        ... --------            27,911
                                                                                                                                                                                    110"If                        21                                                                                                                                                                             15
          i ami f............ (S.,(d (                                                                                                          27.932                                                                            C evehrad ---------------_-----                                                                             74                                                                                                          *
                                                                                                                                                                                                                                                                                                                                                                                                                                                       : 31
                                                                                         971                   I . Gas
                                                                                                                   569            241
                                                                                                                                    0,           11:  11               32               4 :2
                                                                                                                                                                                           111                                                                                                                                                                                                  773                                                              1
    Cleveland... .              (See it)I                         Iflo
                                                               1: ' .            ............                                                                                                                                       It
                                                                                                                                                                                                                                  Datanlt_ ..........:: -._::: -.
                                                                                       1,161                   1.544              2              34 916               Go              34 32
                                                                                                                                                                                      1                          1
                                                                                                                                                                                                                 1)                                                                                                                            6
    Detroit --------------- (Miclig n)- :::                           9                                                                                                                                                           Imfen.paPs--------                                inch ..)_
                                                                                                                                                                                                                                                                                    "i"il --- ...... 1- ---
                                                                                                                                  1111           10 1
                                                                                                                                                 . 3:        ..... :::::::            23:~146~                   311                                                                                                                       737          ............ ---                        2
                                                                                                                                                                                                                                                                                                                                                                                              737 .............                                              10
    1 adlanapolis ........... (I am,                                                                                                                                                  1.                                         Lou 1xville-----------                             Ken uc1fy~..___. ......1- -----                  476,396                    474,091                     1.3"
                                                                  732                         -------- JiM                                            9739                                                       6
    La 1-11e. ............ (Ken tucky).                                                                                                                                                                                           Psrk' .,sb.,g........                          !We,! Virginia)------------- ------                       233          ................                      231 .......    ......
                                                                      9          ----- ------      1-)                 9                              298    ------------                    197                101                                                                                                                                                                                                                                              1
    Parkersburg            . .. (West Virginia) ----------                                                                                                                                                                  h ad.ext R
                                                                                       2,.11                         .                         319.75 3 33   ........ux                 Its. ass,               611
Fruld...' ye"--__......                                ------  -,-'                                                                                                                                                                            .... ....................
                                                                                                                                                                                                                                 Aberdeen ........................ (South Dakota)                             -----------                    11
                                                                                                                                                                                                                 3                                                                                                                                                                               10                               1                    .277
           dean-----------_ (South Dakota).----- --- ------------                ------------ ------- -              _F                                                                                                          Chicag.__ ....................                                                                                 5
                                                                                       1,427         4,45                                         9,56               2-3-5- ------iiw-                           36'                                                                                                                                                                              4                               1                     165
    Chicag- ---------- .... (Sea Hit hot..)-- - ----           5, gsq                                                                                                                                                            Des Moines ----- ------- - ...... (low          .S
                                                                    12             ----------            67
                                                                                                          '           15                               21 2 ------------ --
                                                                                                                                                          9                                                                                                                                                                                                                                          -- .. ..                                            23
    Des Moines. . ~ ........          h                    ::
                                                         ....                                                                                                                                                                    To go----------------------- ---- (North D~lmai)_ .............. _ -------ff
                                                                                                                                                        10                                                                                                                                                                                                                 ::::::    -------
                                                                                                                                                                                                                                                                                                                                                                                     .....6 . --