He Commissioner of Internal Revenue .1

HE COMMISSIONER OF INTERNAL REVENUE

.1 Commissioner of Internal Revenue

1965 ANNUAL REPORT

for the fiscal year ended June 30, 1965

Publication No. 55

INTERNAL REVENUE SERVICE U.S. TREASURY DEPARTMENT "To Keep Government Service Alert and Proud" -President Johnson

President Johnson presenting Incentive a%vards to Internal Revenue Service employees (left to right): Richard N. Fell, Murray H. Handel, Joe L. Finch, Fred Oubitsky, Word E. Holland accepting an oveard; observing of the extreme left Is Douglas Dillon, then Secretary of the Treatsury. TRANSMITTAL

Hon. HENRY H. FOWLER, Secretary of the Treasury,

Washington, D.C. WASHINGTON, D.C., 20224.

DEAR MR. SECRETARY:

Achievements reflected in the attached annual report of the Internal Revenue Service for the fiscal year 1965 testify to the unremitting pursuit of excellence by a dedicated work force. Much of the progress occurred under the able leadership of Deputy Commissioner Harding during his tenure as Acting Commissioner throughout the first 6 months of the year. Operating statistics only partially reveal the Service's accomplishments. Nonetheless they are impressive. A comparison of 1964 and 1965 data reveals that: Gross collections soared to $114.4 billion despite a tax reducLion-more than $2 billion above last year's all-time record; returns filed increased 2.4 million; 100,000 more delinquent returns were secured and the total amount collected from this source was $6 million higher; disposals of taxpayer appeals increased about 2,000 cases; and additional taxes and penalties recommended by examining officers reached $2.7 billion, or $179 million greater than last year's record sum. Vigorous enforcement of the tax laws continued unabated throughout the year with particular emphasis on the Organized Crime Drive and its objective of bringing to justice racketeers and tax evaders. Several of the more notorious racketeers were prosecuted and the additional taxes and penalties assessed against tax law violators far exceeded a-mounts levied in pastyears. The Management Improvement Program was revitalized and set a pattern of increased personal involvement in carrying out its principles, policies, and aim. Savings of $17.1 million realized through improving operations surpassed by 47 percent the record-breaking $11.6 million Notes: All yearly data are on a fiscal year basis, unless otherwise reported in 1963. Of particular significance was the variety of the improvements. These specified. For example, data headed -1965" pertain to the fiscal ranged from systems and procedural changes to those involving better selection and utilization year ended June 30, 1965, and "July I" inventory items undei of personnel, reorganizations, modification of training programs, and improved service to this heading reflect inventories as of July 1, 1964. taxpayers. In many tables and charts, figures have been rounded and may Close attention was not add to the totals which are based on unrounded figures. also given to elevating the performance level of frontline and intermediate supervision-areas that I consider as vital to efficient tax administration as our highly successful executive development program. Action taken involved establishing specialized supervisory training programs for incumbents, initiating plans to identify and reassign incumbents lacking supervisory talent, and devising procedures to insure selecting and training applicants with known ability or potential for assuming managerial responsibilities. A milestone was reached on January 1, 1965, when the business master file under the Service's automatic data processing system became operational nationwide. The Southeast Service Center, Chamblee, Ga., and the Mid-Atlantic Service Center at Philadelphia are fully For sale by the Superintendent of Documents, U.S. Go,ernmen( Printing Office Washington, D.C., 20402 - Price $1.00 (paper ro,cr) processing individual returns and by 1967 all seven service centers will become part of a complete TRANSMITTAL-Continued and unified nationwide system. The benefits of mass document processing-such as rapid identification of nonfilers, prevention of duplicate refunds, complete verification of estimated tax credits, and identification of taxpayers who underpay their estimated taxes-now being performed by a few service centers-will then be fully realized. i OF CONTENTS Finally, may I say that the mainstream of our efforts has been and will continue to b~ TABLE directed towards strengthening and improving our ielf-assessment tax system, so peculiaifly American and so increasingly a model to the rest of the world. Page Letter of Transmittal ...... v Summary of 1965 Annual Report ...... xi Commissioners of IRS ...... xvii Principal Officers of the...... Internal Revenue Service ...... * ...... * xviii Maps of Internal Revenue Regions and Districts ...... xxii SHELDON S. COHEN Charts of Internal Revenue Service Organization ...... xxiv Commissioner of Internal Revenue. REPORT ON OPERATIONS Chapter 1 -Interpretation and Communication of Tax Law to Taxpayers ...... 2 Chapter 2-Internal Revenue Collections, Refunds, and Returns Filed ...... 8 Chapter 3-Automatic Data Processing ...... 13 Chapter 4-Enforcement Activities ...... 20 Chapter 5-Supervision of the Alcohol and Tobacco Industries ...... 40 Chapter 6-Legislative and Legal Activities ...... 43 Chapter 7-International Activities ...... 49 Chapter 8-Planning Activities ...... 53 Chapter 9-Management Activities ...... 60

APPENDIX ...... : ...... 82 Trend charts ...... 96 Statistical tables ...... 105

INDEX ...... 133

vi vii Summary

Mission of the Service

The mission ofthe Service i's to encourage and achieve the highestpossible degree ofvoluntary compliance with the tax laws and regulations and to maintain the highest degree of public confidence the . in integriy and efficiency ofthe Serv- ice. This includes communicating the requirements ofthe law to the public, determining the extent ofcompliance and causes of noncompliance, and doing all things needful to a proper enforcement of the law. - - SUMMARY a ANNUAL REPORT

GROSS COLLECTIONS IN 1965 BY MAJOR CATEGORY

ALL BUT ONE MAJOR CATEGORY OF TAX All Major Types of Collections Increased Summary CONTRIBUTED TO RECORD COLLECTIONS %I Except Individual Income Tax Withheld 36.1 Collections reached a record high of $114.4 billion, 2 percent above 1964 collections, despite individual and corporation tax rate reductions effective during the year. The increase in corporation tax payments was $1.8 billion-attributable to TOTAL the requirements accelerating the payment of esti- 19641 :112 3 965 4.4 mated tax and higher co.rporate earnings. Allother CHANGE +1.9% major categories of taxes except individual income taxes withheld also showed increases. These were ALL MAJOR TYPES OF RETURNS INCREASED individual EXCEPT PARTNERSHIP AND EXCISE led by income taxes not withheld, which registered a gain of $1.5 billion. Together these Ro increases more than offset the decline of $2.4 billion in individual income taxes withheld occasioned by WM the tax rate reduction.

REFUNDS DECLINED IN NUMBER AND AMOUNT TOTALS ~964 100.1 The number of refunds issued dropped from 42 965 102.5 CHANGE +2.4% million to 40 million and the $6 billion refunded was $1 billion less than the 1964 amount. For taxable years beginning in 1964, the Revenue Act of 1964 provided for a greater nate of reduction in the tax Individual Corpontion Employment Individual Alcohol Manufacturer's Estate Gasoline Miscellaneous Tobacco withheld i . income mce.. excls and excMe than in the tax rate. As a result, many 4thh.1d)" (not gaisol(except withheld) me) lift individual taxpayers normally filing overpayment returns found that they were liable for a small balance of tax due in 1965. The second-stage decrease 6.2 41 in tax rates, effective for taxable years beginning 1.4 1.0 CHANGE FROM 1964 after December 31, 1964, 0 Mm will return withholding I ndividua I Employment Declarations Excise and CotPomfion Partnership fWuc,.ryand of estimated .11 the, to its normal pattern. tax

13.3 NUMBER OF RETURNS FILED INCREASED CHANGE FROM 1984 0 A growing economy and an expanding population 3.1 resulted in the filing of 102.5 million tax retums- an all-time high and an increase of 2.4 million over 1964. In addition, the Service received about 340 million related documents, such as wage and tax statements, Forms W-2, and information returns, -0.7 -0.7 Forms 1099.

-0.2

xi SUMMARY e ANNUAL REPORT SUMMARY * ANNUAL REPORT

AUTOMATIC DATA PROCESSING the primary cause for the overstatements of tax OPERATIONS EXTENDED liability was that taxpayers were not taking advantage of their right to use the standard deduction On January 1, 1965, handling of business tax re- providing them the greatest tax advantage. This turns through the automatic data processing (ADP) was probably due to the minimum standard deduc- system became national in scope. Two regions, tion being available for the first time with respect to Southeast and Mid-Atlantic, are now processing in- 1964 returns. dividual tax returns by ADP methods. The master file for all individual taxpayers will be complete by 1967. AUDIT PROGRAM PLACED MORE EMPHASIS In a pilot study, individual income taxpayers in ON COMPLEX RETURNS the Southeast Region eligible for a refund were given The examination of 3.5 million returns for correct- the option of filing their returns directly with the ness in reporting tax liability resulted in the recom- Southeast Service Center. The majority of tax- mendation of $2.7 billion in additional tax and payers claiming refunds, over 4 million, took ad- penalties. This amount was $179 million above the vantage of this option. The processing of returns record set in 1964. The number examined was 4 filed directly with the service center proved to be percent less as a consequence of a change in the ex- more economical than when filed with district offices. amination program that placed greater emphasis on The option will be continued in the Southeast Re- more complex and therefore more time-consuming gion and extended to the Mid-Atlantic Region in 1966. returns. In the course of auditing returns, examining offi- When fully operational, many benefits will accrue cers from the new ADP system. Among these advan- also uncovered overpayment by taxpayers in the amount of $145 million, or $2 million more than the tages are that the system will identify nonfilers halt duplicate refunds, make complete verification' ' of 1964 total. In addition, taxpayer claims examined and estimated tax credits, and facilitate identification of closed by the audit divisions resulted in overassessments of $192 million-an increase of $15 taxpayers who underpay their estimated tax. The system has, in fact, already illustrated its million from 1964. worth in these and other areas of operations. For A substantial number of the returns examined example in the Southeast Region alone, partial re- resulted in no change in tax, thereby confirming the sults for 1965 show that 14,000 individual income validity of the taxpayers' reported liability. Of the tax returns were secured as a result of pursuing de- total returns examined 1.3 million, or 38 percent, were linquency leads generated by ADP. These returns no change. In 1964, no change returns con- were about equally divided between balance due and stituted 37 percent of the total examined. refundables. Over $600,000 in additional taxes The returns of 12,406 organizations with tax ex- was reported, and over $500,000 was claimed for empt privileges were examined to determine if any refund. changes in their operations occurred that would affect eligibility for exempt status under the provisions of the Internal Revenue Code. This was 21 MATHEMATICAL ERRORS CORRECTED TO BOTH percent more than were examined in 1964. Addi- TAXPAYERS' AND GOVERNMENT'S BENEFIT tional tax and penalties recommended totaled $36.7 million, of which $33.8 million was attributable to The mathematical verification of 62.9 million tax the revocation of the exempt status of 123 organi- returns disclosed 3.9 million errors in computation zations. of tax, an increase of 49 percent over last year. The tax increase resulting from mathematical verification was $194 million, while the tax decrease was $94 RISE IN BOTH RECEIPT AND DISPOSAL million-a net tax recovery of $100 million. This OF APPEALED CASES net yield was less than 8 percent above the 1964 yield principally because 75 percent of the addi- Disagreement by the taxpayer as to the findings in tional errors detected involved returns in which the tax cases led to a 21 -percent rise in the number of taxpayer overstated his tax liability. In detect- cases transferred to appellate divisions for further ing and correcting these errors it was found that consideration. This additional workload was par- i xii xbi SUMMARY 9 ANNUAL REPORT SUMMARY * ANNUAL REPORT

tially offset by a 9-percent increase in the number brought: the inventory to an all-time low of 530,000 of case disposals. accounts by June 30, 1965-almost 45 percent be- TELEPHONE ASSISTANCE low the June 30,1964 inventory. Over 2.8 million FRAUD PROGRAM CONCENTRATED ON delinquent accounts worth $1.5 1964 14.439,157 ORGANIZED CRIME DRIVE billion were closed. Thiswasadropof2~5,000ac- 1965 15,225,954 counts from the number closed in 1964 b4t the value CHANGE UP 12A% Major racketeers and their operations continued was $78 million higher. to receive major attention from special agents. As The lower volume of new delinquent accounts a result, some of the most notorious racketeers were permitted some redeployment of resources from this brought to trial. area to the delinquent returns program. In 1965 The 3,643 full-scale fraud investigations com- the Service secured 1.2 million delinquent returns pleted in 1965 were slightly lower than 1964 com- that involved $281 million in additional tax, penal- pletions. There was, however, an increase in the per- ties, and interest. In comparison, the number se- centage of investigations in which prosecution was cured in 1964 was 1.1 million and the amount was recommended. The enforcement effort in the wa- $275 million. gering tax fraud area was directed toward more substantial cases greater strategic of importance and MANAGEMENT IMPROVEMENT SAVINGS PREPARATION OF RETURNS AND OTHER fewer prosecution recommendations resulted. REACHED NEW HIGH FORMS FOR TAXPAYER

NEW APPROACHES USED IN The Service devoted considerable effort to finding 1964 6,968,918 ALCOHOL TAX ACTIVITIES ways and means of promoting economy through im- 1965 7,416,117 1964 1,560,403 proved utilization of resources. Record savings of CHANGE UP GA% 1965 1,457,000 In one of the Southern States unremitting pres- $17.1 million from management improvements were CHANGE DOWN 7.8% sure on illicit distillers by an enlarged investigative achieved during the year. Particularly noteworthy force resulted in the virtual elimination of com- were: (I ) the purchase rather than the lease of mercial violators. Extension of "Operation Dry- ADP equipment; (2) merger of the New York and Up" to additional Southern States is planned. En- Northeast Regions; (3) a 7-percent reduction in the forcement of the laws against illicit activities con- number of forms and form letters; and (4) revised sumed about 80 percent of all investigative time. procedures for the collection of delinquent accounts. Introduction of more advanced procedures for Also, 25 individual management improvement and regulating the legal alcoholic beverage industry ef- cost reduction actions, resulted in savings in excess fected significant reductions in on-premises super- of $ 100,000 each. vision despite expanding industry activity.

EQUAL EMPLOYMENT OPPORTUNITY PROGRAM DELINQUENT ACCOUNTS DECLINED- EMPHASIS PLACED ON SECURING The Service continued to place strong emphasis DELINQUENT RETURNS on the Equal Employment Opportunity Program YEAR-ROUND TAXPAYER ASSISTANCE some type of assistance, an increase of 2.1 million and excellent progress was achieved in improving PROGRAM EXPANDED over the number assisted in 1964. Assistance by tele- Taxpayer delinquent accounts arising in 1965 the position of minority group employees. Minority phone was furnished to 16.2 million taxpayers--an totaled 2.4-million, nearly 650,000 less than in 1964. group persons were placed in areas and job cate- Greater emphasis was given the year-round Tax- increase of 12 percent. Use of this medium has The decline was largely attributable to the initiation gories which heretofore were not occupied by them. payer Assistance Program by providing additional proved very satisfactory. It provides service at a of a new "followup notice" procedure that elimi- Changes are most noticeable in the upper grades locations where taxpayers could seek and receive minimum of inconvenience to the taxpayer and has nated the need for further enforcement action on which require highly technical or managerial skill. competent advice, by conducting training programs most economical some accounts and will defer such action on the The best example of progress was the appointment to improve the quality of assistance rendered and the added advantage of being the In remainder until early in the next fiscal year. Yet the of two minority group members to the 1965 Execu- by stressing the responsibility of the Service's, tax- form of assistance to him and to the Service. $1.6 billion value of new accounts in 1965 was $88 tive Selection and Development Program which is payer assistors to respond promptly and courteously addition, the inquiries of 7.4 million walk-in taxpay- million above the 1964 figure because of a few that the route to the highest executive positions of the to requests from taxpayers. Operating the program ers were handled by the taxpayer assistance staff- were extraordinarily large. Fewer new accounts Service. throughout the year made it possible to furnish more 6 percent more than were handled in 1964. Direct help to a greater number of taxpayers and give as- assistance in the preparation of tax returns was ex- sistance much earlier than in prior years. tended to 1.5 million taxpayers-an 8 percent de- In 1965 a total of 25.1 million taxpayers received crease from 1964 in the number requiring such help. xiv xv COM M ISS I ON ERS OF I NTERNA L R E V E N U E Office of Commissioner of Internal Revenue created by act of Congress, July 7, 7862.

Name State...... - July From Ta George S. Boutwell ...... Massachusetts 17,1862 Mar. 4, 1863 Joseph J. Lewis ...... Pennsylvania ...... From Past Reports- Mar. 18, 1863 e 330 11865 William Orton ...... New York ...... July 1, 1865 JOucnt 1,, Income tax laws, authorized by the'l6th Consti- Edward A. Rollins ...... New Hampshire ...... Nov. 1, 1865 Mar. 10, 1869 Annual tutional Amendment, were enacted October 3, 1913. Columbus Delano ...... Ohio ...... Mar. 11, 1869 Oct. 31, 1870 Much work had to be done by November 1, 1913, Alfred Pleasonton ...... New York ...... Jan. 3, 1871 Aug. 8, 1871 when the provision for "withholding at the source" John W. Douglass ...... Pennsylvania ...... Aug. 9, 1871 May 14, 1875 Reports became operative.-I 914 Report. Daniel D. Pratt ...... Indiana ...... May 15,1875 July 31, 1876 Green B. Raum ...... Illinois ...... Aug. 2, 1876 Apr. 30, 1883 Reflect Walter Evans ...... Kentucky ...... May 21, 1883 Mar. 19, 1885 The Prohibition Unit was created to enforce the Joseph S. Miller ...... West Virginia ...... Mar. 20, 1885 Mar. 20, 1889 103 Years National Prohibition Act, approved October 28, John W. Mason ...... do ...... Mar. 21, 1889 Apr. 18, 1893 1919. This law, known as the Volstead Act, pro- Joseph S. Miller ...... do ...... Apr.. 19, 1893 Nov. 26, 1896 hibited the manufacture, sale, and use of intoxi- W. St. John Forman ...... Illinois ...... Nov. 27, 1896 Dec. 31, 1897 of Service B. Scott ...... cating beverages.-I 920 Report. Nathan West Virginia ...... Jan. 1 , 1898 Feb. 28, 1899 George W. Wilson ...... Ohio ...... Mar. I , 1899 Nov. 27, 1900 John W. Yerkes ...... Kentucky ...... Dec. 20, 1900 Apr. 30, 1907 John G. Capers ...... South Carolina ...... June 5, 1907 Aug. Social Security Tax Division created to administer 31, 1909 Royal E. Cabell ...... Virginia ...... taxes imposed under Title VIII of the Social Security Sept. I , 1909 Apr. 27, 1913 William H. Osborn ...... North Carolina ...... Apr. 28, 1913 Sept. Act, approved August 14, 1935-1936 Report. 25, 1917 Daniel C. Roper ...... South Carolina ...... Sept. 26, 1917 Mar. 31, 1920 William M. Williams ...... Alabama ...... Apr. 1 , 1920 Apr. 11, 1921 David H. Blair ...... North Carolina ...... May 27, 1921 May 31, 1929 The withholding tax rate was raised from 5 to 20 Robert H. Lucas ...... Keniucky June 1, 1929 Aug. 15, 1930 percent (on income minus exemptions) and esti- David Burnet ...... Ohio. ' ...... Aug. 20, 1930 May 15, 1933 mated tax payments were required of those not Guy T. Helvering ...... Kansas,' --- ..... * ...... June 6, 1933 Oct. 8, 1943 subject to withholding by the Current Tax Payment Robert E. Hannegan ...... NewMissouri...... Oct. 9, 1943 J an. 22, 1944 Act of 1943-1943 Report. Joseph D. Nunan, Jr ...... 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 Major revisions in the basic structure of the Serv- T. Coleman Andrews ...... Virginia ...... Feb. 4, 1953 Oct. 31, 1955 ice were effected under a plan approved by Congress Russell C. Harrington ...... Rhode Island ...... Dec. 5, 1955 Sept. 30, 1958 in March 1952. Resulting changes included: (1) Dana Latham ...... California ...... Nov. 5, 1958 Jan. 20, 1961 Abolition of offices of collectors and eventual crra- Mortimer M. Caplin ...... Virginia ...... Feb. 7,1961 July 10, 1964 tion of 9 regions and 64 districts. (2) Selection and Sheldon S. Cohen ...... Maryland ...... Jan. 25,1965 ...... appointment of key personnel through established Civil Service channels.-1953 Report. In addition, the following were Acting Commissioners from Aug. 16 to Aug. 19, 1930; Pressly R. Baldridge, of during periods of time when there was no Commissioner Iowa, from May 16 to June 5, 1933; Humid N. Graves, of holding the office: John W. Douglass, of Pennsylvania, Illinois, from Jan. 23 to Feb. 29, 1944; John S. Graham, of Results of studies initiated in 1959 led to approval from Nov. 1, 1870, to Jan. 2, 1871; Henry C. Rogers, of North Carolina, from Nov. 19, 1952, to Jan. 19, 1953; of a proposal that the Service develop and install Pennsylvania, from May I to May 10, 1883, amd from May Justin F. Winkle, of New York, from Jan. 20 to Feb, 3, I to June 4, 1907; John J. Knox, of Minnesota, from May 1953; 0. Gordon Dclk, of Virginia, nationwide an automatic data processing system.- from Nov. I to Dec. 4, I I to May 20, 1883; Robert Williams, Jr., of Ohio, from 1955, and from Oct. I to Nov. 4, 1958; Charles 1. Fox, of 1959 Report. Nov. 28 to Dec. 19, 1900; Millard F. West, of Kentucky, Utah, from Jan. 21 to Feb. 6, 1961 ; a,nd Bertrand M. Hard- from Apr. 12 to May 26, 1921; H. F. Mires, of Washington, ing, of T"w, from July 11, 1964 to Jan. 24, 1965. Format of Individual Income Tax Return, Form 1040, underwent major revision including the objective of reducing it to a 2-page form-1962 Report.

xvi 790-388 0-66-2 xvii PRINCIPAL OFFICERS OF THE INTERNAL REVENUE SERVICE Principal Officers of the Internal Revenue Service Continued As of June 30, 1965 NATIONAL OFFICERS-Continued Technical Advisor to the Chief Executive Assistant to the Associate Chief Counsel------Robert B. Jacoby Counsel------E. Riley Campbell Division Directors: Technical Advisor to the Associate Chief NATIONAL OFFICERS interpretative ------Richard M. Hahn Counsel ------Paul E. Treusch joint Committee ------W. Dean Mathis Division Directors: OFFICE OF THE COMMISSIONER INSPECTION Alcohol and Tobacco Tax Legislation and Legal------Robert B. Ritter Commissioner------Sheldon S. Cohen Assistant Commissioner ---- Vernon D. Acree, Jr. Regulations------Charles R. Simpson Collection Litigation_ J. Walter Feigenbaum Deputy Commissioner ----- Bertrand M. Harding Executive Assistant------Fred G. Robinette Operations and Planning-- William P. Crewe the Commissioner_ Edwin M. Perkins Division Directors: Enforcement ------William F. McAleer Assistant to Associate Chief Counsel Assistant to the Commissioner_ Thomas D. Terry Internal Audit ------Francis 1. Geibel Refund Litigation ------James F. Dring (Litigation) ------Ruby P. Hertzog Tax Court ------Assistant to the Deputy Internal Security------William A. Kolar John T. Rogers Commissioner ------Albert W. Brisbin Director, Foreign Tax Assistance PLANNING AND RESEARCH Staff ------L. Harold Moss Assistant Commissioner ------William H. Smith REGIONAL AND DISTRICT OFFICERS Division Directors: ADMINISTRATION Plans and Policy ------James R. Turner CENTRAL REGION Assistant Commissioner------Edward F. Preston Research ------Richard W. Nelson All Regional Offices at 550 Main Street, Cincinnati, Ohio, Executive Assistant------Donald C. Dawkins Statistics------Vito Natrella 45202 unless a different address is indicated Julius H. Lauderdale Systems Development, Director, Program Staff ---- Regional Commissioner ------Ernest H. Vaughn District Directors: Division Directors: Lancelot W. Armstrong Assistant Regional Commissioners: Cincinnati, Ohio, 45202 ---- Paul A. Schuster McNair Facilities Management --- R. Bruce Administration ------F. Dean McCrory Cleveland, Ohio, 44113 - Frank S. Torbett, Jr. TECHNICAL Fiscal Management---- Gray W. Hume, Jr. Alcohol and Tobacco Tax- Henry R. Peterson Detroit, Mich., 48226-- Ambrose M. Stoepler Personnel Albert J. Schaffer ------Assistant Commissioner------Harold T. Swartz Appellate ------G. Waldron Snyder Indianapolis, Ind., 46204---- James E. Daly Public Information --- . Joseph S. Rosapepe Executive Assistant ------Charles G. Keebler Audit------Michael A. DeGuire Louisville, Ky., 40202 ---- Gilbert C. Hooks Training ------T. Reeves, Jr. George Technical Advisor------Arthur Singer Collection------William J. Grabo Parkersburg, W. Va., 26102-- Hugh D. Jones Division Directors: Intelligence ------Harold B. Holt Director, Central Service Center, Cincinnati, Ohio, COMPLIANCE Income Tax------John W. S. Littleton 45202 ------Everett L. Meek Assistant Commissioner--'--- Donald W. Bacon Exempt Organizations and Pension Regional Counsel ------Clarence E. Price Executive Assistant------Singleton B. Wolfe Trust------Richard J. Stakem Regional Inspector ------Gordon M. Anderson Division Directors: Miscellaneous Alcohol and Tobacco Tax --- Harold A. Serr Tax ------(Acting) Linder Hamblen Appellate------Arthur H. Klotz Technical Publications and MID-ATLANTIC REGION Audit ------Henry J. Donnelly, Jr. Services ------August F. Pohlig Collection ------Harold E. Snyder All Regional Offices at 2 Penn Center Plaza, Philadelphia, Pa., 19102 unless a different address is Intelligence------H. Alan Long OFFICE OF CHIEF COUNSEL indicated Office of International Chief Counsel------Mitchell Rogovm Regional Commissioner ------Dean J. Barron District Directors: Operations------Clarence 1. Fox, Jr. Deputy Chief Counsel ------Lester R. Uretz Assistant Regional Commissioners: Baltimore, Md., 21202 ------Irving Machiz Chairman, Policy and Research Administration ------Robert D. McDowell Newark, N.J., DATA PROCESSING Committee------Herman T. Reiling 07102-- Edward J. Fitzgerald, Alcohol and Tobacco Tax ---- Louis DeCarlo Jr. Commissioner ------Robert L. Jack Executive Assistant to the Chief Assistant Appellate ------William E. Steynen Philadelphia, Pa., 19108 -_ Kenneth 0. Hook Executive Assistant ------Garrett DeMots Counsel ------Thomas McP. Davis Audit ------Joseph M. Shotz Pittsburgh, Pa., 15222 ------John H. Bingler Special Assistant to the Chief Division Directors: Collection ------William F. Culliney Richmond, Va., 23240 ------James P. Boyle Operations------Clinton L. Walsh Counsel ------Arthur B. White Data Processing ------Edward J. Manning Wilmington, Del., 19802 - James H. Kennedy IRS Data Center, Detroit, Special Assistant to the Chief Intelligence ------Daniel L. Tucker Director, Philadelphia Service Center, Palmer Counsel ------Lester Stein Mich ------William C. Philadelphia, Pa., 19154 ---- Anthony L. Carrea National Computer Center, Special Assistant to the Chief Regional Counsel ------Cecil H. Haas E. Stewart Counsel------Samuel R. McClurd Martinsburg, W. Va-- John Regional Inspector, Bankers Securities Building, Reports------Harry K. Dellinger Staff Assistant to the Chief Walnut and juniper Sts., Philadelphia, Pa., Donald G. Elsbcrry Counsel------Ray E. Williamson Systems------19107 ------Earl L. Fuoss xviii xix Principal Officers of the Internal Revenue Service-Continued Principal Officers of the Internal Revenue Service Continued REGIONAL AND DISTRICT OFFICERS-Continued REGIONAL AND DISTRICT OFFICERS-Continued MIDWEST REGION SdbTHWEST REGION I All Regional Offices at 35 East Wacker Drive, Chicago, Ill., 60601 unless a different addrcss,., is indicated All Regional Offices at 11 14 Commerce Street, Dallas, Tex., 75202 unless a different address is indicated Regional Commissioner ------B. Frank White District Directors-Continued Regional Commissioner---- Homer 0. Croasmun District Directors-Continued Assistant Regional Commissioners: Des Moines, Iowa, 50309-- Ernest W. Bacon Assistant Regional Commissioners: Dallas, Tex., 75201 ------Ellis Campbell, Jr. Administration ------William F. Sullivan Fargo, N. Dak., 58102 ----- Martin L. Webb. Administration ------Vacant Denver, Colo., 80202 ------V. Lee Phillips Alcohol and Tobacco Tax Milwaukee, Wis., 53202 --- Walter S. Stumpf Alcohol and Tobacco Little Rock, Ark., 72203 --- Fred W. Johnson WilliamA.Collawn Omaha, Nebr., 68102 ----- Richard P. Vinal Tax ------Harold S. Caplinger New Orleans, La., 70130 ---- Chester A. Usry Appellate ------Wallace T. Morris St. Louis, Mo., 63 101 -- Edwin 0. Bookwalter Appellate ------Tom F. Reese Oklahoma City, Okla., Audit ------John W. Baudendistel St. Paul, Minn., 55101 --- George 0. Lethert Audit ------Lawrence M. Stewart 73102 ------Clyde L. Bickerstaff Collection ------Edwin P. Trainor Springfield, Ill., 62704 ------Jay G. Philpott Collection ------Alfred N. Kay Wichita, Kans., 67202 ---- Harry F. Scribner Intelligence ------William B. Mayes Director, Midwest Service Center, Kansas City, Intelligence ------William E. Beloate, Jr. Director, Southwest Service Center, District Directors: Mo., 64131 ------Arnold S. Dreyer District Directors: Austin, Tex., 78741 ------Ervin B. Osborn Aberdeen, S. Dak., 57401 -_ Wdliam, C. Welsh Regional Counsel------Frank C. Conley Albuquerque, N. Mex., Regional Counsel, 1025 Elm St., Chicago, Ill., 60602 ---- Eugene C. Coyle, Jr. Regional Inspector------William A. Costello 87101 ------Donald T. Hartley Dallas, Tex., 75202 ------J. Marvin Kelley Austin, Tex., 78701 ------Robert L. Phinney Regional Inspector, 1511 Bryan St., Cheyenne, Wyo., 82001 -- Arthur A. Kennedy Dallas, Tex., 75201 ------David 0. Lowry, Jr. NORTH-ATLANTIC REGION All Regional Offices at 90 Church Street, New York, N.Y., 10007 unless a different address is indicated WESTERN REGION Regional Commissioner------Harold R. All District Directors-Continued All Regional Offices at 870 Market Street, San Francisco, Calif., 94102 unless a different address is Assistant Regional Commissioners: Buffalo, N.Y., 14202 ------John E. Foley indicated Administration ------Arthur J. Collinson Burlington, Vt., 05402 ----- Fulton D. Fields Regional Commissiozier ------Harold Hawkins Alcohol and Tobacco Tax--- Edward J. Fox Hartford, Conn., 06115- Joseph J. Conley, Jr. District Directors---Continued Assistant Regional Commissioners: Appellate ------Ellis L. Zacker Manhattan, N.Y., 10007- Charles A. Church Phoenix, Ariz., Administration ------Homer C. Gant ------Audit------Alfred L. Whinston Portsmouth, N.H., 03801-- CharlcsW.Emlet 85025 George D. Patterson, Jr. Alcohol and Tobacco Tax Collection ------Elmer H. Klinsman Providence, R.I., 02907 ----- Ellis R. Rogers ----- Isham Railey Portland, Oreg., 97232 --- Arthur C. Erickson Appellate ------Gardiner B. Data Processing------J. Orville Tuescher Director, North-Atlantic Service Center, Lawrence, Willmarth Reno, Nev., 89502 ------Dalmon Davis Audit ------Raymond F. Intelligence ------Ralph U. Berry Mass., 01841 ------Thomas J. Gilfillan Harless Salt Lake City, Utah, 841 10 -_ Roland V. Wise Collection District Directors: Regional Counsel, 30 Church St., New York, N.Y., ------Charles D. Moran San Francisco, Calif., Data Processing ----- Frederick W. Albany, N.Y., 122 10 ---- William E. Williams 10007 ------Marvin E. Hagen Bearman 94102 ------Joseph M. Cullen Intelligence ------Herman F. Augusta, Maine, 04330-- Whitney ~. Wheeler Regional Inspector, 50 Church St., New York, N.Y., Kuehl Seattle, Wash., 98121 ------Neal S. Warren District Directors: Boston, Mass., 02115 ------Alvin M. Kelley 10007 ------Sidney M. Wolk Director, Western Service Center, Ogden, Anchorage, Alaska, 99501 -_ Lewis J. Conrad Brooklyn, N.Y., 11201-- Thomas E. Scanlon Utah, 84401 ------Robert H. Terry Boise, Idaho, 83701 ------Calvin E. Wright Regional Counsel, 447 Sutter St., Helena, Mont., 59601 ------Frank J. Healy San Francisco, Calif., 94108 --- Melvin L. Sears SOUTHEAST REGION Honolulu, Hawaii, 96813 ----- Evan S. Lloyd Regional Inspector, 1076 Mission St., Los Angeles, Calif., All Regional Offices at 275 Peachtree Street, N.E., Atlanta, Ga., 30303 unless a different address is 90012 __ Robert A. Riddell San Francisco, Calif., 94103 ---- Henry A. Feltz indicated Regional Commissioner ----- William J. Bookholt District Directors--Continued Assistant Regional Commissioners: Birmingham, Ala., Administration ------Burton M.'Graham 35203------Andrew J. O'Donnell, Jr. Alcohol and Tobacco Columbia, S.C., 29201 -_ Harold M. McLeod Tax ------F. Dale McClanahan Greensboro, N.C., 27401 ------John E. Wall Appellate ------Vance N. Bates Jackson, Miss., 39202-- James G. Martin, Jr. Audit------Harold B. Bindscil Jacksonville, Fla., 32202-- Frank S. Schmidt Collection ------William H. Loeb Nashville, Tenn., 37203--- James A. O'Hara Data Processing------Wayne S. Kegerreis Director, Southeast Service Center, Chamblee, Ga., Intelligence------Allen T. Hollinrake 30005 ------William H. Weaver District Directors: Regional Counsel ------Henry C. Stockell, Jr. Atlanta, Ga., 30303 ------Aubrey C. Ross Regional Inspector------Vacant xx Xxi Internal Revenue Service 8 Regions ;8* Districts It

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Organization *ffective January 1, 1965 (See page 63) U.S. TREASURY DEPARTMENT

CHIEF COUNSEL O~pwy Chid C.....I

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ASSISTANT ASSISTANT ASSISTANT ASSISTANT ASSISTANT COMMISSIONER COMMISSIONER COMMISSIONER COMMISSIONER COMMISSIONER (Ad,I,Istr,tI,,) Vc..plfi..) (PI-Iq ..d (Tah.lul) R-..h)

-I C-imic REGIONAL COUNSELS (7) (7)

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1112,2603 $114.435.0 A 2 39.9 ASA $6.068.6 xv, 102.5 345 3 ,?mfwD~'~ $2.629~95 "2 $1,312.9 ~:ups.jo $1 0955 ~217*.A INTERPRETATION AND COMMUNICATION OF TAX LAW TO TAXPAYERS

PUBLIC SERVED BY ACTIVE the column twice a week between January and April. INFORMATION PROGRAM After the April 15 fifing deadline, the frequency of the column was reduced to once a week and some Laws, Procedures Taxpayers Chapter I Change: informed 450 newspapers continued to run it for their Major changes in the tax law and in administra- readers. tive procedures led to a Step-up in the volume and Public information seminars were held for Service personnel in a number of districts before the filing Interpretation INTRODUCTION variety of information supplied to mass communications media during 1965. The Revenue Act of 1964 season. These were helpful in improving information programs in the field since most of the A well-informed taxpaying public is essential to the Interest Equalization Tax Act of 1964, and the, personnel involved handle and voluntary compliance, the foundation of our unique Excise Tax Reduction Act of 1965 (see p. 46) public information on a part-time or seasonal basis. self-assessment system. Therefore, the Service called for a coordinated public information program Communication strives to foster voluntary compliance by making to inform individual and business taxpayers of their Media Inquiries Serviced every effort to apprise taxpayers fully of their rights rights and responsibilities under the new laws. of Tax Law and obligations and by establishing to the maximum The further extension of the automatic data The National Office serviced about 34,000 re- extent possible administrative practices and pro- processing system required special information pro- quests for information from mass media representa- to Taxpayers cedurcs for the convenience of taxpayers. Programs grams to familiarize taxpayers with the system. In- tives and other interested organizations during the directed toward the accomplishment of these ob- formation programs on automatic data processing year. Full cooperation was given to help assure jectives include: publication of numerous tax guides emphasized as a special feature an optional filing accurate, complete coverage of tax information. covering a wide variety of separate tax situations; procedure available to individual taxpayers in the Fact sheets were prepared for uniform, in depth cov- dissemination of information through news media by Southeast Region. Taxpayers were told through erage of significant matters. newspaper, television, a broad public information program; providing di- and radio publicity that they The National Office issued 123 general news re- rect personal taxpayer assistance in local offices; and could speed up their refunds by sending their returns leases and 139 technical information releases during direct the preparation and distribution of educational ma- to the service center at Chamblee, Ga., in- the year. In addition, the National Office prepared and stead of to their district offices. The terials, tax forms and instructions, regulations, response was 310 items that field offices could adapt for use in very rulings. substantial (see p. 15). local information programs. These included newspaper releases, radio announcements and scripts, and Articles, Films Explain Changes in Low other information and news features. PROVIDE A MEANS TAXPAYER PUBLICATIONS The changes resulting from the 1964 tax reduc- FOR SELF-ASSISTANCE tion law were emphasized in all materials distributed Millions See Tax Films through the public information program to mass Although detailed instructions are furnished with To reach the mass audiences who watch tele- media during the income tax filing season. Is- vision, most tax return forms, the Service provides taxpay- the National Office prepared films for distri- suances included news releases, magazine features, bution to local stations. Seventeen films were ers with a further means of self-help in complying in the television and movie films, radio scripts and spot form with tile tax laws through a variety of special pub- of 10-, 20-, and 60-second spot announcements announcements. In addition, exhibits, displays and covering the more important tax filing requirements. lications. An effective method for fostering volun- related items were prepared to augment filing season A 28-minute film, "Your Federal Income Tax," tary compliance through a better informed public, communication. gave taxpayers a line-by-line CXPI',Lnation of individ- nontechnical lan- these publications are written in Several new programs were initiated in the Na- ual income tax forms. guage and give information and guidance on prac- tional Office to make information materials more Over 500 television stations used the films as a aspects of Federal taxation. Somearesold helpful and meaningful to taxpayers. Certain areas ticallyall public service. Three other documentary films-- free. of frequent taxpayer error were emphasized in ma- at a nominal cost but most are distributed produced in prior years-were made available for develop- terials prepared for newspapers, magazines, radio, Revisions of the tax laws necessitated the showing to civic and other community groups. . and television. ment of several new taxpayer publications (bringing Besides these films from the National Office, many the total of those issued during the year to 68) as live television programs on taxes were arrailged by Eight Hundred Newspapers Use Tax Column well as the expansion of many that have been issued regional and district offices. These ranged from regularly over the past several years. For example, Most significant of the new techniques was the interviews with Service officials to panel discussions adoption of a the 1965 edition of Your Federal Income Tax con- newspaper question and answer on the 1964 tax law and question and answer ses- column series tained a new chapter giving a detailed and compre- to present tax information. This sions. Over 275 public service hours were provided column was based on questions most often asked by by television stations for hensive explanation of income averaging. A these local productions. taxpayers about the new law and other filing Four description and list of publications appear on pages 5-minute films were also prepared for show- requirements. ing on closed-circuit television at the York 82, 83, and 84. New Over 800 daily and weekly newspapers printed World's Fair.

2 3 ANNUAL REPORT 9 CHAPTER ONE INTERPRETATION AND COMMUNICATION OF TAX LAW TO The National Office distributed a number of ra- tacts, an increase of 12.4 percent. Since telephone TAXPAYERS dio scripts for use by local offices. These, and service is an effective method of providing assistance, caused the elimination of one excise tax form and TECHNICAL INTERPRETATIONS ARE locally-produced programs, were broadcast for a -as well as the least expensive for both the taxpayer required the revision of several others. COMMUNICATED TO TAXPAYERS IN total of over 1,500 public service hours of radio time. and the Government, taxpayers were encouraged to In all, over 250 forms, instructions, and docu- A VARIETY OF WAYS In 1965, for the first time, a series of 5-minute obtain information by telephoning rather than by ments were revised or reviewed. Some.of the more radio interview shows were taped and distributed to making a personal office visit. .1 significant changes are indicated below: It is the practice of the Service to answer inquiries the field for placement' with local stations. For those 9 million taxpayers visiti~g Service of- Form 1040, U.S. Individual Income Tax Return, o individuals and organizations as to their status The National Office also distributed taped radio fices, continued emphasis was given to the self-help was rearranged so that it is now possible for an addi- ffor tax purposes and the tax effects of their acts or shows in Spanish for use in areas of the country with method in which taxpayers themselves prepared the tional 4 million taxpayers who have interest and transactions. One of the functions of the National large Spanish-speaking populations. major part of their tax returns or forms. dividend income to complete their returns on a Office is to issue rulings in such matters. Rulings single To furnish this assistance required an expenditure sheet. Space provided on the new single are written statements issued to a taxpayer which of 1,298 man-years, an increase of 73 over last year. sheet return makes it unnecessary for these taxpayers interpret or apply the tax laws to a specific set of TAXPAYER EDUCATIONAL SERVICES WIDENED to file a However, in line with the effort to reduce costs, the separate "Schedule B" to account for divi- facts. dends and interest. With the revised form it Taxpayer educational assistance has been enlar'ged participation of higher-graded technical personnel in is esti- During the year, 31,255 requests from taxpayers mated that 22 million of the 48 million 1040 filers for in most regions and now includes such activities as: the assistance program has been substantially re- rulings and 3,090 requests from field offices of now are able to complete their tax accounting Taxpayer assistance institutes, tax clinics, adult tax- duced without sacrificing the quality of assistance to the Service for technical advice were processed. At the Government on a I -page return. payer education materials, educational television, Tendered. This has been accomplished by use of the close of the year, 5,922 requests for rulings and A significant addition to the face of the return farmers' tax education activities, professional and special training programs. technical advice were on hand, not including a rela- and to the instructions makes provision specialty group activities, ADP-taxpayer education, for the new tively small number relating to alcohol and tobacco standard deduction established by the 1964 tax law. tax seminars, meetings with tax practitioners, small Taxpayer Assistor Positions Established taxes. Other revisions take into account higher ceilings on business ta-x problems, taxpayer education for aliens, Since the institution In addition to the processing of requests for of a new, and broadened year- charitable contributions and the retirement income rul- and taxpayer assistance for Indians. Experience has ings and technical round Taxpayer Assistance Program 364 full-time credit, benefits for persons 65 and over on medical advice, 6,892 formal and informal indicated that, through a comparatively small in- taxpayer assistor positions have been authorized in expenses and on sales of their residences and ex- technical conferences were held with taxpayers and vestment of time and money, compliance under- 275 local offices throughout the Nation. It is fur- tended deductions for moving expenses. 'Also pro- their representatives. standing can be greatly increased through use of the ther planned that taxpayer assistor positions will be vided for are the changes in the sick pay exclusion An analysis of the rulings and technical advice coopoerative service-, of, for example, the university re- made available to staff many more local offices on an and the deduction for taxes paid, an increase quests processed, extension services, the American Institute of Certi- in the by subject matter, follows: itinerant basis. dividends received credit, and an averaging sy~tern fied Public Accountants, and State public education The full-time taxpayer assistor position was estab- to moderate the effects of large annual increases in departments. income. Requests fol tax rulirig, cond advice processed The Tcacbing Taxes Program, aimed primarily at lished for the primary purpose of providing the Form 1120, U.S. Corporation Income Tax Re- high school students, continues to grow. Nearly 3.5 public with quality assistance. Each assistor received Subject Total Taxpayers Field turn, as revised, now accommodates both requests requests million pupils participated this y ar. specialized training that equips him to explain Fed- calendar and fiscal year taxpayers. A Fiscal Year eral tax obligations, and assist taxpayers in prepar- Schedule Total._ ------34,345 31,255 3,090 was added to Form 11 20 and Form 11 20 FY ing their returns. was 26 169 24 8381 1,33101 TAXPAYER ASSISTANCE PROGRAM BROADENED discontinued. E, a tax"_-and all-ecopl.yrnert------1:112 1:01 ExtePis ardglttt3xes__ ------627 504 123 Further improvements in the Taxpayer Assistance Form 2119, Statement Concerning Alcohol ..d tobacco t...a 4, 166 31:21 1518 Sale or Ex- Other excise taxes ------1,691 131 Over 25 Million Engineering questions (dvprWciil1;. ------Taxpayers Assisted Program are anticipated as a result of plans at the change of Personal Residence, was redesigned in ', at,.)" 580 497 83 national level to test new concepts in the use of com- order to reflect the It is the policy of the Service to provide taxpayers special provision available to tax- munication facilities, office furniture and space, payers 65 and over on with advice and assistance in fulfilling their Federal the sale or exchange of their residences. DETERMINATION LETTERS ARE ISSUED IN tax obligations. assistance techniques, and filing period staffing Form 2106, THE FIELD The Taxpayer Assistance Program is a major fac- requirements. Statement of Employee Business Ex- penses, tor in the development and extension of effective vol- was revised to incorporate an optional method for computing Determination letters are issuedby district direc- untary compliance. The program is designed to the automobile expense de- TAX RETURN FORMS PROGRAM ACTIVITY duction. The tors in response to inquiries by individuals and or- provide, on a year-round basis, the type and degree optional method provides a flat rate INCREASED BY NEW LEGISLATION per mile ganizations relating to exemption of assistance that will make it possible for taxpayers for automobiles used for business purposes. from taxation. In Form 843, Claim, these letters relevant principles and to fulfill their tax obligations with a minimum of Due to the enactment of the Revenue Act of 1964 was revised by adding a sched- precedents al- ule for the income inconvenience, and to provide this assistance by the and the Excise Tax Reduction Act of 1965, whole- computation of the tax refund re- ready announced by the National Office are applied quested by the taxpayer. most efficient and economical means possible. sale revisions of tax returns and related instructions to the particular facts involved. Five new Nationwide, more than 25 million taxpayers re- were made necessary. Reduction of the income tax forms were required to implement the Many determination letters are issued to authorize Interest ceived assistance during the year. This is about 2 rates alone required the revision of the tax rate tables Equalization Tax Act. These and other tax-exempt status for trust funds established under new forms million more than last year. Of the total taxpayers of all income tax returns, both individual and 1cor- necessitated by legislative changes are employee benefit plans. Information on this activity listed on page 85. assisted, 16.2 million were through telephone con- poration. The Excise Tax Reduction Act of 965 during 1965 is shown in the following table: 4 5 ANNUAL REPORT fe CHAPTER ONE INTERPRETATION AND COMMUNICATION OF TAX LAW TO TAXPAYERS Determination letters issued on employee benefit plant Revenue Rulings and Revenue Procedures published REGULATIONS PUBLISHED IN THE FEDERAL of 1964. Fourteen final regulations and six notices REGISTER St k Type related It.. spZarflirt g P:~~ 'tuiffq ' Ismq. Number to the Revenue Act of 1962. Several final plans plan, plan, Total...... ------ff] Increased activity in the regulations program oc- regulations resulted from other Revenue Acts while Determination letters issued with respect to- Administrative------I Q curred during 1965. Eighty-five final regulations others were written pursuant to administrative de- 1. Initial qualification af~lars: Alcohol and tobacco taxw-...... __ ------5 523 7.072 13 Employment ta.as.-. ------_----- and 61 notices of proposed rulemaking were 588 452 -:------..... 423 pub- cisions. Three notices and eight final regulations a- PlansPartapFmveaccalml- ..p---- i 2D5:756 I 20,116 Estate and gift taxes- _ ------2 b PI... disapproved ------94 Excise taxes ------_------__------lished in the Federal Register. In addition, 13 Ex- 2. Tormin.tion of plans--... ' ------71 ------i Income tax.._ .... ____ ------11 were in connection with alcohol and tobacco tax C.... cl...d ithqO of 6ii,;;W;f~; Wtiir' 156.. 4117 1 ecutive orders Self-employment tax. ------were published. During the previous administration. year 85 final regulations, 39 notices of proposed rulemaking, and 2 Executive orders were published. Some of the more significant Treasury Decisions The tax benefits of employee pension and profit- The more significant Revenue Rulings and Pro- Fifteen of the final regulations and nine notices in which regulations were prescribed are described sharing plans were extended to self-employed per- cedures are summarized on page 86. of proposed rulemaking related to the Revenue Act briefly on pages 85 and 86. sons in 1963. Determinations issued during 1965 The Revenue Rulings relating to income tax in- with respect to these plans are set forth in the fol- cluded 24 which dealt with the exempt or nonexempt lowing table: status of certain described organizations. This represented a significant increase over the number of Determinations issued an benallt plans for self-employed persons such rulings published in prior years and was a re- Profit. Bond sult of the extensive program instituted in 1963 to It.. sharing Pension purchase plan, plan, plan, improve administration and compliance in the exempt organizations area. DeterminationsI. issued with respect to- Initial 'wifi,ster, of Plans: a. Plans a proved. ------_------3,093 5,29D 796 The Bulletin is also used to announce the issuance PaMcipatifts employee$. . ----- 4,661 8,36053 17715 ~. Plans disapisroved ...... 20 of proposed regulations relating to internal revenue 21. Twrem onwIjhqtme .1 p an------2 2 11 C. or , .,ad ..an,, of M-imili.m- 151 312 100 matters and, periodically, to announce those decisions of the Tax Court of the United States in which the Commissioner does, or does not, acquiesce. District offices issue determination letters to or- In addition, 127 announcements of general inter- ganizations seeking to establish exemption from est were published during the year. Twelve listed Federal income taxes under provisions of the In- the names of organizations to which contributions ternal Revenue Code which authorize a tax-exempt are no longer deductible under section 170 of the status for qualifying charitable, religious, educa- Code, and six announced tax administration agree- tional, and other nonprofit organizations. During ments with the States of Maine, Michigan, North 1965, requests of this type resulted in 11,929 deter- Dakota, Pennsylvania, South Carolina, and South mination letters of approval and 717 of dishpproval Dakota. Five listed disaster areas in which losses while 1,668 cases were closed without issuance of a qualify for the special tax treatment under section determination letter. 165 (h) of the Code. Other significant announce- Under established procedures taxpayers may ap- ments of general interest are described on page 87. peal adverse field determinations relating to pension trust and profit-sharing plans. During the year 68 Advance Notice of Technical Changes Given to appeals were considered by the National Office. Of Alcohol and Tobacco Industries these, 34 appeals were decided in favor of the taxpayer, 31 were adverse to the taxpayer, and 3 were Several Revenue Rulings and Revenue Procedures partially in favor of the taxpayer. relating to alcohol and tobacco tax matters were published during the year. To insure timely dissemina- Revenue Rulings, Revenue Procedures, and An- tion of important technical information to members anouncements Are Published in the Internal Revenue of the liquor and tobacco industries, six Industry uIlefin Circulars announcing the substance of these Rev- As part of the continuing program of publishing enue Rulings and Revenue Procedures were issued all substantive rulings and all internal procedures in advance of publication in the Bulletin. In addi- affecting the rights or duties of taxpayers, 321 Reve- tion, three Industry Circulars, described on page 88, nue Rulings and 45 Revenue Procedures were pub- were issued calling the attention of the affected in- lished in the weekly Internal Revenue Bulletin as dustries to the more significant operational changes follows: resulting from enactment of Public Law 89-44. 6 7 INTERNAL REVENUE COLLECTIONS, REFUNDS, AND RETURNS FILED

amounts to be refunded account for the remaining Federal gasoline taxes are applied to the interstate revenues. The Internal Revenue Service makes con- highway-building program as payments from the tinuing collections for these trust funds which are Highway Trust Fund. Other trust funds finance Chapter 2 reserved by the Treasury Department for later pay- fish and wildlife preservation, inland waterways im- ments on long-term commitments. For example, provement, and various other special programs. taxes collected from certain employees and employ- Gross collections for 1965 are shown in the table ers are used to finance social security payments; below by class of tax and compared with 1964: Revenue RECORD $114.4 BILLION COLLECTED Internal Gross Internal revenue collections Despite substantial reductions in individual and linthousandsotdollins. For details see table 3,p. 1141 Collections, corporation tax rates that prevailed throughout the Percent of Iwo... a, decrease year, gross collections in 1965 increased $2.2 billion Source 1965 1964 1965 collection, Refunds, over 1964 and set an all-time record of $114.4 bfl- Amount Percent lion. Administrative budget funds constitute over 75 percent of collections. These are the Govern- Grand total I ...... ------...... _ .... 100.0 112,260,257 114,434,634 2,174,377 1.9 and Returns Income taxes, total ------_------_ ment's general funds, used to finance the bulk of 69.7 78,891,218 79,792,016 '799 1. 1 Car"ration 22": 1' 2454: 31:,111 11~ 1,16,1:,33~4, 1.83 : ,4 70 _1:77 1 Filed such Federal expenses as defense, space, public debt Individual, ~90 54 53, -9290 72 interest, and agriculture programs. Trust funds and Withhold by employers 2 ------_-----_------32' 2 39 25B 881 36 840 394 Other' ------_ ------_ ...... 14.7 15:331:473 16:920:288 -21:488:8"' 4'157 9 7 Empt ment taxes, total ------_ ------14 104 306 101 902 ALL MAJOR TYPES OF COLLECTIONS INCREASED EXCEPT grd .m a nd disa bility lax...nce, tota l ------3.8.1 5: 846: 073 2101: 290 1 : 9 Federal insurance ambribubons------...... ------12.9 79 14 815 855 21443: 1 1.7 INDIVIDUAL INCOME TAXES once contributions ...... ------86,596 1:030:218 622 4.4 ofIa in fp~'.,na an'ot ya,u'lln[a 85 858 622 499 228 359 26.8 Railroad laritern,rit ------_------:9.65 593:864If 635:734 41:871 7.2 Estate and gift taxes ------_------121.49 13:2 4911: 13 14:2 715 532 329 229 136:01 Eidu taxes, total ------50 232 792:779 842:547 Alcohol ------1. 1 1, 177, 199 1,172,11 115 .131, 1 : 17 ratio,ca ------:::: ::: 052,545 2,148,594 96: Other ------_ ------_ ------...... 7: 98 8020,188 8,871,547 551,359 6.6

are mijustad to exclude amounts transferred to the Government of and disability insurance tax collections Mown is based on estimatesI made by the Guam.' Collection'I For details a. table j,pd105 .,nq footnote 5, p. 116. secretary of the Treasu pursuant toall d ty l1nocu 20 h Social Security 1 Ent ..led.--Collection, . in ividua income tax withheld am not reported Mine-11 rl Act as amended, and im, urfes, all old. n,.1(2101taxes.a Th. estimates 1964TOTALS ,.I,ly fr.. old-ega and disability in. show,ii,zg.forandthe 2 hilass a of individual income taxes were mr,derivedtobr.subtractini the ,a. to binsof.rd'Od.ril in-t-ol.ithloldurac' ""a.. notan wagesomited"it...'a""'rarely iron,"' di. lily In .... ran tax estimates from the a ad Is reporto 1123 nd disability insurance taxes on Salf-CrIPIDYinart income. The annout of aid-age 11 .4 I`H`5CHARGE +1.9'/. Pattern of Collections Altered by Income Tax Cut evident that gains in economic activity and revenue, confidently forecast at the time of the tax reduction, Individual income tax collections dropped nearly wFre already occurring with regard to the business $1 billion between 1964 and 1965 to the total of community. $53.7 billion. The amount withheld from wages fell $2.4 billion because of the decrease in withhold- Changes in withholding and payments on income taxes shown in the following coming tax rates. However, the increase in total collec- during 1965 are tions confirmed the predictions expressed in the Rev- parison with 1964: enuc Act of 1964: ". . . the tax reduction provided Income tax collections for 1964 and 1965 by this Act, through stimulation of the economy, will, Corporation Individual Employment Estate and E.Ma, tax. IThausand, of d.11-1 income is to... got taxes taxes intoAxesas after a brief transitional period, raise (rather than 13.6 lower) revenues. . . ." Fiscal year 1965 was in Change 1964 1965 the heart of that transitional period. Amount percent Corporation income taxes more than offset the IndIvIdual-Withhold. ------39,258,881473 36 940,394 -2,418,487 -6.2 decline in individual tax collections by increasing Indlitid.til-Oth., than withheld. 15,331, 16:920,288 ~1, 488, 815 +9.7 about $1.8 billion in 1965. While the proportion of Total . .------_--- __ 54,590,354 53,660,683 -929,672 -1.7 annual tax prepaid through estimated payments in- Corporation.... --- _ ------24,300,863 26,131,334 +1,930,470 77~5 creased pursuant to the Revenue Act, the overall Total Individual and corporation------78.891,218 79,792,016 +900.799 annual rate itself decreased. Accordingly, it seems

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8 9 790-388 0-66-3 ANNUAL REPORT 9 CHAPTER TWO INTERNAL REVENUE COLLECTIONS, REFUNDS, AND RETURNS FILED Employment Taxes Reflect Increased Wages pealed many different kinds of excise taxes (see Gross collections, deductions, and administrative budget receipts page 46) The results of this reduction were not . (in thousands of dollars) Collections of employment taxes in 1965 generally reflected in' collectionssdming 1965. Even though showed increasingly healthy employment conditions. Gross collec. Trust und. Interford Ad.lhl,t.. some excises are unaffected by the law, the changes Source tied, Us mt! he Refunds reductions five budget Only one decrease occurred (caused by a rate re- receipts Should have profound effects next jear, as excise duction in the unemployment insurance tax) in ndividual income taxes: taxes currently amount to about 13,0~crcent of gross Withheld ------_------___ contrast to significant rises in Federal insurance con- 394 _ ------_ ...... tax. collections. The impact on collections will con- Other.... ------IS16:8"20, .,288 ------...... self-employment insurance contributions, tributions, tinue over an extended period of time as the new Corad Total ------_ ------:- : SM 693 633 and railroad retirement taxes. ratio" income taxes. ------_ -:----- 5326 131:334 4' 869670: 03 5089 .------...... :: '2 15:4161:945 law provides for phased reduction of some tax rates Excise is..,: gIII hway trust funds,. ------_------693 691 123 499 over the next several years. For 1965, however, ------Effects of Excise Tax Cuts Not Apparent in 1965 10": 1115 :58911 -- --- , 99:423 ------...... ------.886,166 the $14.8 billion collected represented a healthy in- T.t.L------___ ------14,792,779 3,683,691 222,922 _ ------lo'S86,166 Late in 1965 Federal legislation reduced or re- crease of over 6 percent from 1964. mployment taxes: Old-ag. and disability ims.radc...... __ ------...... 15,846 073 15 654 383 191,690 _ ...... R.Hroad retirement.... ------_------_ ------_ 635:734 ' 635:555 179 ------Unemployment insurance ------_------622,499 614,920 7,579 ------state Total_ ...... ------...... 17,104,306 16 904 857 199 4 9 ------and fiftlans ------2,745,532 ------, 29:3469 ------2.716,164

,,,tTotal Internal revenue.. ------_------___ ------__ !!4_ ~4,_ 04 _ I 20 588 548 5 991 177 ...... 87, 5 : 909 d ad to conform with "Statement of Receipts and Expenditures of the U.S. Gov " ux.ms ----- '-~25:220 - ' "42 220 Adjusted total Internal revenue.. ------0,563,328 1,11135:217057 111: 1 121 ------ADMINISTRATIVE BUDGET RECEIPTS M iscellaneous ------3,162 869,865 3, 4141,325":3 1 Total ------_------_---- ...... _ ------120,534,S34 20,563,328 6,029,54,11 869,865 93,071,797 Source of Budget Dollar-1965 ------

Total Receipts 93.1 billion OVERPAYMENT REFUNDS DECLINED were over withheld and consequently, the $6.1 bil- Eon refunded in 1965 was more than $1.1 billion Lower withholding tax rates resulted in less with- below the 1964 figure. Interest paid on these re- holding and consequently, fewer individual income funds declined correspondingly, by $11 million or tax refunds were paid in 1965. The number fell 13 percent. The average refund check for all kinds from 40 million to 38 million, while all other kinds Individual Income Tax Corporation Income Taxes of tax, overpayment and interest included, was of tax refunds held constant for both years at about 52.4% 27.4% $152.03 compared to $170.82 in 1964. 2 million. Refunds issued during the past 2 years arc classi- The lower withholding tax rates resulted in a fied and compared by type of tax in the following reduction in the number of taxpayers whose taxes table:

Internal revenue n0unds, Including Interest Excise Taxes 11.7% lFor refunds by regionand district testable 5, P.1181

Amount refunded (principal Annual of let. at included Number and Int ....t-thousand (thousand dollars) Type of tax delta.)

1964 um 1964 1965 1964 1965 Estate and Gift Taxes 2.9% Total refunds of interne I revenue 1 2. ------_- 42, IK 709 31 111 211 7 203 078 596 88 502 77 419 113 766 Customs 1.5% Iddi,kd..I?rco.T 40: ' 122: 376 ' 868:229 '0'71.:879 59:887 44: 490 ,:dd`an 39 682: 373 38,440.692 6,098 691 4:097,5 865223: 226 24:011110 11lo:,7072' nto 70DIse, 992 3 345 272 5 886: 585 951 IS Miscellaneous 4.0% Oth sot.x.nd a ataxnd ifsWiNy .';i; ii ;i; 1: 352 ':1 049:652195 , 196,13'387 307 435 1 4 629 17,6769 Railroad aUra.,rt ------148 189 34e.9931Is 41:6 751 ' 104 172 EstateUnemploymentis ------ih.U..a ------Ins'7 24: 7'733 2,693 3,3D9 Gift Is 657 791 729 1: 994,1 226 "Administrative budget receipts" represents the miscellaneous sources are reduced by transfers to Excise 220 65 taxes, total ------1,363 978 1 345 579 696 223 587 1 056 666 Alcohol xes'.------015 12:045 amount of total collections of the Federal Govem- 4_...... 78:907 93: 796 28 4 trust fund accounts, refund of collections, and inter- Tabs=htaxes 1 039 4 075 6.728 Manufactura" and retailers excise taxes, total-. I1: 3329:': M7 10 12: 262 129:109 126:463 135 305 ment available to finance the many operations and Gasoline fund transfers. The following table reflects the used an far...... ------305.955 79 777 103 914 101,071 programs included in the annual budget. To arrive Gasoline nanhighway-. ------21,400 28:211 21:822 22 428 ------An d0th------1:31111, 4 274 3 473 2: 964 135 305 at administrative budget receipts, gross internal rev- source of gross collections, deductions, and adminis- the, xco. taxes I------_------2 20: 233 8:605 6,601 893 357 enue collections, customs duties, and receipts from trative budget receipts: I Revised. Includes fund, 'hot otherwise cl-Ifi.d." an' Figures have hot been reduced to reflect reimbursements from the Federal Old. Include, drawbacks and stamps oulturpti.rus. ,hd S.M.. and federal Divibilij lntU,.r,!h TrustH Fundsamountims to 8191,690,10Ir0 Includes In.hopticl, surer, wagering (erase and Stamps), capital stock, and other and $165 8DO 000 in 19 ; hern I a Ighw% dx 1965 rust Fund ShroUrthrIA to excise tax re on L 1123.498,000 in 1969 fmii $126,637,ODOin 1964fland from I a Unemployment Trust und -Less than $500. ountingN to $7,609,000 in 1965 and S4,291A 0 in 1964. e't of 58,817 Undeliverable checks totaling $4,165,000 In 1965 and 64,870 undel venebie check, totaling 10,636,001) In 1964.

10 11 ANNUAL REPORT 9 CHAPTER TWO

TAX RETURNS FILED INCREASED relieve them of interest charges. In relation to the number of returns filed, postponements granted de- in Americans filed more tax returns in 1965 than clined 12.5 percent compared tb the previous year. any prior year, as would be expected from our grow- Chapter 3 ing population and expanding economy. The total Information Documents Amplify Tcne Data of all types of tax returns filed was 102.5 million. This was an increase of 2.4 million over the 100.1 About 340 million information.,documents were filed with the Service during the year. Almost two- million filed in 1964. Returns filed during 1964 and Automatic ALL BUSINESS TAX RETURNS thirds were employers' statements of wages paid and AUTOMATED 1965 are categorized and compared in the table the remainder reported payments of dividends, in- below: In 1965, just 4 years after implementation began terest, and various other items, Data with a pilot operation in the Southeast Region, the returns flied, by principal type of return Number of ALL MAJOR TYPES OF RETURNS INCREASED EXCEPT Processing Service's integrated automatic data processing IngurIn In thousands. For details, see table 6, p. 119] PARTNERSHIP AND EXCISE (ADP) system became operational nationwide with Type of return 1964 1965 respect to business returns. Under the integrated system, data is taken from tax returns and converted Grand total--- ___ ------_------Ifio-.11L to magnetic tape on high7speed computers at seven laceas, tax, total ------74,193 FG, 113 Internal Revenue Service Centers. These tapes are Individual and fiduciary, ------__ ------65,154 66,952 then forwarded to the National Computer Center at Individual-citizens ad resident aliens, total. - 64,201 65,932 Martinsburg, W. Va. where the data on them Fo;ms'a 1040.-_...... 1 is F. 1040A------4'17: M1 4'7: "'774 entered on a master file. The master file is in two All other Individual and fiduciary--.--...... 953 1,020 TOTALS major ;964 100.1 segments, the Business Master File (BMF) us, total ------6, 1 N 6,197 Declarations of estimated 965 102.5 and the Individual Master File (IMF). led ideal ... ------6,077 6,166 CHANGE +2.47, CorporationW' -----_------31

Pintmership-.. ------984 977 Carpsratio ...... ------_ ---- 1,367 1.4 0 INDIVIDUAL TAX RETURNS AUTOMATED IN TWO Other------_-_---- 594 568 REGIONS Employment tax, tolol__------21,753 22,258

ar, Form III ------15 331 11,4115,2 Urearproyan For- 94 4:429 4, 651 The service centers for two regions (Southeast Farm 943 M ---- 6S8 fthoodEmploys"I"'Y'ra'aill,ement, to 22G and Mid-Atlantic) are successfully processing in- ant Ins rance.rareFor 1, 3112 51 dividual returns as well as business returns under the We . tax .... ------_---- 10717 194 Gill I ------...... 22 new System. The centers for the other Internal Excise tax, total ------_ ... __ ...... 3,925 3,899 Revenue Regions (Central, Southwest, Western, Occupational tax__------__ ... 1,262 Form 720 (retailers, manufacturers, cc.)...... I:2 287.. 2,289 Midwest, and North-Atlantic) will begin individual Alcohol------2311 2310 Tobacco. returns processing in~ 1966 and 1967. Thereafter, High.yOt ;xa'&_~ 23347 141,6 Individual Declarations Partnership Corporation Employment Exci 9 and ------fide_'y.ad of talins Led .1101h., data from the Federal tax returns of all of the Na- ax tion's taxpayers, business and individual alike, will Taxpayers' Requests for Filing Extensions be recorded on the master file. In a very real sense, however, all taxpayers will be under ADP beginning Almost one-half million individual taxpayers re- CHANGE FROM 1964 on January 1, 1966, since all taxpayer transactions quested the Service to postpone their filing dead- 3.8 after December 31, 1965, will be shown on returns lines. Two-thirds of these requests provided valid filed in 1967 and subsequent processing years: reasons for granting the request. This approval re- 1 lieved taxpayers of late filing penalties, but did not DATA CENTER HANDLES NON-ADP MASTER FILE PROCESSING

Operating independently of the basic ADP system will be an IRS Data Center at Detroit, Mich. Be- ginning January 1, 1966, the Data Center will relieve the service centers of all data processing activities not directly related to the A DP master file.

12 13 ANNUAL REPORT 9 CHAPTER THREE AUTOMATIC DATA PROCESSING

WHY ADP? These other operations included the sorting and Service Center was ready to test the direct filing area, also provides advantages to the taxpayer. The handling of over 330 million information reports on plan. Beginning January 1, 1965, taxpayers in the centralized file, updated periodically with the filing During the last 30 years, and more particularly wages, dividends, interest, etc., and the, addressing Southeast Region were given the option of filing their of new returns, enables the Service to keep abreast since the beginning of World War 11, the national and mailing of approximately 140 carloads of tax individual income tax returns directly with the cen- of the current address of each taxpayer. Thus, un- tax collecting job has grown at an unprecedented return forms. ter if they were to receive a refund. About 4.3 mil- delivered refund checks may be made available to rate. The vast increase in economic activity, cou- During the period from 1955 to,,..l 961 the Service lion taxpayers in the seven-State area exercised this taxpayers who have moved without leaving a for- pled with the enactment of increasingly comprehen- gradually updated its equipment~ and transformed option. This test proved that mail opening and warding address. Also, through positive identifica- sive tax legislation, resulted in the Service's funda- what had started as a punched card system to one other preliminary processing operations can be per- tion of taxpayers by name and identifying number, mental operating problem: that of attempting to which utilized magnetic tape and the latest high- formed more economically at the centers. Savingsof they may be certain that their payments are credited carry on effectively its assigned returns processing speed computers. This course, primarily that of nearly $50,000 were realized and taxpayers received to their accounts and not to those of taxpayers with and enforcement activities while the workload was machine substitution for manual processes, could their refunds a few days earlier. The option will be similar names. Incorporating the results of prior increasing more rapidly than the resources for han- not solve the Smice's long-range processing prob- continued in the Southeast Region and extended to audits and other transactions obviates the necessity dling the job. lem. It was clear that a system was needed which the Mid-Atlantic Region in 1966. for making repetitive request for the same informa- For example, the Service had roughly 12,000 em- would permit the performance of functions which tion from the taxpayer. For example, an exemption ployees in 1930. Although this number has now were not possible or economically feasible with con- In the Mid-Atlantic Region once substantiated should not be questioned in the grown to something over 60,000 employees, the ratio or machine processing. This need next filing period. Most important, however, ventional manual The service center for the Mid-Atlantic Region, is the of returns per employee during this period increased assurance to the conscientious formed the basis of the development of the ADP capitalizing on the experience gained in the pilot taxpayer that the from about 500 to nearly 2,000. In other words, plan, which has been characterized as a natural, overall tax burden is fairly distributed through the installation, began processing business returns under the volume of work increased about four times as Service's mech- facility which the system provides for though dramatic, step forward in the the new system in January 1963, and was phased identifying rapidly as the work force. This, moreover, does not anization program. The ADP plan, featuring a those few who would evade their obligations. into individual return processing on January 1, 1965. take into account increases in the various types of master taxpayer file, a taxpayer numbering system Taxpayers in the Mid-Atlantic Region will be given information reports and other documents handled. and increased centralization of processing, contem- ADP Identifles Taxpayers Who Don't File Their the option of filing refundable income returns di- During the past several years, the Service has of Returns plated the utilization of the special characteristics rectly with the service center in the 1966 filing period. followed two basic courses in its approach to resolv- modem electronic data' processing equipment not Under ADP, the delinquency check is performed ing this workload problem~ (a) increasing the effi- only to aid in strengthening enforcement and revenue In Other Regions by comparing the recorded returns filed against the ciency of work performance, and (b) eliminating producing operation, but to provide more direct ben- filing requirements in each taxpayer's account in the low priority operations. Although a number of pro- efits to the taxpayer. Service centers for the Central and Southwest master file. For businesses, the system is little more cedural improvements have proven worthwhile, only Centralization does not extend to activities such Regions began processing business returns on. Janu- productive than the manual procedure previously the adoption of mechanized processes has given as taxpayer assistance, audit, and collection. These ary 1, 1964. The centers for the Western, North- since the business population is small and promise of more than limited relief to the Service's operations and others requiring frequent taxpayer Atlantic, and Midwest Regions began processing employedmanual delinquency checking was not altogether fundamental problem. contact will continue to be performed locally. In these returns on January 1, 1965, thus completing impractical., Computer checking has proven, how- fact, by being relieved of the routine paper handling installation of the system for business returns nation- ever to be faster, easier, and somewhat more com functions, local offices should be in a position to de- wide. The Central and Southwest Service Centers AN ADP SYSTEM EVOLVES prehensive. Results of the BMF check for 1965 are vote more time and attention to their duties in these will begin processing individual returns January 1, as follows: The first true step toward mechanization in the areas of operations. 1966, with the North-Atlantic and Midwest Service occurred in 1948. This Centers following in 1967. The Western Service Number of notices of nomec6pt issued ------1,011,366 Internal Revenue Service Number of delinquent return investigation Center is scheduled to begin processing 35 percent of year marked the beginning of the installation of IMPLEMENTATION IN FULL SWING notices issued------583,749 the total volume of individual returns for the West- Number of delinquent retums secured ------396,915 punched card equipment in the larger offices. Since Dollar value of returns secured------$83,289,000 this laborsaving equipment required a large-scale In the Southeast Region ern Region in 1966, with the remaining 65 percent, operation, the Service began testing the centraliza- from the Los Angeles and San Francisco Districts, The full potential of the system for detecting failures tion of returns processing in 1955. An Internal Rev- The Southeast Region was selected for the pilot following in 1967. Similarly, the Central Service on the part of individuals to file will not be realized enue Service Center was established on a test basis installation of the system, and service center opera- Center will process all individual returns with the until the system is fully installed. A delinquency at Kansas City, Mo., followed by one in Lawrence, tions began in Atlanta on January 1, 1962. After exception of those from the Detroit District in 1966. check by computer process however, was made in the Mass., in 1956, and another in Ogden, Utah, in successfully processing business returns for the dis- Detroit will be included in 1967. Southeast Region in 1964. Results to date show 1957. trier offices in the Southeast Region in 1962, the cen- that 14,000 delinquent returns were secured. The ter undertook the more voluminous task of process- total tax shown on these returns was $2.2 million, of This program of centralized processing' which ADP PROVIDES MANY BENEFITS ing individual returns in 1963. From the beginning which $2.1 million was prepaid through payments began so modestly with just over I million returns, it was apparent that a really efficient and economical of estimated tax and withholding of income tax at increased at the rate of about 10 million returns ADP Benefits Taxpayers annually over the next 5 years. By 1961 the three regional operation would be dependent upon returns the source on wages. The returns procured were centers were processing the bulk of the Nation's in- being filed directly with the service centers. After The system, although aimed at enabling the Serv- about equally divided between balance due and re- dividual income tax returns and also doing other 3 years experience in processing business returns, and ice to keep pace with its ever expanding workload fundables. Over $600,000 in additional taxes was work which was susceptible to mass processing. 2 in processing individual returns, the Southeast and to do a more complete job in the enforcement reported and over $500,000 was claimed for refund.

14 15 Automatic Data Processing in the IRS

COM LITER CON ERTS DATA FROM CARDS TO TAPES. Computers at th: .V.l.n .nv.. to. Information from punched card. to SERVICE CENTER EMPLOYEESmumsSORTING AND ..Sn tic top., essential far high speed Proc... Ing required by IRS and ROUTINGZurn MAIL. Most tax related rklood. _,..nents come from district offices to service far processing. This picture shows the initial stop In such proces5ing-4he mail opening TAPES FROM COMPUTER CENTER PRODUCE PRINTOUTS IN THE SERVICE and sorting operation. CENTER. Service canton am involved of both ends of the twm of information fro' and to taxpayers. With such equipment as high speed print..,todata which has been processed an magnetic tape c . be converted readable form, and subsequently communicated to taxpayers and tax administrators.

HUB OF THE SYSTEM IS LARGE COMPUTERS AT THE NATIONAL COM- quirePUTER . CENTER. The complexities of modem tax administration re- texpayicirr. Ily complex machinery. In one centralized facility, each . maintained, up-datod, and a vari!ty of Imns- actions InvolvingaccountIt generated.Is

TAX EXAMINERS REVIEWING RETURNS TO BE PROCESSED,of I n..':Y prompt and accurate processing Toreturns computer, Tax Exam. in.. review them before transcription of data into punched cards.

DATA ON RETURNS BEING PUNCHED INTO CARDS. Identification Information and data from returns and related documents must be put into mochine-clable form. Here am can see typical . an., k.ypunching operation during It,. .-,an. ANNUAL REPORT * CHAPTER THREE AUTOMATIC DATA PROCESSING operation Consequently both the Government and taxpayer cards was made long after the refunding was made by manual methods and, of necessity, on taxpayers to place on returns to be filed; (3) a com- benefit. Some 80,000 cases involving persons ap- was over and costly procedures to recover the refunds a sample basis. puterized tape library system which permits better parently liable for filing remain to be completed erroneously allowed had to be instituted. About $11.4 million in revenue were produced utilization of existing tape inventories by releasing for through followup action by enforcement personnel. The ADP master file system will not be fully ef- as a result of verification during 1965. reuse all tapes upon expiration of the prescribed re- fective in preventing duplicate refunds until after the The ADP system also facilitated the identification tention period; (4) key punching whole dollars Extended Mathematical Verification Produces Individual Master File is complcte~' embracing all of taxpayers in the Southeast Region who underpaid only and discontinuing key verification of certain multiple-refund Increased Revenue filers in the Nation. In the interimi their estimated taxes. Approximately $1.5 million Forms 1040 and 1120 tax returnsdata; and (5) pur- cases are being detected through use of a National in additional charges for failure to make adequate chase The full potential of verifying the mathematical instead of lease of several computers and sup- Identity File, which is a tape file of individual tax- and timely payments of estimated taxes were as- port equipment. A accuracy of returns is being realized for all business full description of these and payers established during the course of processing sessed in 1965. This program is being extended to other management returns and for the individual returns of taxpayers in improvements may be found in returns filed in regions not yet fully under ADP. taxpayers in the Mid-Atlantic Region in 1966. chapter Mid-Atlantic Regions. These re- 9, Management Activities. the Southeast and A check of the National Identity File during 1965 verified to some extent turns were mathematically identified nearly 22 1,000 returns where initial review ADP Brings About Increase in Voluntary fa- Compliance prior to ADP, but the new system provides the indicated two or more were filed by the same tax- SOME VITAL STATISTICS ON ADP cility for doing a much more comprehensive job, par- Because of the difficulty of determining motiva- payer. Almost $3.4 million was realized from In general, it could be said tion in cases of With the addition ticularly of Forms 1040. 109,243 cases of multiple filing as compared to $2.7 disclosure, the amount of revenue of the Mid-Atlantic Region, the that under the old system only the computation of realized from taxpayers whose fears of being caught Individual Master File now contains million from 103,477 cases during 1964. The ma- approximately on Forms 1040. It has by the system have 18 million accounts. tax liability was verified Jority of these cases result from taxpayer error caused resulted in the filing of delinquent During the year, some 19 million returns been conservatively estimated that a net additional by misunderstanding of filing requirements. and amended returns cannot be accurately measured. and estimated tax declarations were revenue yield of $9.5 million was realized from the However, since January 1, 1962, a total of $5.2 mil- posted to these accounts. These totals for the South- expanded mathematical verification of these returns Maximum Use of Dividend, Interest, and Wage lion in previously unreported taxes has been realized east and Mid-Atlantic Regions represent approxi- in the Southeast and Mid-Atlantic Regions in 1965. Reports is in Offing from taxpayers who have specifically indicated that mately 26.4 percent of individual income tax re- they were filing delinquent and amended returns be- turns and declarations filed nationwide. Approximately 340 million information reports Computers Check on Outstanding Accounts Before cause of fear of detection by the ADP system. The Business Master File, with the addition of are received each year from individual taxpayers and ac- Refunding counts for the Western, from savings institutions, businesses, and employers North-Atlantic and Mid- west Regions, Operations in Atlanta since 1962 have illustrated reporting payments of interest, dividends, wages, INNOVATIONS SAVE MONEY now contains over 5 million taxpayer accounts for Forms 941, 720, CT-1, that the system is effectively identifying outstanding etc.' to investors and wage earners. These docu- 1120, and 940 filers. In the first half accounts prior to refund. Reports covering 1965 menis have been of rather limited use to the Service Numerous oper-ational improvements were ini- of the year, when only four regions were on the BMF, nearly 4,200,000 returns indicate that 149,786 overpayments (including un- in the past because of their sheer volume and the tiated in the ADP area throughout the year which and delivered refund checks) -aggregating approxi- time it takes to make a manual match of data ap- brought about substantial savings and increased declarations of estimated tax were posted to the mately $22.9 million-were offset against other tax pearing on them with the figures reported by tax- efficiency. Briefly, these included: (1) A new sys- file. Over 8,450,000 returns were posted during liabilities against the same taxpayers. With the ex- payers on their returns. Introduction of computers, tem which transfers data directly from magnetic tape the second half for a total of 12,650,000. This total tension of~the Individual Master File to the Mid- coupled with the tax account number and master file to microfilm at speeds 15 times faster than printing can be expected to grow as more types of returns Atlantic Region in 1965, the offset operation will also operation, offers processing capabilities not pre- on paper; (2) a two-part "piggyback" mailing label and documents are brought within the scope of ADP be effective with respect to individual returns filed v.iously available. In the Southeast Region tests are affixed to individual and corporate return forms for processing. in this Region in 1966. being conducted to derive information and experience for obtaining maximum value from these docu- Now System Halts Duplicate Refunds merits. Not only has the test been productive from On the potential of the system for detecting and a revenue standpoint, the results will also serve as a preventing duplicate refunds, 139,000 of duplicate basis for making informed judgments on procedures filing cases were found during the processing of in- that should be followed and potential yield estimates. dividuad income tax returns in the Southeast and ADP Makes Complete Verification of Estimated Tax Mid-Atlantic Regions in 1965. Whileanumberof Credits these were instances where the taxpayer had filed an amended return, others represented filing errors The facility of the system for doing a better and on the part of taxpayers. A small number repre- more complete job of assigned tasks is illustrated by sented attempts to take advantage of the Govern- the fact that all credits for payments of estimated tax ment. The important thing, however, is that the claimed by individuals in the Southeast Region on computers automatically reject subsequent returns their 1963 income tax returns, and by individuals in and identify them for investigation prior to making the Southeast and Mid-Atlantic Regions on their any refund, thereby avoiding costly recovery action. 1964 income iax returns were verified in the returns Under the old system a manual matching of index processing operation. Heretofore such verification

18 19 ENFORCEMENT ACTIVITIES

1964 tax year returns filed by taxpayers in the Mid- the mathematical verification process. It can be de- Atlantic Region were processed under the ADP sys- fined as the difference between the amount of tax- tefil at the service center in Philadelphia. This cen- payer errors resulting in increased revenue and the Chapter 4 ter, along with the Southeast Service Center (in its amount of taxpayer errors resulting in decreased third year under the Individual Master File), ac- revenue. This year 3.9 miHion taxpayer errors were counted for 15.1 million, or 24 percent of the total discovered during the verification process, an in- number of returns verified during the year. The crease of 49 percent over last year, while the $99.9 Enforcement INTRODUCTION significance of mathematical verification under ADP million in net yield exceeded last year by only 7.6 procedures is recognized in the additional net yield percent. The increase in errors is due primanily to Through enforcement activities the Service seeks Activities accruing from this operation, primarily for Forms the failure of individual taxpayers to take advantage to assure that all taxpayers pay their just share-no 1040. (See ch. 3, p. 18 for a more complete dis- of the standard deduction providing them the great- more and no less than the law requires. The tax- cussion of mathematical verification under ADP.) est tax advantage. This may be because the mini- payer's confidence that the Service is indeed enforc- Of the returns verified by ADP this year, 10.4 million mum standard deduction was available for the first ing the tax laws in a fair and even-handed manner were Forms 1040. The potential yield from verifi- time with respect to 1964 returns. Of the additional is essential to voluntary compliance, the foundation cation of these returns is $26.9 million ($2.59 per 1.3 system. Consequently, a sub- million crrors uncovered by mathematical verifi- of our self-assessment return) compared with $17.5 million ($1.68 per stantial portion of the resources available for the cation this year, 25 percent represent returns in return) if the verification had been accomplished administration of the tax laws is expended on activi- which the taxpayer undercomputed his tax liability under non-ADP procedures. ties such as the examination of returns, correction of (increase error), and 75 percent represent returns in which the taxpayer overcomputed his tax liability errors in tax liability on returns voluntarily filed, in- Net Yield Was $99.9 Million vestigation of tax fraud, collection-of delinquent ac- (decrease error). The amount of net yield resulting counts and securing of delinquent returns, and en- The net yield represents the potential additional from mathematical verification of Forms 1040 and forcement of the laws rt~lating to firearms, alcohol, revenue accruing to the Government as the result of 1040A is indicated in the table below: and tobacco products. The Service also administers Individual income tox returns mathematically verified a taxpayer appeals system, processes legal cases in-

volving criminal prosecution and civil litigation, and Total Form 1040 form 1040A It'. conducts a Federal-State information exchange pro- 1964 1965 1964 1965 1964 1965 gram. Numb:;Numb of returns verified. ------_ ...... thousands-.- 63,414588 G2 979 46 610 47 174 16,604 705 of returns on which changes are ads-.....------_------2, 3:856 1: U2 2:412 706 Is1: 4" Returns with inc ease: FEWER RETURNS MATHEMATICALLY VERIFIED Number _ ------_------_ ------...... do---- 52 ------the ... nd dollar,-- 1651: "150, 1941: 8"011 127': M473 49 909 38, 45'Q28 14.277 R.t."'u"'de,reas,with ------BUT YIELD INCREASED "Number ------...... thousand,., 922 1 8761 666 956 256 920 Amount. ------_ ------_ ----- ..thousand delta..- 72,639 94: 94 51,355 61.138 21,283 33,056 Net t1d Almost 63 Million Returns Verified at 92,862 99,892 76 98,671 16,745 116221 AWliepii i;ian dellars .46 .59 1 '6311 .88 .00 .71 During 1965, 62.9 million individual income tax returns filed on Forms 1040 and 1040A were mathe- SUCCESSFUL AUDIT PROGRAM CARRIED OUT 3.0 million of these returns were selected for exam- matically verified, a decrease from the previous year ination. of half a million returns, or 0.9 percent. Due to ac- Careful Returns Selection is Basic As ADP is extended to more regions, it is antici- celerated processing during January-June 1964, Selection of those returns most in need pated that much of this work will be programed for only 7.8 million returns remained to be processed of examination is fundamental to a successful audit program. and performed by computers. In the prerefund during July-December 1964, compared to 10.5 mil- Selection is basically the visual scanning and identifi- audit program, which is designed to screen out lion returns which remained to be processed during cation of returns reflecting the greatest tax error returns which do not appear to justify refunds the corresponding period in the prior year. potential. These error characteristics, also known claimed, computer assistance in selection *of returns increase in returns verified was re- A 2.2-million as selection criteria, have been determined largely for examination was used in 1965 in the Southeast half of this fiscal year over the corded for the second through experience and scientific sampling studies. and Mid-Atlantic Regions. same period last year. This increase is due in part Selection for audit is made from all types of in the number of returns Continued Emphasis Placed an Quality Audits and to a 2.7-percent increase returns to insure adequate examination coverage in implementation of ADP Improved Techniques filed, and in part to the each tax area. From the 68.6 million individual, processing of individual income tax returns in a sec- corporation, estate, and gift tax returns filed, ap- An integral factor in the field examination pro- ond service center. Effective January 1, 1965, the proximately 21.9 million were classified in 1965, and gram in fiscal year 1965 was continuation of the 20 21 ANNUAL REPORT e CHAPTER FOUR ENFORCEMENT ACTIVITIES emphasis on qualitative concepts initiated in pre- Additional Tax and Penalties Recommended Number of tax returns examined vious years. Because of the steadily increasing num- Increased [Figures in thousardsl ber of higher income individual returns and more complex corporation returns filed, a greater propor- District audit divisions recommended $2,729 mil- fyp..f return Total Field audit Offl-udit tion of the field audit manpower had to be allocated lion in additional tax and penalties ~for returns ex- 1964 1965 1964 1965 1964 1965 to the examination of these more difficult and com- amined in 1965. This was an incre.4c of $179 mil- Grand total ------_ ------_---- plex returns. Although the result was an increase lion over the previous record dollar recommenda- 3,620 13,472 762 -756 2,858 2,716 In.., is., total... _ ------_ ...... ------3,409 in examination time per return, it was accompanied tions of $2,550 million in 1964. Gains of $149 mil- 3,268 586 584 2,823 2,684 'l.Xids.I onal---fi-dud-ary------_ ...... ------___ 163 164 161 162 2 2 by the largest amount of additional tax and penalties lion and $47 million occurred in the individual and Exemptorganuation__------...... 3,23610 3,092 416 410 (,;2 020 2 682 recommended in any fiscal year. corporation tax areas, respectively. The estate, gift, 12 10 12 is d gift tax _. ------...... Eadt:"3 an employmenttax...... _...... __ ...... 31 Considerable effort was directed to improving ex- excise, and employment tax areas showed a net de- ISO '169'3 1"37 1 1"02 A 219 amination techniques used on returns of the rela- cline of $15.9 million. I I.. than 500. tively few very large corporations. The Service Public Law 88-563, Interest Equalization Tax, I Includes 623 interest -ollication tax returns examined. continued to improve and expedite examination of approved September 1964 imposed an excise tax on NUMBER OF TAX RETURNS AND ADDITIONAL TAX AND PENALTIES these returns. A technique employed to a greater the acquisition by American citizens of certain for- RECOMMENDED extent was the assignment of a team of experienced eign securities from a foreign person. Prompt en- Examinations declined due to planned shift to more revenue agents to the examination of large complex complex returns-amount forcement efforts were initiated by the Service, and recommended increased corporations. during the year $2.1 million in additional tax and 3620 ADDITIONAL TAX AND PENALTIES RECOMMENDED penalties were recommended for interest equaliza- - 3472 Reflects three year rising trend In total tion tax returns examined. Average additional tax and penalties recom- EiM 2729 mended per examined field audit return rose 9 per- 2,7n cent; from $3,014 in 1964 to $3,288 in 1965. Field r__ audit average additional tax and penalties recommended per examined individual and fiduciary re- 2.160 turn rose 26 percent and the corporation average recommendation per return rose 3 percent. 122D 1267 315 Number of Examinations Decreased

The 3.5 million returns examined during the year 173 176 321 319 represented a decrease of 4.1 percent from 1964. If 35 In 169 771 F 17 1. The majority of this decrease occurred in returns ex- Total Individual Corporation Estate Excise Total Individual corporation Estate 1.6" arnined by office audit techniques-correspondence fida ad ry or and andlift. a ad and and ndgift and =.art fiduciary .=on employment i or office interview. This decrease in office audits alum cufferanton was planned with a view to achieving a more bal- 16.3 CHANGE FROM 1964 anced program and provided for a shift from the 0 10.7 examination of low income nonbusiness returns to the examination of higher income nonbusiness returns and small business returns. The number of 1961 1912 1363 1964 1065 examinations by type of return was as follows:

-6.0

22 23 ANNUAL REPORT CHAPTER FOUR ENFORCEMENT ACTIVITIES

No Change Rate Relatively Stable exempt organizations with probably over one-half Claims for refund disposed of by district audit divisions, fiscal years, 1964 and 1965--Continued million additional subsidiary organizations. Not all returns examined result in the recom- Protested-translarred to appellate divisions The Service in recent years expanded its exempt mendation of additional tax by the examiner. For . organization audit program, developed specialized Aprount(Mousind dollars) some returns, examination results in the determina- training programs, and instituted studies into tax Class of tax tion that the taxpayer has overstated his tax liability. Number Ilmornmumdal by audit di,bio.x abuses in this area. Data processing techniques are Claimed by taxpayer For a substantial number of returns no change in the also being applied to improve compliance and to Allowed Disall-d reported tax liability is recommended by the ex- provide a master file of exempt organizations. aminer. During the year 1.3 million, or 38 percent, 1964 1965 1964 1965 1964 19G5 1954 1965 During the year, there were 12,406 exempt or- of the returns examined required no adjustment in Total _------_------ganization returns examined, an increase of 2,144 4,397 5,022 149,501 91,990 3,512 7,130 145,989 84,810 tax liability. A slightly smaller number and per- Individual income ------981 134:10 042 10 668 566 6. 905 9 476 9 763 over last year. Additional tax and penalties recom- income-... ------1:201 1:3,9114 3,0351 539 49:63141 2,722 125 131:81721 43 centage (37 percent) of examined returns resulted GoEt.'I* ...... _ ...... ------9D 137 1141. 4: 5GO02 mended totaled $36.7 million of which $33.8 million Gift ...... ------38 34 263 F17 29 249 21:215 1 in no change in 1964. EExcis-__ ------.... 744 753 25,5164 44 29 344 35 was attributable to the revocation of the exempt mployment.... ----__ ------343 393 388234 72 32 16 202 556 RISING TREND IN EXAMINATION OF EXEMPT ORGANIZATION status of 123 organizations. In the prior year, RETURNS recommendations totaled $13.9 million with $11.3 Many Overassessments Are Disclosed Upon Audit invitation to the taxpayer. Except under unusual million attributable to the revocation of the exempt status of 3 16 organizations. District audit personnel determined that a total circumstances, the examining officer is not present at the conference. The taxpayer may still resort to of $145 million in taxes had been over reported by other Claims for Refund taxpayers exclusive of amounts determined to be established avenues of appeal if resolution cannot be achieved at the district level. allowable on the basis of claims for refund. Cor- District audit divisions completed action on poration income tax accounted for 58.2 percent of 388,133 claims for refund of taxes. The total the overassessments. The following table shows the APPEALS PROVIDED FOR BY FORMAL amount claimed was $392.1 million of which $192.1 amount of overassessments recommended by major PROCEDURES million was allowed and $200.0 million disallowed. type of tax: In addition, 5,022 claims with an amount claimed Taxpayer May Obtain Independent Administrative of $92.0 million were unagreed and forwarded to Overassessments of tax exclusive of claims for refund Review appellate divisions for further Consideration. Of the total number of claims, 83.5 percent in- Amount retnummended The primary purpose of the appeals procedure is Type of tax (thousand dollar,) volved individual and fiduciary tax returns. Of the to provide a taxpayer with the opportunity to obtain total amount claimed, 54.8 percent was from corpo- 1964 1965 promptly an independent administrative review of his EE ration returns and 29.9 percent from individual and T0taI____ ------142,564 144,577 case when he does not agree with a proposed ad fiduciary. The following table shows a detailed Individual oand fiduciary income..._------5kslo 47.052 justment to his tax liability. Exempt Organizations Given Continuing Emphasis ------comparison of the number and amounts involved CExtT.Pto.r!tu_ -income ------_---_ --- 11 ----- 80,9349,372371 11,614584,133 The appeals function operates at both district and Gift------_------04 There are at present several hundred thousand tax during the past 2 years. regional levels. The audit divisions of the district Ennipl.y...1E-ci"------_ ------866 1.21 296 422 directors' offices and the appellate divisions of the Claims for refund disposed of by district audit divisions, fiscal years, 1964 and 1965 regional commissioners' offices handle appeals on District Office Conference Procedures Revised overassessincrits as well as deficiencies involving all Closed by audit divisions internal revenue taxes except those on alcohol, to- The Service has long been alert Amount (thousand dollars) to its responsibility bacco, firearms, narcotics, and wagering. Number to provide meaningful procedures that will permit A taxpayer who dm not agree with the findings Claimed trytexpayer Allowed Disallowed resolution of disputed issues at the earliest possible of the examining officer may file a protest and re- time. Procedures for informal conferences at the 1964 1965 1964 1965 1964 1965 1964 1965 quest a conference in the audit division of the district district office level were established in 1952. In director's office. In the event an agreement is not Total ... ------_------375,288 388,133 495,077 392, 100 177,165 192,132 317,911 199,967 1956, the position of Conference Coordinator was reached at the district level, he may ask that the Indi,idual income ------3311: 636 32285 987 115 093 134 024 7979 845 93 080 35 238 40,944 established in each district office. Further revisions C.,peration imax-__ -_------_ 1, 256 :933 331:1022 Gst 11.1:111~5~ :028544 83:8806 252:140 131,625 appellate division of the regional office consider his Exist ------608 1 760 6 604 11141f2 11 741 were instituted in 1960 243 339 '255 408 '617 1:132 when taxpayers were of- case. If an agreement cannot be reached at the ap- GiftE ------146:465 2 2346 121:79,21 fered a conference with an independent conferee. pellate level on a proposed ExcP1Ioy__._.mtE ------_~_.____.___----__ ------13': 8'796 649 21: ING 1': 0"512 37 7 division deficiency in Finally, an exhaustive study of the informal confer- income, estate, or gift tax, the taxpayer may file a ence activity resulted in recommendations which petition with the Tax Court of the United States were implemented in 1965. for a redetermination of his tax liability. Confer- Under the new conference procedures, the ex- ence opportunities are available in appellate divisions amining officer prepares a full report for study by a even after a case has been docketed in the Tax Review Staff prior to the issuance of a conference Court.

24 790-388 0-66-4 25 ANNUAL REPORT 9 CHAPTER FOUR ENFORCEMENT ACTIVITIES Option of Seeking Relief Through the Courts May APPEALS-(Income, Estate, and Gift Tax Cases) METHOD OF DISPOSAL The number of pre-90-day cases on hand June 30, Be Exercised 1965, was higher than a year ago, reflecting the effect of the greater volume of referrals from audit If a taxpayer desires to tale his case to a U.S. BEFORE ISSUANCE OF divisions. STATUTORY NOTICE District Court or the U.S. Court of Claims rather than to the Tax Court he can pay the deficiency and In 1965, 2,972 more cases were closed by agree- 17.161 within 2 years from the date of payment file a claim ment than in 1964, a rise of 20.9 percent. A 5-year for refund of the amount in dispute. Upon notice trend toward more and greater percentages of clos- TOTAL of disallowance by the Service of the claim, or 6 ings by agreement is illustrated by the following ~964 23.031 chart. 965 25,127 months after the claim is filed, he may then file suit CHANGE +9.1% with either a U.S. District Court or the Court of Claims. TOTAL PRE-90-DAY CASE DISPOSALS Rise in Workload (Income, Estate, and GIR Taxes) The number of case referrals from audit divisions Three year rising trend In cases closed by agreement and total to appellate divisions was 21 percent higher than in disposals 1964. This increase in appeals was partially offset by a 9-percent rise in the number of case dispositions, resulting principally from more effective use of manpower. While the number of cases on hand on June 30, 1965, was 24 percent above a year ago the inventory remains in a cur-rent condition. Anticipated further increases in effective use of manpower and planned staffing adjustments in those areas with the heaviest workloads are expected to permit the continued timely handling of the larger caseload.

1961 1262 1163 1964 1165 Pre-90-Day Cases Processed in 7965 Increased tby) 10.9 10.4 11.8 141 17.2 Dispouls.freerr'n When a taxpayer does not agree to a proposed determination of tax liability shown in a Percentage ofidisposals by agreement has preliminary risen steadily over the past 5 years. notice, commonly called a "30-day letter," he may N file a protest and request a conference. If agreement is not reached at the district level he may re- CHANGE FROM 1964 quest that his case be transferred to the appellate divisions. These cases are referred to by appellate .7 divisions as "pre-90-day cases." The processing of 1.6 these cases by the appellate divisions during 1964 and 1965 is summarized below. lost 1962 EE DIE 1".1 1 (Additional details are shown in table 15, page 126). Increase in Agreements at Pre-90-Day Level Decreased 90-Day Workload Pre-90-clay cosits

[Appeals prior to issuance of statutory notice) _15.2 When agreement cannot be reached after issuance N..b.r of c.... of a preliminary notice involving a proposed dcfi- Status ciency, at the district level or in appellate division, a 1964 1965 statutory notice of deficiency is issued. Such a notice P ndingJuly I ------_--- ...... R:celved - - ~ ------___ ------1111: IN' ":26 M30 is commonly called a "90-day letter," because the Disposed at, total ------_- ...... 18,616 737 taxpayer is allowed 90 days from the date of the LineaBy agrearrient------...... 14,189 17.161 letter to petition the Tax Court of the United States. 9 ...d c-a-surent and 0.1. rejection 459 499 Yateissuance of statutory noti-traralerned to 90-day The following table shows the results of processing I...... ------,968 .07 90-day Pending June 30------__ 1 531 2 .095 cases in the appellate divisions. (For additional information, see table 16, page 126.) 27 26 ANNUAL REPORT * CHAPTER FOUR ENFORCEMENT ACTIVITIES Manpower Shifted to Returns Compliance Work 90-day cases Docketed cases This fact, along with the absence of any increase in special agent personnel, resulted in a decline in the [statutory fit. issued] [Petitioned to the Tax Court] During the past few years, it has been possible to number of full-scale investigations give. more attention and emphasis to corMucting de- completed and Nu.b.rcfc.... Niunberef,nes prosecution recommendations. Status Status lin quency investigations (generated primarily from More detailed information on investigations by 1964 1965 a check of records of previously filed returns). This 1964 1965 spe cial agents is given year, however, it was also possible to deploy a signifi- in the following table - Pending July I ... ---_------1,159 1.390 Pending July I ...... ------8,631 7,980 Received, Intel. ~------_------4,377 4,379 Received, total ------__ ------_------5,614 6,952 cant number of additional resources to returns com- Tax froad Investigations Statutory notices issued by appellate divisions 1~ ------3,785 3.921 petitions filed in response 1- pliance activity, which includes special programs Statutory noticiapicesued by district directors and received District directers' s!atutory entices ------1:767 4,493 Type 1964 1965 d.ri.990-d-y ri.d ------592 457 Appellate divisions statutory poticesl ...... 847 2,359 designed to locate nonfilcrs not as yet on Service Disposed of, total-.. ------4,146 4,469 Disposed of, total-__ ------6,265 5,448 records. These activities were possible because of Full-scale investigations, total ...... 3,796 3,643 1653 :.1,dI 5 935002 4,4762 the success achieved in reducing taxpayer delinquent Prosecution recommended. total._...... 2,391 2,382 By Ism Ira ------:--: ------I, " i,'-"84 By 'diif.'I a IS------1Pxg1d.t.-_-it ---- ' 328 78 By petition to the Tax Court-trx~;f~ired to -docketed------'thed before the Tax Court on the marl 694 account inventories significantly, combined with a Fraud...... _...... 1 032 1 216 status ------2,028 2,450 wtipuing_ ------.....I—— ------1:257 1:088 Prodica June 30__ ..... _ ------_------_------7,980 9,384 stable or declining level of new delinquent account Coin,opersted gaming devices ------38 26 Pending June 30.------71, 3-90 1,299 Miscellaneous.------64 52 issuances. Thus, manpower previously assigned to 1 Difference fienn number shown as petitioned in preceding table 9i,O_d.yca"I.Itc!at.b~~ Prosecution mitmarminumd.d. total ...... 1,405 1,261 ailing table is caused by cases being combined or split for chiding, district ifirectors',sbatutory embefttheconsidered by Appellate in enforcement actions on new delinquent 1 DIfferenm Difference he cum er shown in preceding tablix, and in table 19, p. 127, account Preliminary investigations, total...... 9,846 10,520 P.,Pcs..f issuingimmlipr2l,I at. uI .,y notice. due to cutoffhere respective issuances and those on hand has is datets in reporting systems. been available for Fraud and 95G deployment to delinquency investigation and returns W.9inirgiindi.'11.c.umin-operated------gaming------devices ------: ":890 1: '7'34 The number of 90-day case disposals was higher compliance activity. These increased efforts were Revised. Disposals Balance Receipts in Excise and than in the previous year and the number of such instrumental in causing a rise of 8.7 percent in de- Employment Tax Appeals Although there was an increase in income and mis- disposals involving cases petitioned to the Tax Court linquent returns secured and 1.1 percent in amount cellaneous tax fraud prosecution recommendations also was somewhat larger. The number of excise and employment tax cases over the 1.0 million delinquent returns and $217.9 million assessed in 1965, this increase was substantially offset by the on hand June 30, 1965, was 1,153 or I case lower last year through the established delinquent returns program. decrease in wagering prosecution recommendations. Cases Petitioned to the Tax Court Increased than the same date last'year. There were 1,825 In addition, special nationwide and locally de- This decline, after a 3-year upward trend (see chart cases received and 1,826 dispositions. on following page), is partially The Tax Court of the United States is an inde- veloped surveys and tests, including a saturation type due to the fact that pendent agency of the Government and has no canvass undertaken as part of this year's activity, will only two nationwide coordinated raids were con- Overassessments Reported to Joint Committee ducted in 1965, as compared to three such raids connection with the Intemal Revenue Service. A continue for at least a portion of next year. . Guid- Increased made in previous years. But to a greater extent it taxpayer who does not agree with a deficiency de- ance was furnished field offices for adaptation in the context of local geographic, population is due to the wagering tax enforcement effort being termined by the Service in a case involving income, A total of 540 cases involving overassessments oi density, and taxpayer characteristics. directed toward more substantial cases of greater estate, or gift taxes, may file a petition with the Tax $333.3 million was reported to the joint Committee The voluntary compliance effect of this effort, al- strategic importance. That there is merit in the Court asking for a redetermination of his tax lia- on Internal Revenue Taxation in accordance with shift in emphasis in the wagering though not precisely measurable, is known to be sub- tax enforcement bility. The Service refers to these cases as "peti- Revenue program is section 6405 of the Internal Code of 1954 stantial. However, these programs resulted in secur- demonstrated by the seizure of $861,000 tioned" or "docketed." Committee of all re- in currency and other which requires reports to the ing 486,000 returns accounting for $96 million in property valued at $326,000, the aggregate A taxpayer may discuss with the gervice the pos- funds and credits of income, war profits, excess additional tax, penalty, and interest. Additionally, amount constituting a 16-percent in- cTease over the preceding year. sibilities of settling his case even after it is docketed profits, estate, or gift tax in excess of$ 100,000. Dur- a greater number of cases than heretofore were re- . Some of the more significant wagering tax in the Tax Court. Tic Service encourages the tax- ing the preceding year, 512 cases involving $296.5 ferred to audit and intelligence activities for further raids were made at Mount Vernon, N.Y.; Cleveland, Ohio; the Pentagon payers to take advantage of an early conference in million were reported. investigation. and Navy Annex, Arlington, Va.; docketed cases. Settlement negotiations by appel- and the Navy Build- ing, Washington, D.C. In these raids 68 persons late divisions in these cases may be conducted at any TAX FRAUD INVESTIGATIONS ABOUT 1.2 MILLION DELINOUENT RETURNS CONCENTRATED were arTested and six automobiles and $430,000 in time before the case is called for trial by the Tax ON SECURED ORGANIZED CRIME currency were seized. Court. The Regional Counsel may be represented The investigation of the tax affairs of major in these negotiations since settlement of docketed During the year the Service secured 1.2 million Fraud Investigations racketeers by special agents, as a part of the Govern- Foster Voluntary Compliance cases requires his concurrence. delinquent returns representing $281.3 million in merit's drive on organized crime, continued to re- Although there was an increase this year in in- The number of docketed cases on hand June 30, unreported tax, interest, and penalties. TIC bulk, ceive top priority in the fraud investigation program. vestigations completed (total of full-scale and pre- 1965, was somewhat higher than a year ago, prin- approximately 1. 1 million returns representing As a result, the Service again this year succeeded in liminary), the results of the work of special agents is tax, interest, and pen- cipally because of an increase in the number of $220.2 million of unreported helping to bring before the courts many of the coun- not measured solely by the number of criminal cases delinquent cases petitioned. altics, was secured through the established try's most powerful and notorious racketeers. investigated or prosecutions recommended. Of par- The following table shows the processing of dock- returns program. Tle remainder was secured by Investigations involving racketeers require more amount importance is the increase in voluntary com- eted cases. (For additional information see table district audit divisions incidental to the examination manpower per case than other fraud investigations. pliance by the taxpaying public resulting from the 17, page 127.) of returns. 29 28 ANNUAL REPORT as CHAPTER FOUR ENFORCEMENT ACTIVITIES Receipt and disposal of criminal cases in Chief Counsel's office IN 1965 INCOME TAX- FRAUD AND MISCELLANEOUS CASES CONTINUE Technological Advances and Administrative A comparison of indictments and court actions TO RISE WHILE WAGERING AND COIN-OPERATED GAMING DEVICE Improvements Increase Effectiveness status for the last 2 years follows: CASES DECLINED ...... Information that a taxpayer has filed more than Pending July 1 1 ------12M956 19M2.104 Results of criminal action in to. fraud c.... total ------.....-...... - one claim for refund of taxes paid isr now available Received, 1,493 1,507 With recommendations for prosecution ------Nuo'bmef I.Ju 1.251 through the computerized processing of returns. With requests tar opinion, atc------1,111116 1,311I'll defendants investi- Action This information is being used to defect and Disposed of, total. ------...... 2,345 claims 1,275 1964 1965 gate the multiple filing by taxpayers of false Promotion not warranted------106 =.ot.t Joan.. declimnl------64 120 for refund. Several taxpayers were prosecuted and too------92 Total 11919 1853 Indictments and Information, ------7 convicted in 1965 for filing false refund claims. 0 Inimns call.... cl------190 172 Disposals, total------1 ...... ------Aft other closings ------66 48 -807 1: '"12' PIN, guilty or nolp contend ... A case classification system has been developed Pending June 30 1 ------...... ------2,104 2,336 Convicted after trial-. ::: ..... : ------1,23,1,1 1, 251 11g%but -~C ...... ------200 and is now in use which provides for a more accurate N ;;f ...... -- t f or is 1 Includes cases awaiting action in Department of, Justice act., tax -- --- I I ...... go 95 I,-valuation of the complexity of tax fraud cases prior Nes referred by Di,isom. he of wagering W clo'~Dlff...7ng in Intellhamu com Imurn-ed nniffelleman, a. I 10 assignment to special agents for investigation. moor Ollwageringt..usaou,quantity of Pmecutionsh in 1965 as Fx1ed to 1964 do. to the od included ill, were referred direct y by Intelligence Division, lodict-AgD.nd int.mutiono...... 679 823 This will pennit more effective utilization of man- were in the 1964 statistics. Disposals, tal.------772 790i_72 power since the assignment of cases for investigation PIN, isrilly-nip contentd m...... - ...... ;4-3 Convicted after trial ...... 121 73 can now be made largely on the basis of the com- Additional understanding NoAo?.~pttod ------...... --, 40 5D of the magnitude of the rused or dismissed -68 95 plexity of the case and the expFriencc of the special legal workload in criminal cases and the accom- Wagering tax uses agent. plishment of Service attorneys during the past 2 Ivelictrunt,.rd information...... 1. D isposals. total------...... -...---- ... 898 110969 litCOM AND COIN OPERATED -I One of the major factors in the continuing suc- years can be gained through examination of the fol- $CELLANEOUSE GAMING DEVICES PIN, guilty or nalo contendere------cess of the Service's enforcement of the criminal tax lowing table: Convicted after trial...-. ------.... --...... 771 679 Acquitted ------...... 103 127 ,statutes has been the highly selective recruitment of Nol-pressed or discrissed,.. ------120 IOD so special agents and the intensive training that has Tax and Penalty and number of tax years involved in I Includes .1.1 dismissed for the following F'IE,35_ __1E3-'_, 26 been given to those recruited since 1959. Only defendant, 13 beaso-f lefloo, reasom: JObecauseddeatholprincgi criminal fraud as. disposal. 9"Ity. or had be.. ce, nvicted In aIllness. and 56 because principal defendant had PI., ad after completion of a 5-week course at the Treasury related use. IN5 lExclusive of wagering and coin-opersted gambling device cases] finnamn,Imhuhumume,I x estate, gift. and excise taxes other tha n agering, alcohol, tobacco, 1962 logo 11114.1965 1902 1163 1964 1165 IN2 190 19641 Law Enforcement School, a 5-week course in basic and 'Inchnil. Income, Estate, Gift and Excise tax. other than Wagering, Col. Operated income tax law, a 7-week special agents basic train- Tax Gaming Davk", Alcohol, Tobacco, - M Firearms wn. Disposition years Tax and penalty ing course, and a period of on-the-job training does Both Indictments and Disposals in Alcohol, 1964 1965 1964 the new appointee assume the full duties of a special 1965 Tobacco, and Firearms Cases Decreased agent. In addition, all experienced special agents Totla ------3,849 3,801 $63.278,143 impact of these investigations and subsequent suc- - $122,231,399 As the result are given refresher and selected on-the-job training, 8 211,11, of actions taken against violators of violators. Honest taxpaye All other clocings 0,1,0081 725d. 110 603 cessful prosecution of as needed, on a continuing basis. 91611 " 8'929 '1'7: 22,7968' the laws relating to alcohol, tobacco, and firearms who comprise the vast majority, thus are reassuredrs, I Includes cases declined by Department of Justice. taxes, a total of 3,774 cases involving 6,097 defend- and potential tax fraud perpetrators receive a de- ants were reported to U.S. attorneys for prosecution. terrent warning. Therefore, in a relentless effort to MORE CASES INVOLVING CRIMINAL This reflects the decrease in the number of arrests further the improvement of voluntary compliance, PROSECUTION RECEIVED A total of 994 income tax and miscellaneous for illicit distillery operations. (See p. 38 for more the tax fraud investigation program is directed to- criminal cases, with prosecution recommendations detail.) The number of indictments ward the identification, investigation, and prosecu- Total additional taxes and penalties of $147.6 involving 1,005 prospective defendants, were for- and disposals cases Chief warded for the last 2 years are shown in the following table: tion of tax fraud cases in all sections of the country, million were involved in received in the to the Department of justice. This was an in all strata of society, and involving all types of Counsel's Office with recommendations of criminal increase of 5.0 percent in the volume of referrals Results of criminal action in alcohol, tobacco, and firea,ms cases taxes. prosecution. This was an increase of $34.1 million over the prior year. In 1965, indictments in such several persons prominent in pub- over the prior year. cases were up 21.2 percent and the total disposal Number of During the year defendant. lic life were convicted of criminal tax law violations. An analysis of criminal tax cases of all types (other of cases in those categories in the district courts in- Action creased 2.3 percent. Also convicted were a number of notorious racketeers than wagering-occupational tax cases handled at 1964 1965 Cicero, the district level) flowing from the Assistant Re- In income and miscellaneous, and wagering tax including James Plurneri and Charles Lo Indictments and informations ...... 59 4,870 gional Commissioners (Intelligence) through the criminal cases, Disposal., IN.]— ------...... ------* ...... New York, N.Y.; Clarence Williams, Detroit, Mich.; 1,251 defendants pleaded guilty or ':5 646I -5,021 Bakes, Ill.; Morris Klein, office of the Chief Counsel to the Department of nolo contendere, 200 were convicted after trial, 86 CP eg!d1ty or. noto co, Man do re... 4 108 3 696 Ned Chicago, "Snag" at r trial ...... ~:::::: '668 ' 564 Vegas, justice follows: were acquitted, and cases against 195 were dis- Acquitted—— ...... ------... 298 220 Kansas City, Mo.; and Sam Cohen, Las Nev. Nol-mossed or dismissed. ------...... ---- missed. 572 541

30 31 FOUR ANNUAL REPORT 0 CHAPTER ENFORCEMENT ACTIVITIES DELINOUENT ACCOUNTS PROGRAM percent were closed while in notice status. The Progress Made TAXPAYER Toward Utilization of ADP ADDITIONAL TAX FROM DIRECT ENFORCEMENT INCREASED REFLECTS CHANGING PATTERN amount collected was $217 million. IN ALL AREAS Throughout the year much effort was directed Volume of Accounts Issued and Closed Declined- TAXPAYER DELINQUENT ACCOUNTS toward the fullest possible utilization of data process- Z151 ing equipment in deli6quent accounts Amounts Rose Value of accounts Increased activities. A major result has been the establishment of addi- Service activity in the delinquent accounts area tional mechanized functions in the issuance of de- was greatly influenced by several situations which linquent account notices to taxpayers. The benefits combined to make this a significant year. In the to be derived from the revised procedures will be first instance, only 2.4 million new delinquent ac- 115211 found in workload and staff reductions in account counts were issued. Although this was a sizeable servicing activities. from amount of de- drop of 21 percent last year, the Other program changes of a similar nature are tax involved, $1,551 million was $88 mil- linquent presently in progress. Total enforcement effective- unusually large accounts. lion more, due to a few ness will therefore be served since advances of this of delinquent The significant decline in the number type allow greater manpower diversion for the pur- issued, however, was caused mainly by accounts pose of attaining broader coverage in compliance 164 three factors: ( I ) A new procedure which altered work. the issuance pattern so that accounts previously is- The delinquent accounts activity (including ac- sain'.. Taxpayer Delinquent main sued in June will, starting in 1965, be issued in July; onination delinquent at...... Mason. tivity related to the accelerated collection of trust me-ta secured (2) increased activity at the service centers in June collected fund taxes and dishonored checks while in notice 1964 caused, over and above the normal which has status) is shown in the following table: June level, a larger number of new delinquent ac- . - 17.3 last year's workload, thereby CHANGE FROM counts to be issued in Ta.pcy.r delinquent accounts I"170I 1984 reducing this year's by a comparable number; and have had a hunnh., Annour, (3) intensified enforcement efforts which "hounrids, "Insand dollars) Issued in ...tory Status salutary effect by reducing the number of new de- June 30 1964 1965 1964 1965 linqiient accounts. CHANGE FROM 1964 were closed Issued------3,065 4173 462 561 Over 2.8 million delinquent accounts 0 Closed. total 1 551 041 ------3,077 84 449: 998 1: 528: 183 235,000 de- 1.6 during 1965. This was a drop of some By typelol act! n; closed 1964. Col Wed._--- _ ------2,537 2,341 1,030,262 1,034,734 linquent accounts below the number in 2di'l.ral collectirs ...... 44,726 60,904 Other disposals I ------54 375,000 432,645 To a large extent, the fall-off was the direct result of Additional assessments resulting from examina- Pending June 30, total ------956 530 1,098,447 L 182, 110 the changes which occurred in the issuances pattern tion of tax returns totaled $2.2 billion, Acc.loiated collection of trust an increase described earlier. Even so, however, the $1.5 billion fund Is- I of $89.2 million over 1964. These assessments are Number of Accounts in Inventory Decreased Received. ------205 10481 4 397 931 313 082 value of delinquent accounts closed in 1965 was $78 GD[lected----- _ ------124 247:182 217: 371 not comparable with tax increases on returns ex- Aimost 45 Percent amount of delinquent ac- amined during the current year as they represent tax million greater than the :ncludesdo, distosals due to unonlectibilitz and erroneous and duplicate assessments. n, u collections of dishonored choc s. counts closed in 1964. Of equal importance and significance to an liability finally determined upon examination or other single accomplishment in the delinquent ac'- after appeals action or court decision. Adiatinistra- overdue Trust Fund Collections Declined counts program have been the sharp inroads made SUMMARY OF ADDITIONAL TAXES FROM tive appeals or litigation may del ay settlement of in reducing the size of the inventory. Here, the drop DIRECT ENFORCEMENT a case for a year or more and consequently' the results of enforcement results can be . Additional evidence in new delinquent accounts issued enabled the Serv- should not be viewed as a mexsure of current year While practically all American taxpayers volun- found in the trust fund program. For sever years, ice to concentrate greater resources on reducing in- audit operations. tarily report and pay their correct taxes, it is never- the Service has made immediate contacts to collect ventories. efforts, plus the new Additional tax resulting from mathematical verifi- These nationwide theless essential for the Service to withholding and similar trust fund taxes from em- resulted the maintain direct cation of individual income tax returns totaled issuances pattern described above, in enforcement programs to insure excise taxpayers who have failed to that all taxpayers $194.1 million or $28.6 million more than last year ployers and pay national inventory declining to an historic all-time receive equitable treatment and pay their just share while tax, penalties, and interest on delinquent re- the tax when due. For the first time since the pro- low of 530,000 accounts, almost 45 percent fewer of tax. The amount of tax, penalties, and interest turns secured during the year increased $5.8 gram was started, activity in this area declined, than last year's. However, because a few of those million assessed as a result of these programs reached a new over 1964. thereby indicating a greater compliance with tax issued involved unusually large amounts, total de- high of $2.6 billion, an increase of $124.3 million The following table shows the additional obligations. 148,000 notices on trust linquent taxes in the accounts pending at the close tax, The total of over last year. penalties, and interest, by source: fund and dishonored check accounts was 57,000 of the year aggregated $1,182 million, $84 liniffion fewer than in 1964. Of this number, 104,000, or 70 more than last year.

32 33 ANNUAL REPORT Is CHAPTER FOUR ENFORCEMENT ACTIVITIES resulting from direct enforcement Tax, penalties, and Interest internal revenue Collections levels, are confined to Amounts of revenue involved at each level of the tax system, An active and closely controlled program was fiscal years 1964 and 1965-Conlisumd jin thousands of doll-I these types of returns. again carried out in the compromise area during [Millions of dollars] 1964 1965 1965. The fellowing table gives detailed inforrna- Work flom, In the Internal Revenue Service and the courts, fiscal . yamn 1964 and 1965 ,6, 1 .... tion on the compromise activity: Additional tax. penalties, and Interest annossul total. - 12,505,642 2. U9,925 1 From ....irutiom of to. Wurne, Intel. - ~ ------2. 062, OD8 2.151,187 1964 INCOME, ESTATE, AND GIFT TAXES Income tax, total_ ------1,750,555 1,966,230 Its. 1 .S Civil cases COLLECTION LITIGATION LEGAL SERVICES Ion ~,- . ------901,864 1,001,565 Rertnur. C1.2voirdatfilPnndu., 11 dud Additional to. and teralthu in as., disposed of in audit REOUIRED BY FIELD OPERATIONS audit.. 123:799 107:583 tax returns filed, total------dl,1,jsioh,1tby greemon1 f, payment. o~ 1,273 1,269 Regular audit., .- 724 892 757 083 OD, 066, 198 102,484,632 Add rtd~,., -ndism.1tui-111d'posedb, dola"Nii ------Individual Income ------65 154 491 66 952 231 late v sions ~ gromment,gymn.mt, Or defaultp n -T 208 195 Although collection litigation legal services are Estate and gift tax ...... 261~, 499 224,617 Corporation Incamo-. ------1: 367:401) 1:419:566 AddltiDnal tax an p R fit a do ermined by settlement in Employment tax (including I a Estate and glft.------511 215 568 To. Court...... -'------I——------Jos 90 performed at both the national and regional levels, E 639 ------231: 719543~220 22,258:107 Additional.tax and penalties determined by Tax Court xcl3a ...... ------...... 37'63395, 15 50~ 701 Exch.!------925,001 3.998,418 dect'i. most of the work is done at the regional level. At- Other ------7,740,742 Dismissed ------3 From mathematical ...Ifial of Income tax returrs-- 165,501 194,086 7,671,565 Decision on merits ------.... 25 torneys who provide these services are primarily con- Additional taxand penaltiesin cases decided bySupreme 233 From National Identify Fit...... ------2.654 3,374 Co rt and courts of appeals ------17 15 cerned with legal work generated by the operations INCOME. ESTATE, AND GIFT TAXES Amount refunded to taxpayers as a result of refund suits.- 45 37 From delinquent return, ...und, Will ------275,480 281, 279 of the district directors' offices. In general, the Fraud us. - By d1std Id collecti n divisions...... ------7:860 220.152 Number of returns m.1red. 1:~ al~:D.112 3 services include providing legal opinions in noncourt By sI~cfaudItdIvWom,------'5'7 620 - Gi, 126 Return, .1th.djustnunt, proposed I: :2'49:'11'91 Deficiencies and pen Ities In cases disposed of In Intel- Disposedoltyawfit,11,11lon.: Agleel.padd,ordefautted. 2,108.136 I 1,95G.. ligencedfiWoons:8 matters and work in connection with court proceed- P s:,cuU.n recommended. ------46 72 Claims disallowed Civil uses Co.. P'., uti.~~.t.~,,..td.~d,.,.d.Ilin.dbyD.- ings. Total...... -- 445,556 278,795 p.,qmmtpfju,t1 u------17 50 Total received In appellate divlshons.---~---~d.... --- 121,903 26,602 ByBy district loopsaudit------divisions.. ------317,911 199,967 filsomed of Is also 11 to divisions: Agree , P , a, a- nitions liatedivislons...- 127,645 78,828 is tied --'------! ' ------16,766 19,679 ------.- Courts of original jurisdiction: I Includes excise taxes. Total Delinquent to,. .11.,td Tax Court: Statistics Show Some Increase in Casework --- 1,322.170 1,312,909 Total petitioned to Tax court...... ------5,690 6,942 Dismissed... ------346 284 Performed D.11hq..ht,c,,n------1.074 gag 1 095 538 S:godled by Tfjpbr1.,1u1,n~_-a rt ---- :::-::- ---- ~:-- 4,947867 4,635 OFFERS IN COMPROMISE INCREASED Trust fund tax..." ...... 247:192 '217:371 ------825 D.dd.d by Tax Court but ~ppoaled------349 30 The legal work performed during the year con- District courts and Court of Clsums: Rental T lot fi ad din dist Ict court, and Court of Claims- 1,494 1.477 The compromise provisions of the tax laws pro. tinued at the same general level of activity reached thqualluthmInclude,d III ul- with odditlemel to. and Penalties .1 $2,03D.558 (interest S:ttled'in istrIdrcosrt1rmdCoutqfCI1im--- 896 762 to.). Courts Decided by district courts and Courtof Claims.. - 488 566 vide a means through which taxpayers can finally in 1964 with comparatively minor increases in both fit, =t,xf.pp.xIadocI*m ------520 381 dispose of receipts and disposals. There were 12,493 cases re- F. to Government.------3" 26 outstanding tax assessments when it is de- COURTS Favorable taxpayers------139 79 ceived during 1965, 11,987 during 1964. The WORK FLOW IN THE SERVICE AND Modified------" ------37 35 termined that.the taxpayer cannot pay the full Decided by count. Of appeal, but reviewed by So-_ number of cases disposed of during the year was 3 22 amount of the liability, interest and penalties, or It is not posgible for the Service to completely a ------...... - 22 12,456 compared with 11,762 in 1964. The in- when it is concluded that there is process the millions of tax returns during the fiscal Fraud us. - substantial doubt ventory of pending cases at the end of the year was Foui,thl to, foll.scas irv..Ugition in intelligence as to the amount of the liability. 5,09 1, an increase of year in which they are filed. The time required for division 2,241 2,307 3 7 over the 5,054 cases pending himsed of------by Intelligence divisions: processing varies from a few days or weeks for the Prosecution recommended------1,032 23 Nosecution not recommended..------1,165 11: 043 simpler returns to several years for the most complex, Dis ad Of by Offil. of Chief Cmmxsrdl~ litigation are Prosecution not warranted, In,]. ug cas. doulimn! especially when fraud or appeals and by the Department of Justice------1,170 202 Offer In compromise disposals involved. Consequently the work of the Service does Prosecutions ------919 853 not flow through a complete cycle during any one Revised. Number Amount (thousand dollars) year. However, a comparison can be made of the Includes excise tax uses Type of to. Or Penalty Liabilities volume processed.at each administrative level of the 1964 1965 Offers Service and in the courts by analyzing the work- Am...is of revenue Involved at each larval Of the fox system, fiscal 1964 years 1964 and 1965 19" 1965 load for any given year. In evaluating the work 1965 Offers accepted, total,------...... ------flow, it that unit count IMIllho-f dollars] 10, Sgs 11,094 44,493 28,667 10,121 7.590 is necessary to recognize the .is Iwfftlh". Employ I ~d' a 890 1.068 17 61 6 383 3 941 at the point of receipt and in the audit divisions is 1964 1965 A .hot tax...... ------908 956 '69:54'6146 '7: 7' 2:275 &h., scia, Iasex 41'~' 1'592 104 on a return basis while in the appellate divisions, in- elm7,uency Fenalies...... J79 222 1;I ~4 3J: III '1:'12 716 Irternal revenue collecti-, total------112,260 114,435 on all taxes.. ------I:619121 62:21 "57 542 329 313 teffigence divisions, and the courts the work unit is Speci so pena ties------566 ------177 240 Individual Income taxes, foist ------54,590 53,661 Often rejected or withdrawn, total. the case which may involve one or more returns...... ------4,370 4,485 73,559 65.631 11,678 11,870 Withholding. ------: ------39,259 36.940 noglffw The major administrative burden is on the processing Other ...... ------15 331 21 Employ -- --- 1,711 763 589 46,062311 7 987 8 313 =oil ---- 24:301 '131 .....Idin, ------1,328 1: 279 1'1: 564 2:432 2:558 of income, estate, and gift tax returns, especially at ano'll"":It tax x""'------:,:...... 1,:411 0, 0 77 85 526 37799 69 54 Employment 3 137~1'04' SDeli,~,~,usrcy onalties on all taxes ...... 360 1,276 9,065 77175 1,095 783 the appellate and court levels. Therefore, the fol- Ex"'. tax" ------tax".. ------13,950 14,793 ------...... 84 056 SIS 6'7 181 159 p.n.Ftiso...... ------...... ------45' 26 -...... ----- 14 lowing tabulations, beyond the returns filed and - 4

34 35 I ANNUAL REPORT e CHAPTER FOUR ENFORCEMENT ACTIVITIES at the end of 1964. For a detailed statistical report of activit)-the exchange of audit information- of case receipts and disposals during the year, see indicate that the program is producing worthwhile tables 23 through 25 on page 129. revenue results. For example, in calendar year 1964 the Service made additional assessments of taxes, in- Other Services Are Important terest, and penalties totaling nearly $7 million which were attributable to audit information received from show the number of cases . The statistical data the S tates. At the same time 18 Staid And the Dis- area and indicate handled in the collection litigation trict of Columbia made deficiency asgessments of $25 performed. generally the types of legal services being million as a result of audit information provided by However, such data do not reflect all of the activ- the Service. The proportion of such assessments collection litigation ities of the lawyers handling ranged from 11 to 85 percent of the total deficiency performs work. The collection litigation lawyer assessments made by the States and the District. many other services which are not counted as cases, A growing phase of the program is the use of com- with the including the maintenance of daily contacts puters to generate tax data for a mutual advantage and in- district directors' offices in furnishing formal to the Service and the States. For example, in de- formal legal assistance. In addition, these veloping leads to identify nonfilers and delinquents, t ininger' participate as instructors in the in-Service a State's tape file of income taxpayers was matched program for revenue officers. against the Service's tape to produce two separate tape files: ( I ) For State use-showing identifying Courts Decided Several Important Cases data. and names of individuals who filed a Federal The U.S. Supreme Court decided three cases but not a State return; and (2) for Service use- vitally affecting legal problems in the collection liti- showing names of individuals who filed State r~cturns gation area during the year. Also, the Court but no Federal return. granted certiorari in two cases decided by the U.S. Courts of Appeal. In addition, there were a num- Cooperation Includes Training and Discussions ber of cases decided by the Courts of Appeal, par. Cooperation between the Service and the States in ticularly in civil summons enforcement cases, in coordination of tax administration was not confined to the Supreme which petitions for writs (if certiorari to the exchange of tax data. The training of State Court were denied. Summaries of some of these personnel by the Service under Public Law 87-870 cases may be found.on page 128. gathered momentum during the year. Forty State tax men were admitted to various training courses FEDERAL-STATE COOPERATION EXPANDED conducted by the Service. In furtherance of the cooperative program, several Increase in the number of cooperative agreements discussions were held with officials of the National and expansion of benefits highlighted the Federal- Association of Tax Administrators who served as State Cooperative Program this year. South Da- a focal point for contact with State tax administra- kota, Maine, South Carolina, North Dakota, Michi- tors on across-the-board problems. This approach gan, Pennsylvania, Vermont, and Delaware were is proving especially effective in the formulation of added (in that order) to the growing list of States criteria and guideposts for exchange of the ADP with which the Service has concluded a cooperative data and the training of State tax personnel. exchange agreement. At year's end agreements were in force with 38 States and the District of Co- ALCOHOL AND TOBACCO TAX ENFORCEMENT lumbia and 2 additional ones were in process of PURSUED THROUGH A VARIETY OF APPROACHES negotiation. The map on the opposite page indicates where agreements are in force. Development of Cases Against Major Violators Emphasized Exchange of Information Benefits Both the Service confronting alcohol and and the States Enforcement problems tobacco tax investigators were substantially the same Although complete information on the benefits as those encountered in 1964, with the majority of accruing to the States and the Service from the pro- illicit liquor violations occurring in the Southern gram is not currently available, reports in one area States which historically have been the principal

36 37 ANNUAL REPORT CHAPTER FOUR ENFORCEMENT ACTIVITIES Eighty Percent of Enforcement Manpower Engaged through the agency scene of moonshine activity. To cope with these of the Association of Official The successful application of neutron activation in War on Moonshine Agricultural Chemists. problems with greater success, the perfection of cases analysis to specific items of physical evidence en- posing the greatest threat to the Research has led to the use of ountered in Treasury against violators Manpower directly involved with illicit liquor thin-layer chroma. law enf6rcement work led to and the development of evidence to with- tography as a routine laboratory practice in & further expansion of space revenue activities required about four-fifths oFall investiga- and equipment to carry trial action were given particular identification of narcotic substances. This new tech- out this work. The stand the tests of live time. The remainder Of the investigative effort number of samples subjected to nique was developed to confirm or verify neutron analysis emphasis. was expended on general enforcement programs, in- color and more than doubled from 1964. reflected in crystallization tests which in the past have often Service laboratories The soundness of this approach was cluding firearms, liquor dealers, and tobacco investi- analyzed 8,769 samples of proven inconclusive. Service chemists have illicit spirits and 5,088 the increasingly receptive attitude of U.S. attorneys gations as well as investigations requested by the written samples of narcotic drugs in and published a paper on the solvents 1965. During toward such cases, and the more severe sentences Attorney General and assignments to the Intclhgence system used in the preceding year, 9,316 illicit spirits this chromatographic imposed by the courts. Federal judges are fre- Division in connection with the drive on organized identification. It is antici. samples and 6,334 narcotics samples were analyzed. law pated that further research in this field For statistics on quently expreming their impatience with liquor crime. will extend laboratory work required by the violators in open court. This stiffening attitude is thin-layer chromatography to other analytical prob- Service's regulatory function, see page 42. Seizures and arrests resulting from this investiga- of prison sentences which lems, such as the development of a solvent system for reflected in the length live work in 1965 are compared with results of the averaged 449 days in 1965 compared' to 403 days in the separation and identification of barbiturates. A prior year's work in the following table: FIREARMS ACTIVITY APPROXIMATED 1964 LEVELS 1964, an increase of approximately 11 percent. system for assaying opium by thin-layer chromatog- This increase is significant, but more encouraging is raphy in combination with ultra-violet spectrophoto- Investigations of violations of the National and Seizures and arrests for alcohol, tobacco, and fireams violations the result of trial actions in conspiracy and other metry is another likely development. Federal Firearms Acts in 1965 resulted in the per- cases in which sentences increased from an fection of 394 criminal major It'. 1964 1965 Gas chromatography is being used successfully to cases, 254 arrests, and the average of 584 days in 1964 to 1,165 days (more seizure of 94 vehicles and 4,050 firearms. resolve many difficult analytical problems hitherto During S.1-im: 1964 these than3years) in 1965. 4:814'6 investigations resulted in the perfection DWIIf.,]as ------7: IN considered too complex for practical solution. Since mStill OdWilM as ...... -- 37 of 373 criminal cases, 300 arrests, and NM.,hontautiudd distilled SPIrits; ------its importance as a law enforcement the seizure Showed Great Promise ------I ------: --- : !!'cl* 3,123,183 1":637 '881 tool is now well of "Operation Dry-Up" Joel:: 94 vehicles and 3,567 firearms. See page 45 for V'hi'las------:7do'I 2,433:25'012 'a, ~19-3 established its use in the examination of enforcement, Property...... (appraised 7,426 information on the Service's legislative assistance Results of an experimental program initiated 3 knot ------n.rnbe- 8,198 as well as permissive, samples will increase. work in the firearms area. years ago in a Southern State may point the way to I Includes I afrest to, tube,. iolltion, and 254 r,.ot, for firear- Violations in elimination of large-scale illicit distilling operations 1965 cornfulld and, I and 300, spectiv.1y, in 1964. violations Includes seizures and arrests In cases adopted, as mil as originated, by in the Southern part of the country where theNoteIn6n.1- R.vlnu- S-1c.. in 14 States accounted for 96.7 percent of the mash seized, 82.0 percent of all seized vehicles, and 87.5 The 1965 increase in the seizure of illegal distil- percent of the arrests in 1965. This experiment, leries and the decrease in arrests were largely the rc- known as "Operation Dry-Up", was keyed, basi- sult of saturation-type raids carried out periodically cally, to unremitting pressure on the violator by an in an effort to measure the volume of illicit liquor enlarged investigative force. Tied in with this con- operations in selected areas of the Southeast Region. centration of manpower was an all-out effort to In conducting these raids the cardinal objective of secure the active support of enforcement officers and arresting violators at the scene of their operations was prosecutors at all levels--local, State, and Federal- subordinated to the more immediate objective of and to arouse the public to take a firm stand against locating and promptly destroying illicit distilling Alicit liquor violators and to take an active part in equipment. suppressing their criminal endeavors. The program was further supported by extensive use of radio, tcle- Low Enforcement Strengthened Through Chemical vision, and other news media to bring public at- Analysis and Research tention to the health hazards involved in drinking The development of court acceptable chemical produced with crude apparatus, moonshine whiskey and physical test methods for alcoholic beverages, often under the filthiest of conditions. The success narcotics, flavors, tobacco, and foods containing of this approach is demonstrated by the almost com- alcohol received increased attention in 1965. Many plete elimination of the commercial violator in this of the newly developed test procedures have gained State, where illicit operations in terms of average national and international recognition among regu- capacity per distillery, are now the smallest of all the latory chemists, and have generally been accorded a Southeastern States. The program will be extended preferred status in court testimony. This work was other to another Southern State in 1966 in an effort to carried on in cooperation with chemists from destroy the large-scale operations. Federal, State, city, and industry laboratories

38 1 39 SUPERVISION OF THE ALCOHOL AND TOBACCO INDUSTRIES

as consumer understandings. Industry members, gram for on-premises supervision. As a result, on- State control authorities, other Federal or State agen- premises inspector staffing at the close of the year cirs, consumer organizations, and others concerned was below the target figure for the first time since Chapter 5 will be invited to express their views and suggestions the.inception 10 years ago of a comprehl6nsive pro- for the consideration of the Committee. gram to modernize long-outdated concepts for regulatory control of plant operations. The reductions CENTRALIZED ACTIONS RELATED TO INDUSTRY were accomplished despite a generally upward trend Supervision ADMINISTRATIVE CONTROLS EASED- OPERATIONS in the factors which historically have goverried on- MAJOR REGULATORY STUDY UNDERWAY premises staffing. Label Applications Approved To iflustrate, at distilled spirits plants requiring of the Public Will Benefit From Simplified Reporting on-premises super-vision, Under the provisions of the Federal Alcohol Ad- since 1957, production of distilled spirits has increased substantially, tax-free The Service conducted a comprehensive reap- ministration Act, 47,454 applications for label ap- Alcohol withdrawals-principally for the arts. and praisal of forms and reports that it requires frorr proval, and exemption from label approval, were industries-have accelerated, taxpaid withdrawals gen- the regulated industries in connection with the ad. processed by the National Office during the year. erally have climbed, and stocks in bonded storage and ministration of the liquor, tobacco, and firearrrrs~ The decrease in this activity from the 50,805 appli- have mounted. During the same time, on-rolls laws. As a result, 17 public-use forms were simpli- cations processed in 1-964 was brought about by strength has dropped from slightly more than 800 Tobacco changes liberalizing procedural requirements for fied and the filing frequency was reduced for 14 on-premises officers to 420 at the end of 1965. will approach importers and bottlers of imported distilled spirits. others. Tangible benefits to the public These reductions in the face of accelerating in- of tire simpli- A single label application can now be filed to indicate Industries $450,000 in 1966 when the full effect clustry activity were accomplished by a continuing fications and improvements will be felt. the various degrees of proof at which a given product will be marketed, and, under certain circumstances, GOVERNMENT SUPERVISION AT DISTILLED SPIRITS PLANTS Agreement With Italy Simplified Export one application may be submitted to cover more than Manpower applied Requirements one set of labels. to on-premises supervision decreases while plant production rises An agreement has been reached and procedures Advertising Reviewed established whereby the Italian Government will ac- The Federal Alcohol Administration Act, as a cept American exports of distilled spirits without a means of supplementing controls over the labeling chemical analysis of each shipment of each brand of alcoholic beverages, imposes certain regulatory re- IV received from the United States. Although Italian quirements in thq field of advertising. To assure Ele Customs requires a chemical analysis of this type by compliance with these requirements, advertisements its laboratory, this requirement has been waived in in 19,176 issues of newspapers and magazines were 721 755 favor of a certificate of analysis issued by a chemist or examined and 4,673 radio and television commer- ! 642 laboratory certified by the Service as competent to cials were reviewed by the National Office. Al~ perform the analysis under specified analytical pro- though approval of advertising is not required prior cedures. to publication or dissemination, advance review of individual -advertisements or projected advertising Committee Set Up To Reappraise Labeling and campaigns were made in 918 instances at the request Advertising Regulations of the alcoholic beverage industry.

In June 1965 a Distilled Spirits Standards and Permits Issued, Formulas Processed Labeling Survey Committee was established to re- 1L_L_ In the National Office, 33 permits to use tax-free appraise the regulations issued pursuant to the Fed- 1057 1559 loll 1913 loss 1957 1359 1111 1163 1965 spirits and 15 permits to use specially denatured eral Alcohol Administration Act, as set forth in 27 spirits were issued to Government agencies. The 31.0 CFR, Part 5, Labeling and Advertising of Distifled CHANGE FROM 1957 ZIA 23.1 National Office processed 925 formulas for rectified function of the committee will 0 Spirits. The general products and 198 formulas for wine. be to examine, analyze, and evaluate the provisions of the regulations with particular attention directed ON-PREMISES SUPERVISION WORKLOAD IN- to recommend a pro- to standards of identity, and CREASED, COST REDUCTION CONTINUED gram to fulfill the purposes and objectives of the Federal Alcohol Administration Act consistent with Cost reduction through more effective manpower trade practices, as well utilization -41.3 present day production and again played a dominant role in the pro- _45.5

40 790-388 0-66-5 ANNUAL REPORT e CHAPTER FIVE program of analysis and modernization of on- crease represented a planned reduction to offset the premises supervisory requirements. The first full additional time required for more comprehensive harvest of this effort was realized in 1965 when the evaluations of proprietors' operations under the number of on-premises officers not only dipped be- audit-type approach which was installed only a few Chapter 6 low the reduced staffing goal, but continued to give years ago. Breweries and wineries iubject to inspec- adequate security to a revenue potential which has tion produced 108.0 million barrels (of 31 gallons reached an all-time high. The preceding chart de- each) of beer, 203.6 million gallons of still and effer- legislative picts the steady increase in distilled spirits produc- vescent wines, 5.1 million gallons of vermouth, and Legal The legal and work of the Service, per- tion since 1957 and the reverse trend in supervision 16.0 million gallons of special natural wines other formed by the Service's legal staff, includes technical' requirements resulting from the Service's simplifi- than vermouth. Tobacco products factories, also and litigation, and litigation advisory services. In the cations in plant control concepts. subject to inspection, produced 8.4 billion large technical area the legal staff contributes greatly to Distilled spirits plants requiring on-premises su- cigars, 437.7 million small cigars, 42,520 large cig- the Treasury Department's legislative program (see pervision produced 865.2 million tax gallons of dis- arettes, 563.2 billion small cigarettes, and 169.4 mil- Legislative p. 45). Representing the Commissioner in trying tilled spirits during 1965. Tax-free withdrawals of lion pounds of manufactured tobacco (including and helping to settle cases docketed in the Tax Court spirits amounted to 630.3 million tax gallons of smoking and chewing tobacco, and snuff). Activities of the United States constitute the litigation services which 581.6 million tax gaflons were denatured. rendered. The legal staff also furnishes advice re- Distilled spirits in bonded storage at the close of the lating to refund litigation, collection litigation, crimi- THOUSANDS OF SAMPLES SUBJECTED TO year totaled 1,061.6 million tax gallons. More than CHEMICAL ANALYSIS nal enforcement, alcohol and tobacco tax, and fire- 92.9 million proof gallons of rectified products were arms matters. Criminal prosecution cases, civil Distilled spirits bottled produced during the year. The national and regional laboratories analyzed litigation cases, legal services in collection litigation, totaled 244.5 million wine gallons. during 1965 a total of 38,589 samples in 1965. The number and workflow of cases in the Service and the courts analyzed during the preceding year was 40,559. are shown under Chapter 4, Enforcement Activities. EFFORTS TO IMPROVE TECHNIQUES IN THE IN- The majority of these analyses were generated by Detailed statistics on legal activities are shown in SPECTION OF ESTABLISHMENTS CONTINUED regulatory work but some were required by enforce- tables 18-26 on p. 127. The most important court ment work in the Service and other Treasury De- actions are reported in the Appendix beginning on i The most significant development in this area was partment Bureaus (see p. 39.) page 87. the expansion of the program to identify taxpayer In the National Office laboratory, 2,452 new behavior patterns and industry trends from monthly formulas for the use of taxpaid (nonbeverage) alco- CASELOAD RECEIPTS ROSE, DISPOSALS DECLINED industry operations reports. This program, which hol in foods, flavors, and medicines were approved inspectors and other technical is implemented by and 724 samples were examined. Comparative sta- employees acting as a team, is designed to give early Caseload receipts in the Chief Counsel's Office tistics for 1964 are 2,655 formulas approved and 647 warning of significant variations from normal in- during 1965 were 29,100, up 1,463 cases from the samples examined. Manufacturers usin specially dustry activities. It is expected to be especially use- .9 27,637 received in 1964. The disposals of total ful in measuring taxpayer compliance and self-assess- denatured alcohol submitted 4,682 formulas, 4,834 caseload were 27,551, a decrease of 1,215 from the ment at revenue-producing plants. samples, and 12,485 labels for approval this year. 28,766 disposed of in 1964. At the end of the year During the year a total of 30,552 inspections were Last year 4,876 formulas, 4,187 samples, and 8,754 the pending total caseload was 22,848, an increase completed compared to 31,538 in 1964. This de- labels were submitted. of 1,543.

GREATER PROPORTION OF CASES WON IN CIVIL LITIGATION BEFORE HIGHER COURTS

The Government won 16 and lost 6 of the 22 civil tax cases decided by the Supreme Court in 1965. During 1964 the Court sustained the Government in five such cases and decided against the Govem- ment in two cases. The Government also won, in whole or in part, 302 of the 381 civil tax cases decided by courts of appeal (exclusive of collection litigation and alcohol and tobacco tax legal matters), compared with 381 of the 520 such cases decided in

42 43 ANNUAL REPORT 0 CHAPTER SIX LEGAL AND LEGISLATIVE ACTIVITIES

CASE DISPOSALS BY OFFICE OF CHIEF COUNSEL Trial xwrt cases won, lost, or partially won by the Government SERVICE PROVIDES ASSISTANCE ON suggestion was included in a recommendation trans- REVENUE LEGISLATION mitted to the Congress by the Secretary of the Disposals declined In all areas except Collection To, Court of District Litigation and Alcohol and Tobacco Tax Court Claims Courts Treasury. Variety of Functions Performed 1964 1965 1964 1965 1964 Concern With Firearms Control Increased The principal activities performed by the Service In his message to Congress on law enforcement am Won ------_ ------_ 272 235 14 40 2271 2151 L.,t_...... ------100 84 15 13 80 ....41 I with respect to legislation during 1965 were related Partially sm...... ~ _'i ------143 179, 7 15 45 45 and the administration of justice, the President rec- Par...t eve or pants y -n------81 93 58 81 So 64 I to the Interest Equalization Tax Act and the Excise ommended the enactment of Federal controls over Tax Reduction Act of 1965. In addition, the Serv- the shipment of firearms in interstate and foreign ice engaged in study and research and furnished as- commerce designed to enable the States to control LITIGATION IN THE COURTS SAVES sistance with respect to other revenue measures which more effectively the firearms traffic within their own GOVERNMENT $256.7 MILLION were enacted by the Congress or are still pending. borders under their own police power. Draft legis- The regular and recurring functions performed by lation to carry out the President's recommendation Actions for redetermination of proposed deficien- the Service in connection with the Treasury Depart- was prepared by the Service in coordination with cies in the Tax Court are handled by the seven Re- ment's legislative program, reports on bills, drafting other interested agencies and submitted to the Con- gional Counsels while those for refunds of taxes and of legislation, and other technical work were congress by the Secretary of the Treasury. This legisla- penalties are handled at the National Office level. tinued. tive proposal, in large part, results from the Service's At the end of the year, $1.5 billion were involved in efforts to bring about a realistic and effective revision liabilities for taxes and penalties being contested by Significant Organizational Improvements Intro- of the Federal Firearms Act. For several years the taxpayers. duced into Legislative Advisory Program Service has maintained a close liaison with the Sub- In the trial or settlement of cases in the Tax Court, For a number of years it has been the practice of committee on juvenile Delinquency of the Senate $161.3 million was successfully defended as pro- judiciary Committee in its study of the distribution the Smice to accumulate and to submit annually to posed deficiency assessments, and $95.5 million was of firearms the Assistant Secretary for Tax Policy a substantial to minors and has assisted in the drafting successfully defended in -refund suits in the Court of and consideration of proposals to control and severe- number of suggestions for consideration in the Claims and the Federal district courts, for a total ly limit the sale of firearms in inters-tate commerce of $256.7 million of revenue saved for the Govelm- formulation of the Treasury Department's legislative program. These suggestions dealt principally to juveniles. Thus, the Service was prepared to ment (see table below). come forward with comprehensive legislative pro- with administrative problems, tax loopholes, and tax posals designed to effectuate the President's recom- CHANGE FROM 1964 Taxes in litigation inequities, and were gathered mostly from field of- 0 mendation. in thousands .1 dollars) fices through the Technical Coordination Program. This legislation was introduced in the Senate as This year, in the interest of broadening participation Tax urt S. 1591 and S. 1592 and in the House of Rcpre- Refund in the consideration of recommendations to be pre- Status Total ,032a952,1116,9457.6376,9om'i H gaition sentativrs as H.R. 6628 and H.R. 6629. Hearings sented to the Treasury Department, assuring high- were held on the proposed legislation by the Subcom- level evaluation within the Service, and selecting mittee to Investigate juvenile Delinquency of the Pending July I - 1 431 297 '56 4DO 115 only the most important administrative, technical, Received.---- ::: 1 ' 593 07W 96' Senate judiciary Committee at which the Secre: Disposed of...... ------5601,81 573is 132:66M73 and other changes, a Committee for Legislative Rec- Pendingm, June 30 454 208 2 79.27,3.292 364,95, tary, the Under Secretary, and the Commissioner Arn.u a,,d------~_. '256:705 356821557as P 0Y:28440 4 11 0"454 ornmendations was established. The Committee is appeared in support of the legislation. also responsible for developing the best possible , Revised to give effect to change in reporting methods. means of obtaining suggestions and preparing the Direct Legislative Assistance on Important Acts Service's recommenclationg for the Department's tax TORT CLAIMS CONTINUED TO INCREASE Provided -45.5 legislative program. It is composed of executive- The number of claims for damages resulting from level representatives of each Assistant Commissioner By far the two most important acts involving tax and the Chief Counsel. 1964. Thus, the Goverminent's position was wholly negligence of Service employees acting within the legislation passed this year were the Interest Equali- scope of their employment still continues to increase. In accordance with the desire to restrict sugges- or partially sustained in 79 percent of courts of ap- zation Tax Act, approved September 2, 1964, and Claims in an amount of $2,500 or less may be de- tions from the Service to only the most important the Excise Tax Reduction Act of 1965, approved peal cases, compared with 73.3 percent in 1964. termined by the agency involved. During the past ones, there were submitted this year only 15 items June 21, 1965. Representatives of the Service par- For details as to civil litigation cases, see tables 21 year, 201 such administrative claims were disposed for consideration in the formulation of the Depart- ticipated in all major phases of the development of and 22 on pages 128 and 129. of by the Service (as compared with 143 last year ment's legislative program. One of these sugges- thesetwoActs. This participation included prepar- In the trial courts (Tax Court, Court of Claims and 99 the preceding year). Thirty-one tort suits tons, relating to farmers' gasoline tax refund claims, ing necessary background material, attending public and U.S. district courts) the record of Goverriment for judicial determination were instituted during the was the basis for section 809 of the Excise Tax Re- hearings and Congressional Committee meetings, wins, losses, and partial wins appears as follows: year. duction Act of 1965. Another of these suggestions and rendering technical assistance in drafting the relates to the proposal to require direct filing of legislation. Similar activity was directed toward income tax returns with service centers, and that other enacted and pending bills.

44 45 ANNUAL REPORT 0 CHAPTER SIX LEGAL AND LEGISLATIVE ACTIVITIES

In addition to activity on enacted and pending Public Law 88-539, relating to the exportation of i Two Important Pieces of Legislation Were Pending 622 and nonattorney employees 634. This figure bills, assistance was furnished to the Office of the imported distilled spirits and revolving credit sales. represented a decrease of 20 employees from the Among & tax bills awaiting action by the Con- Secretary of the Treasury by the preparation of Public Law 88-563, the Interest E~ualization Tax preceding year. The attorneys were assigned to the information reports, technical reports, drafts of bills, gress at the end of the year were the following two Act, relating to a tax on long-term debe obligations bills which had already been passed by the House: National Office and regions as follows: and accompanying technical explanations, and other and equity securities of foreign issuci~ which are H.R. 4260, to permit corporations to qualify as data relating to legislative matters. Included were Nuniber of acquired by U.S. persons. real estate investment trusts. a number of formal reports on Congressional bills Oflice attorneys Public Law 88-570, relating to the release of lia- H.R. 6675, Social Security Amendments of 1965. which dealt with proposals to amend the Internal National Office ------245 bility under certain bonds and nonrecognition of Central Region ------44 Revenue Code and other legislative matters, includ- gain on repossessed real estate. Mid-Atlantic Region------56 ing private relief bills. SMALL DECREASE IN LEGAL STAFF Midwest Region ------54 Public Law 88-571, relating to taxation of life North-Atlantic Region------74 insurance Southeast Region------43 Several Means Employed to Implement Legislation companies, the depletion rate on beryllium As of June 30, 1965, the Chief Counsel's ores, and a 10-year corporate carryover of expro- Southwest Region ------41 employed 1,256 persons, with attorneys numberingOffice Western Region ------65 Whenever new tax legislation is enacted, the Serv- priation losses. ice implements the legislation by a variety of means. Public Law 89-44, the Excise Tax Reduction Act Examples are the issuance of new and amendatory of 1965, relating to changes in certain excise and regulations, revisions of tax return forms and instruc- miscellaneous taxes and also to miscellaneous other tions, issuance of News or Technical Information changes in the Internal Revenue Code of 1954. Releases calling attention to and explaining the pro- 'Ile Excise Tax Reduction Act of 1965 embodied visions of the new laws, the revision of Service pub- the recommendations for the reduction and repeal of lications, and the issuance of special instructions on certain excise taxes made by President Johnson in his procedures to field offices. message to Congress on May, 17, 1965. The excise taxes existing prior Much Accomplished in Implementation of New Acts to the 1965 Act were, for the most part, initially levied as emergency revenue-raising The Service is already well on its way toward measures at the time of the Korean war, World War implementing the tax legislation enacted during the 11, or the depression of the 1930's. The 1965 Act year. In the case of the Interest Equalization Tax represented a comprehensive overhaul of the Fed- Act, several technical information releases explain- eral excise tax structure. Among other things, the ing the Act and a series of temporary regulations pro- 1965 Act provided for the of the manufac- viding administrative and procedural rules have been repeal issued. The Service also participated in the devel- turer's excise tax on refrigerators, freezers, self-con- opment of four Executive Orders which were pro- tamed air-conditioning units, electric, gas and oil mulgated under the authority of the Act. appliances, radios, television sets, phonographs, pho- Implementation of the Excise Tax Reduction Act nograph records, musical instruments, sporting goods of 1965 required unusual procedures. There were (except fishing equipment), photographic equip- a number of actions which retailers, manufacturers, ment, and business machines and for the reduction etc., were required to take in preparation for, and of the excise tax on passenger automobiles. Present immediately upon approval of, the Act with regard or future repeal was also provided for a number of to such things as. records for inventory and possible other miscellaneous taxes; for example, those relat- claims for refunds. To meet the needs of such tax- ing to communications, admissions, club dues, play- payers, the Service a series technical in- issued of ing cards, and coin-operated amusement devices. formation releases prior to the approval of the Act which gave guidelines as to what would be required Another category of excise taxes affected by the of taxpayers should approval occur. Act were those on alcohol and tobacco. Itsprincipal effect was to make permanent the temporary rate increases first imposed in 1951. The major other SIGNIFICANT LEGISLATION ENACTED chantsge in this area was the elimination of the 10- Congress enacted a number of public laws relating cents-per-pound excise tax on manufactured tobacco, to tax matters, some of the more important of which effective January 1, 1966. Consequently, statutory are listed below: provisions for the supervision and control of those Public Law 88-484, relating to collapsible cor- who handle and ship tobacco materials wUl be elimi- porations and personal holding companies. nated also. 46 1 47 I I

INTERNATIONAL ACTIVITIES I Bolivia, Brazil, Costa Rica, Dominican Republic, on the basis of their abilities in tax administration. I India, Panama, Paraguay, and Uruguay. Thereare The Mobile Training Teams, which traveled from 17 such teams now !Ictive overseas. In prior years, country to country in Latin America, were equipped Chapter 7 teams were established in Chile, Colombia, Ecuador, to teach audit subjects ranging from basic account- El Salvador, Guatemala, South Korea, Nicaragua, ing to advanced audit techniques depending on the Peru, and the Republic of the Philippines. pre-existing capacity of host country trainees. Both Fifty-one long-term advisors are assigned to these pilot programs were successful. International INTRODUCTION teams. An additional 33 short-term advisors were The newest aspect of the training program, the I detailed abroad this year for special 60- to 90-day International Tax Administration Training Series Activities The overseas affairs of the Service divide into three projects. Surveys of tax administration needs were (INTAX), will become operational in fiscal year broad areas. The largest in terms of Service re- completed in the Dominican Republic, Jamaica, 1966. It will encompass a scheduled series of courses sources expended is the administration of the tax Panama, and the East African Common Services for upper level administration officials from Latin laws as they apply to U.S. citizens living abroad, Organization (Kenya, Tanganyika, and Uganda). America in overall tax administration supervision, nonresident alien recipients of income from U.S. audit, collection, taxpayer relations, training, data sources, and resident foreign corporations. Another Many Foreign Visitors Received processing, and fraud investigation. These courses involves participation in the negotiation of tax con- will be given at the new National Training Center, ventions with foreign countries and the preparation On the domestic side of the program, 319 foreign and will be taught in Spanish. Later, INTAX will from countries visited the of regulations under these pacts. In addition, the officials and students 54 be broadened to cover other geographic areas and Service this year, including the chief tax officers from Service furnishes technical assistance to developing other subjects. Training of foreign technicians will Brazil, France, Nicaragua, and Uruguay. Most countries to help them continue in the host countries, using both local train- strengthen and modernize visitors received specialized orientation or training their tax systems. ing programs and the Mobile Training Teams. in National Office and field operations. The Foreign Tax Assistance Program is conducted in collaboration with the Agency for International FOREIGN TAX ASSISTANCE PROGRAM Conference Held on Tax Administration in Development, Department of State. DEVELOPMENT CONTINUED Latin America In May 1965, a regional conference on tax ad- The Service's foreign taxassistance program, ac- SEVERAL TAX CONVENTIONS NEGOTIATED ministration in Latin America was held in Miami tivated in 1963, is designed to meet requests for tech- under the joint sponsorship of the Service and the Discussions took place in Washington with three nical assistance in tax administration from develop- Agency for International Development. The con- ing countries of the free world. To insure effective countries and abroad with seven countries with a ference operated as a forum for the identification view to the conclusion of four new income tax con- coordination both within the Service and among and analysis of problems, and potential solutions ventions, five protocols supplementing those already other agencies, the Foreign Tax Assistance Staff, found in the Latin American countries. The re- in existence, and one tax convention replacing an I which administers the program, operates as an in- sults of the conference are being used to develop a existing one. The texts of such agreements were in tegral part of the Commissioner's Office. more coherent and systematic approach to adminis- various stages of development at the close of the Generally, the program has been divided into pro- trative improvement in that region of the world. year. gram areas, defined in terms of both function and type of tax. Areas of major concentration include Spanish Used in New Training Programs for On July 29, 1964, the Senate gave its consent to audit, collection, training, and taxpayer relations. Latin American Officials the ratification of two protocols supplementing the In certain countries, due to special conditions, fraud income tax convention with Japan, supplementary Despite the brief investigation and data processing are also being duration of the program, it has protocol to the Swedish income tax convention, a become increasingly emphasized. clear that one of the most urgent protocol supplementing the income tax convention needs in the developing countries is trained per- with the as it relates to the Netherlands- Under the direction of the Staff, the program con- Netherlands sonnel. Two pilot programs were introduced this with the tinued to expand in 1965. Additionally, consider- Antilles, and an income tax convention year, a course for audit supervisors from Spanish- able progress has been made in refining the program Grand Duchy of Luxembourg. speaking Latin American countries at based on experience to date. held the Al. There was an exchange of the instruments of buquerque District Office, and Mobile Training ratification of the protocols with Japan on Septem- Teams. The Albuquerque More Tax Modernization Teams Established course was taught en- ber 2, 1964, and May 6, 1965, the protocol with tirely in Spanish by Service personnel fluent in that Sweden on September 11, 1964, the protocol to the During the past year, long-range tax moderniza- language. This innovation in AID-sponsorrd train- income tax convention with the Netherlands as it tion teams were established in eight more countries; ing, permitted the selection of participants solely relates to the Netherlands-Antilles on September 28,

48 1 49 ANNUAL REPORT * CHAPTER SEVEN I INTERNATIONAL ACTIVITIES at the posts in Ottawa 1964, and the income tax convention with the Grand sentatives and Sao Paulo and for a passport, a passport renewal, or registration at cases involving double taxation. Consultations on Duchy of Luxembourg on December 2 2, 1964. the authorization of additional posts at Bonn, Rome, any U.S. embassy or consulat!e will be requested to six cases were held during the year. A supplementary protocol to the income tax con- and Tokyo. The post at Bonn was activated in 1 complete an information form for the Internal Rev- vention with Belgium was signed on May 21, 1965, June 1965 and arrangements were cqmpleted to enue Service. The applicant will not be denied the Coordinated Examination Program Completed and income tax conventions with the Philippines, activate the Rome post early in fiscal yc~r 1966. In passport or registration if he refuses to complete the Thailand, and Israel were signed on October 10, addition to the performance of their ~egular audit, form. However, his name and foreign address will In addition to the above functions, the Office of 1964, March 1, 1965, and June 29, 1965, respec- International collection, and fraud investigation functions, the be noted on the form by the embassy or consulate Operations completed during the year tively. a special, temporary role in the international en- foreign posts also furnished 261 collateral informa- official. The information on the form will be uti- forcement program. This role resulted from tion reports at the request of various districts and lized in the National the Identity File for checking pos- tremendous postwar EXPANSION OF COMPLIANCE AND National Office components. A total of 207 such growth in the volume and com- sible delinquencies. plexity ASSISTANCE SERVICES HIGHLIGHTED reports were furmished during 1964. of international business transactions. To enable the Service to cope with the situation, special- INTERNATIONAL OPERATIONS Economic Advisory Group Aided Over 45,000 Overseas Taxpayers Assisted Auditors ists in the Office of International Operations when Broad Program Conducted As in past years the economists of the Office of In- requested by the districts, participated in a program To complement the work of the foreign posts in ternational Operations, section 482 Advisory Group of coordinated examinations in domestic cases in- include the area of taxpayer assistance the Service again The international operations of the Service initiated and completed several industrywide studies volving complex international transactions. District administering the tax laws as they apply to U.S. conducted the annual Overseas Assistance and Edu- intended to establish pricing guidelines and provide agents were recruited and trained by the Office of citizens living abroad, nonresident alien recipients cation Program. Participating in the program were other economic data for utilization by Service per- International Operations to handle these cases. The of income from U.S. sources, and foreign corpora- 26 specially chosen and highly trained agents. These sonnel auditing cases involving allocations under specialized training of these agents has now been tions. The promotion of voluntary compliance is of agents traveled in excess of 130,000 miles, visiting section 482 of the Internal Revenue Code. In ad- completed and they were returned to their respective primary importance in these operations. In addi- 118 cities in 56 countries. Assistance was rendered dition to the industrywide studies, this group gave district offices on March 28, 1965. tion, the Service, through its Office of International to 45,131 taxpayers through personal and telephone expert advice when called upon by the field to aid During the year, prior to the return of these agents Operations, acts as the Government's competent au- contact and through correspondence. In addition, in the preparation of cases to be litigated in the to the districts, the Office of International Opera- thority under the many tax conventions between the the agents conducted 14 schools for military tax courts. In a significant case involving intercom- tions accepted for coordinated examination 228 of United States and other countries. instructors assigned to assist armed forces personnel pany pricing, one member of the group appeared in the 550 cases referred to it. Recommendations of court abroad in the preparation of their tax returns. as an expert witness. $95.3 million in additional tax were made and 200 Nearly 455,000 Returns Filed cases were closed out of the 228 accepted for coor- Double Taxation dinated examination. During the existence An indicator of the magnitude of the Service's Identification of Taxpayers Required Special Mitigated of this program, 1,442 cases were international operations is the number of returns Program accepted and 953 of these To provide relief from double taxation resulting cases have been filed with the Office of International Operations. closed. The income adjustments from adjustments recommended under the coordi- A total of 454,717 returns were filed with the Office In order to insure compliance in the international recommended in these 953 cases totaled $768.5 mil- nated examination program referred to below, during the year, an increase of 7,279 over the preced- area, the Service is developing programs for iden- the lion, resulting in tax deficiency adjustments of $386.7 Service has issued Revenue Procedure ing year. Added to the full range of audit and col- tifying U.S. persons whomay be liable for U.S. taxes. 64-54. Rev- million, an average of almost $406,000 per case. lection activity are many special problems not usually Under one program initiated pursuant to the Rev- enue Procedure 64-54 authorizes a U.S. taxpayer encountered in domestic returns. This results from enue Act of 1962 the names of approximately 14,000 to apply for relief for tax years beginning prior to Some Statistics of Income Paid to the complexity of the laws pertaining to international U.S. persons who hold at least a 5-percent interest January 1, 1963, if there has been economic double Nonresident Aliens taxation and to the special treatment of income un- in some 26,000 foreign corporations have been iden- taxation or undue hardship due to income tax ad- Approximately 12,000 of the returns filed with der the respective tax treaties which no doubt ac- tified and furnished to the districts. From these justments. During the final quarter of 1965 the the Office of International Operations were Forms counts for the higher error rate on returns examined. identity lists the districts can check whether such Office of International Operations began considera- From the 22,104 jurisdictional returns examined the tion 1042, the form used by withholding agents to report persons have income from foreign corporations or of several such requests. deficiencies and penalties amounted to $57.9 million tax withheld at the source on certain income paid to are liable for tax under subpart F and subpart G of which is an average of $2,619 for each return ex- Competent Authority Exercised nonresident alien individuals or foreign firms not the Internal Revenue Code. amined. There were 18,753 Taxpayer Delinquent doing business in the United States. Tabulations Another identification program, developed this Accounts collected for a total of $6.4 million. In his role as Competent Authority, the Director income data on the Forms 1042 filed for calendarof year, is concerned with U.S. taxpayers residing of the Office of International Operations continued year 1963 revealed that $727.13 million of income abroad. The primary Workload at Foreign Posts Increased aim of the program is to to be responsible for administering certain provi- from U.S. sources was paid to nonresident alien indi- identify U.S. citizens who have been residing abroad sions of the several tax conventions. This role in- viduals, foreign corporations, and other foreign enti- During the past year activities relating to U.S. orwho intend to reside abroad for at least 6 months. cludes the exchange of information on an automatic ties. This includes the income paid to residents of taxpayers abroad increased materially, necessitating Pursuant to an agreement reached with the Depart- and special request basis and the consultation with the 21 countries in which the tax was reduced under an increase in the staffs of Revenue Service Repre- ment of State, citizens of the United States applying foreign tax authorities concerning the disposition of income fax conventions effective for 1963. The in-

50 51 ANNUAL REPORT 9 CHAPTER SEVEN come paid in 1963 was an increase of $88.5 million Tax withheld from payments to nonresident alien entities of over the 1962 payments and is a record high. treaty and nont,eaty countries, calendar year 1963 Of the $727.8 million paid in 1963, $473.3 mil- Tho ...rd d.11... lion, more than half the total, represented payments Number of Chapter 8 country information Tax withheld TaylfTom of dividends from U.S. industry. Interest paid to documents by domestic foreign gov- withholding -ramits ., Total foreign residents was $147.1 million. The combined agent, withholding total of $620.4 million in dividends and interest paid MANAGEMENT OF THE SERVICE Total ...... __ ------Planning on foreign investment in the United States is 85 per- 436,106 90,904 12,692 103,596 REOUIRES COMPREHENSIVE PLANNING, aliens and Trea~y Countries: cent of all U.S. income paid to nonresident Iu 2,592 251 ------216 1 RESEARCH, AND DEVELOPMENT foreign business entities. Aus ria ------922 61 ------_ Activities lielglum_------_ 9,413 895 ------115 2 000 r ..its ------156,649 201: 943 943 21: 786 The size of the Internal Revenue Service From the total income paid in calendar year 1963 lurnmurrk- 1,429 120 120 and 314 19 ------19 the to nonresident aliens and foreign entities, $103.6 9: 3508- 31: 17 ...... 7. 31:,I ll' complexity of its mission make thorough plan- German6 168 - ning a prerequisite for effective management. Plan- million in tax was withheld at the source. This in- -,::::: _ 2,419969 176 _ ...... 176 harchn clude,% $12.7 million additional U.S. tax withheld Ireland. ----- 2,985 319 _ :: 289 ning activities are centered on the formulation of the IInify.- ~------_----- 15 577 636 ----- 3'136 Long-Range Plan, a comprehensive master plan for by withholding agents in the foreign countries and open.. ------511 405 ...... 405 1 1.13 111 4,974 the entire remitted to the United States where it was deter- N':Uthmr' h'"I'-md~ Antilho 2 &U 2,044 3 2,047 Service. New Zealand ...... 645 47 ------18747 mined in the treaty countries that the ultimate re- Norway...... ------3,938 117 It is axiomatic that planners cannot plan in a Pakistan ------198 21 21 cipients of the income did not qualify for reduced Siald 3 398 ------398 vacuum. In the Service, plans are based on facts Sw 29:4741" 17 945 11 222 29,16 rates. The following table is an analysis of tax with- Union of South Africa 720 ' 227 - ...... , 227 and forecasts arrived at through an extensive and United Kin gdom__and over. held from payments to nonresident alien entities. sees is toris ----- 45,436 22,070 291 22,361 penetrating multiphase research effort. Statistical Nantre ty countries_ by Form 1042S. ------1—- 70,091 12,512 ...... --- 12,512 reporting (required by statute and serving many Treaty and nob tresty countries =tn,. o d information - purposes not related to planning in the Service) and 44,967 1,201 ------... I 1,201 ------I measurement of taxpayer compliance are two of the most important research programs. Basic to all planning efforts is the annual review of the Service's resources and goals in connection with the updating of the Long-Range Plan. The Service, like any large organization, must systematize its work in order to cope with it in an efficient manner. An integral part of research and planning is the refinement of existing systems and the development of new ones.

BOTH LONG-RANGE AND SHORT-RANGE PLANS ARE FORMULATED

Long-Range Plan An Essential Tool

A Long-Range Plan for the Internal Revenue Service is an essential management and planning tool for establishing goals, forecasting future needs, and assuring that current programs are designed to meet established goals. The prime objective of the Plan is to maintain a low-cost Federal tax administration system by maintaining and extending high levels of voluntary compliance with tax administration requirements. The achievement of this objective requires the continuous evaluation of every phase of Service operations in order to forecast basic growth needs and to identify opportunities for improvements in taxpayer compliance and in the utilization of re-

53 52 ANNUAL REPORT as CHAPTER EIGHT PLANNING ACTIVITIES sources. The needs and opportunities thus identi- priations, appropriate adjustments are made and turns to determine the degree of compliance by - of every nine taxpayers in this region was delinquent fied are carefully reviewed in terms of available resources are allocated to the various activities of payees in supplying valid taxpayer identification for either 1962 tax or information returns as of the alternatives, overriding priorities, and practical re- the Service as part of the Financial Plan. numbers to payers for use on information retAis; survey date. However, these results also indicate source limitations. Upon passing these -tests, they Current goals, workloads, and performance meas- and (3) participation in. studies on the feasibility of that the dollar amount of delinquency not already provide the basis for the operational goals and the urements in the principal activities are,provided by extending the information reporting system to addi- disclosed by existing enforcement programs is rela- program guidelines in the Long-Range Plan. detailed work planning and control systems and by tional governmental payments. tively small and consists mainly Of individual income integrated reporting requirements. With a view to increasing compliance by improv- and employment taxes. A special compliance pro- Forecasts Indicate Continuing Increase in ing administrative procedures, the research staff (I ) gram for 1965, based on the survey findings, has Returns Filed CURRENT RESEARCH PROGRAM COVERS A BROAD re-examined the advantages and disadvantages of been installed. The most important workload indicator used by SPECTRUM OF SERVICE ACTIVITIES alternative plans of graduated withholding of taxes; In anticipation of the availability of data from long-range planners is the forecast of tax returns (2) developed alternative formats and methods for Phase III in July 1966, the Service has also started Much Research a Response to filing. The volume of returris filed in recent years extending the use of optional tax tables; (3) tested a new research project to use mathematical tech- Current Developments has been steadily increasing and the outlook for con- and refined procedures to assure taxpayer com- niqurs to develop an effective ADP procedure for tinued growth in the Nation's population, labor Contemporary developments, both internal and pliance in reporting wages, dividends and interest by selecting from the 65 million individual returns filed force, and economy indicates further substantial external, played major roles in shaping the direction utilizing the capabilities of electronic equipment; annually those most urgently in need of examination. gains in the number of returns. The number filed of research activities during the year. Proposed and (4) submitted proposals for improving the sys- If present expectations are realized, the ADP selec- during the calendar year 1964 was approximately changes in the excise tax laws, administrative prob- tem of withholding on payments made to nonresi- tion would increase the effectiveness of a given size 100 million, representing an increase of 12 million lems resulting from the 1964 changes in the Revenue dent aliens. audit staff by: (I) reducing the proportion of ex- returns during the last 10 years. Projections recently Code, administrative difficulties arising out of the amined cases resulting in no tax change; (2) in- prepared for long-range planning purposes indicate increased scope of data processing, the Service's Measurement of Taxpayer Compliance Already creasing the average tax change resulting from audit; that the number of returns filed will reach 111 mil- emphasis on improving operations and compliance, Producing Tangible Results and (3) substantially reducing the manual returns lion by 1970 and will exceed 121 million by 1975. the acceleration of interest in Service statistics and To obtain data in problem areas to permit more classification requirements. The accompanying table shows the national projec- activities by congressional committees, academic in- effective development of the Long-Range Plan, and Expected short-run operational benefits from tions for selected types of returns. stitutions, other Government agencies, and State to meet the demands for a long-range research pro- TCMP can be summarized as: (1) establishing the and local governments, all necessitated research rc- gram which would complement and further the ob- extent of potential cost reduction from revised col- Selected type. of returns filed in 1964 and projected far calendar sponses in the forTn of studies and various analyses. lection programs based on greater use of data proc- years 1965, 1970, and 1975 jectives of the Long-Range Plan and other tax ad- IThe ...mcial ministration requirements, the Service has developed essing procedures and lesser use of enforcement Proposed Legislation Also Necessitated Research manpower; (2) determination of the level of ade- Projected and implemented a Taxpayer Compliance Measure- Type of return Actual quacy of the Business Master File as a delinquent 1964 1 As in prior years, special studies of the adminis- ment Program (TCMP). TCMP is gathering new 1965 1970 1975 trative effects of proposed legislative changes ac- data in three distinct phases (Delinquent Accounts- returns check; (3) disclosure of pockets of delinquent returns for Total .turn ...... 100,370 102,035 111.223 121,479 counted for a substantial part of research time and Phase I~ Delinquent Returns-Phase 11; and Re- noncompliance systematic follow- through by enforcement personnel, educational pro- Individual, total...... _ ------64,460 65,995 73,008 79.783 resources. Prominent among these studies were: tums Filed-Phase III). At this juncture, the grams and other indicated tax administration AGI under $10.000 1 ------56 489 57 121 58 912 59,894 ( I ) an estimation of administrative costs related to foundations of all three phases have been laid; out- AG 1 $10,000 and .was ...... 7:971 8:874 IW,096 19,900 various excise taxes, (2) an analysis of dividend ex- puts from 1963 Phase I and 11 programs have been methods; and (4) development of an effective ADP corporation, total ...... 1,396 1,467 1,837 2,215 clusionS reported on joint income tax returns, (3) tabulated and partially analyzed; and plarls for the selection procedure for some 65 million individual Forns,1120 total I 235 I 240 I 42 I 722 returns filed annually. In addition to the efficiency va~ und;r"iW.W,r-:_ , 549 ' 549 ' 644 ' 738 a study of the income characteristics of stockholders 1966 operations of Phases Il and III are in the Assets $Witor under 619 625 762 898 of small corporations, and (4) a survey of various process of development. expectations outlined above, TCMP will help 68 67 76 86 selected characteristics of tax exempt organizations. Tangible results have already been obtained from greatly to clarify overall tax administration needs by 1441 167 277 398 7 6D 78 96 Research personnel also actively participated in the 1963 Phase I tabulations. TCMP data indicated providing new data indicating the sizes of the var- Employment. ------_ ------21, 22: 37'.94 21u:4171 26,680 deliberations of four legislative study groups. that a significant portion of the payment delinq en- ious kinds of tax-return-filing delinquency problems All others 4...... 12,6D4910 12 98 12,800 cies referred to local offices for collection were closed among farm and nonfarm business taxpayers, and Date by rise class are estimated. Studies of Noncompliance Conducted the tax effor problems of individual income tax- inn,Vddi lion to Forms 1040 and 1040A. includes Forms 1040C, B, N B, N Be, PR, and SS. by correspondence. Accordingly, a new procedure d., For.. 1120 vvith ....ft not reported. payers. Includes individual declarations, corporation declarations, parteenhip, estate, gilt, Research efforts directed toward determining the was inaugurated in early 1965 providing for the ex- exempt7 a organization special occupation 2.fiduciary, and excise to, returns. and Forms, Over a longer period, TCMP will indicate whether 004 nd tentative Y120L and M and 16 extent of noncompliance covered a wide area of the panded use of automatic data processing in the Seirvice's responsibilities. Among the more signifi- mailing of followup notices and in related processing the current levels and methods of tax administration Short-Range Operational Planning Based on cant. noncompliance studies were; (I ) nationwide operations on these accounts. This procedure re- are reducing, increasing, or maintaining the willing- Long-Range Plan taxpayers to comply samples to deterTnine the degree of taxpayer compli- lieves the local offices of a substantial clerical opera- ness and ability of with the Planning for the near and current years is based ance in reporting interest from Series E and H tion and is anticipated to reduce delinquent account Federal tax laws. bonds, and the comparability of other interest in- issuances by about 500,000 annually. on the portions of the Long-Range Plan which can Organizational Studies Promoted Similarly, data realistically be attained in such periods. Budget re- come and dividends as shown on tax returns with useful were obtained from the Operational Effectiveness quests for the coming year are based directly upon the amounts given on information returns; (2) a 1963 Phase 11 survey of nonfarm businesses in the the Plan. After enactment of congressional appro- study based on a sample of filers of information re- Southeast Region. The data indicate that one out A series of studies directed toward the more eco-

54 55 ANNUAL REPORT sit CHAPTER EIGHT PLANNING ACTIVITIES nomical and effective organization of field offices list of these reports published during the year may The U.S. Business Tax Return Report for 1962 permits the Service to make data available for sta. of the be found on page 92. culminated this year in the consolidation presents for the first time statistics on the extent in- tistical purposes while at the same time protecting former Northeast and New York Regions into the The 1962 Individual Income Tax Return Report dividuals engaged. in farming depend on income the confidentiality of the tax returns. present North-Atlantic Region. For more infor- presents new information relating to contributions from various other sources. The 3.3 million individ- mation on this and other improvements resulting by type of recipient, itemized dcductions,~L a percent uals engaged in farming in 1962 also had income of Special Studies Conducted of adjusted gross income, size of inveAment credit, $6.9 billion from wages and salaries, more than twice from organizational studies, see page 63. Under the terms and itemized deductions and types of exemptions by the amount they reported for net farm income. of sections 7515 and 7809 of the States. A supplemental report was issued presenting Internal Revenue Code as amended by Public Law Statistical Reporting Provides Data for Government Other new statistics include data on inventory valu- area data for 1959, 1960, 87-870, the Service continued to undertake special and Non-Government Research State and metropolitan ation methods, the investment credit, and receipts- And 1961. Of particular interest in the report for to-invcntory ratioss. studies on a reimbursable basis. During the year, 13 projects were completed, with the estimated cost By drawing on the data furnished in tax returns, 196:3 individual income tax returns is the increased The 1962 Corporation Income Tax Return Re- of previous the projects ranging from $200 to $17,000. The the Internal Revenue Service continued during 1965 reporting of dividends and interest over port presents the first complete statistics on the in- . major users have been other Federal Government to prepare, at relatively low cost, statistics f or use in calendar years, both in number of returns and vestment credit allowed under the Revenue Act of amount. There were 6.6 million more returns with agencies, State and local government agencies, uni- analyzing the operation of the Federal tax system for 1962. These data show that 40 percent of the cor- versities, private individuals, companies, and re- interest from savings accounts and other sources, a porations that reported an income tax also claimed both revenue estimating and tax research purposes. search organizations. In addition, 72 requests for growth of 45 percent over the preceding year, while an investment credit. The credit totaled $833.7 As a useful byproduct of the tax reporting process, material from the Source Book of Statistics of In- the amount reported rose $2 billion or 29 percent. million and was based on purchases of depreciable these statistics provide a financial profile of taxpayers conic were filled, consisting of approximately 1,400 Approximately 1.6 million more returns showed property in excess of $22 billion. Also new in this and also supply financial and economic data used in in 1962, an increase of 20 photostats or microfilm prints and 44 rolls of dividends in 1963 than report is information on gains and losses from the the preparation of the National Income and Product microfilm. percent, with the amount of dividends increasing sales of section 1231 property and on inventory valu. Accounts and in research conducted by other Gov- over $800 million or 7 percent. ation methods. ernment agencies, businesses, private research or- The following table presents, for a 5-year period, Committee on Statistics Has Advised an Users Needs ganizations, and universities. The data are pub- some of the overall summar~ information contained Models of Taxparying Populations Are The Treasury-Internal Revenue Service Commit- lished in the Statistics of Income series as required by in the Statistics of Income reports for individual tax- Proving Useful tee on Statistics was established in 1962 to advise section 6108 of the 1954 Internal Revenue Code. A payers. Service officials as to the current needs for tax data The Service has been making increased use of Sta- of the principal users of Statistics of Income. It also Individual income to. t.m,: Number of returns, sources of income, and Remixed deductions tistics of Income tax models for tax research. A new provided technical advice and guidance regarding model based on a sample comprised of 100,000 in- Income year the standards of quality and timeliness which should dividual income tax returns for 1962 was developed 1959 be maintained in producing Statistics of Income. In to provide fast and reliable estimates of the revenue accordance with the provisions of Executive Order (Thousands) effect of changes in tax laws and their admintstra- 11007, the Committee was continued for a 2-year 60.271 fil'on 61,499 62,712 63,943 tion. This model, consisting of a magnetic tape file All individual returns, total...... __ ------...... ------period beginning July 1, 1963, and terminated on 7 xabla_ ------47 497 4 5D 092 51 323 of the sampled returns and a computer program 12: 774 12' :"9671 "'12: 9173 12:620 12:620 June 30, 1965. The names and affiliations of the N'ontAxable------capable of simulating the probable result of a wide Returns with itemized deductions, total ------_------__ ...... _ 22,510 24,093 25,262 26,451 28. 15 members of the Committee, composed of recognized variety of possible changes in tax law, was used in 7axable------_ ...... __ __...... ------...... _ 211: 174911 221 :8111 132: 258 242: 3511 25,928 the scholars and principal users of the Statistics of In- 98 004 00 2.326 development of proposals for graduated with- Nontaxable.. ------come publications, are listed in the 1964 Annual 36,945 36,238 36,261 35,789 holding on salaries and wages. A model based Returns with standard deduction,, total I~ ------...... __ ------37,761 on Report. 111,:5 individual income tax returns for 1964 is T ~jpl.__...... ------21u:'2671 11I : 176IR9 21to: 1 being de- 9135 7"2o 10 294 Nontaxable ~ ------_-- signed to provide more up-to-date base data and The group met twice during the year. At each meeting the statistical B. Saunas of income (Million dollins) more flexible manipulation and tabulation possi- program was carefully re- bilitics. viewed and proposed changes and recommendations Adjusted g.... face.,, total-, ...... ------305,095 311,"6 321,111 341,711 30,771 299 4432 regarding selected courses of action were evaluated. Stilaries, ad migeni 2112 1:'37131 257 918 26622 9112 283 373 During 1965, the Service for the first time made Business. far.. and praie' n- - ion------_------21:072 :630 23:925 23:87 The group offered advice on how the data published Dividends in adjusted gross income 2 ------_ - : - ::::: -_ " _: _ ...... 49 356 9 530 9 890 10 640 If 452 available for sale copies of its tax model tape files. Interest re eived I...... :395 5:057 5:683 7:1559 9:212 might be of greater use and also suggested new types Pin,fininshi p_------...... 563 344 3 The tape file for the 1962 individual income tax re- Cotherap ital ga ins------_------...... ------16:27, a5 966 8 949 '6:441'1 77 9,037 of information that might be tabulated. Consid- moar, ------...... _------_------61 04' 7:62o' to 7:'2',f.7 B 491 turn model can be purchased for approximately erable time was devoted to a discussion of how the C. Itemized deductions (Million dollars) $300 by research workers in other Government and available money and resources could be used to best non-Government organizations. Each record in the turnized deductions, total__...... ------___ ...... 32,017 35,313 38,391 41,661 46,D53 advantage in a program that would meet the basic file contains 60 items of information which Tives_ ...... ------1 '21"ll~ 13o, will en- needs of all users of Statistics of Income data. The Int I paid ------_ 4 -27Io able the user ontributions... ------llcl.lab.. . 7 a bb.- to compute the tax and most of the Statistics Will at ad dental ..pan...... trial. 2 11'..da I 71Is Division presented the results of an inten- Other deductions _------...... 4,402 4:747 income, deduction, exemption, and tax credit details FI sive review it had made of its program for producing for the individual Nots-Returns classified as taxable are those reporting income tax after credits. certaina Form 1040 returns with less than $2DO of dividend, or interest were taxpayer, but all identifying data Statistics of Income and of the plan it had developed Includes returns with ndo adjusted grace income. Ise -Wred. as to the specific Excludes dividends an interest reported on Form 1040A and in addition for 1961, 3 Reduced by self-employment pension deduction at $19,493,DDO. taxpayer have been removed. This for the remainder of the decade. Major innova-

56 . 790-388 0-66-6 1 57 I ANNUAL REPORT 9 CHAPTER EIGHT PLANNING ACTIVITIES d tions scheduled include the cycling of topics and in- scription as an intermediate step to conversion to improving the research capability of the system dex of key subject words and provides creased use of tax model tape files. machine language. for the and in providing for the production of useful complete identification of Manual (a) Machinc-language Inputs.-Economi- locations of management reports not heretofore available. subject matter being cally feasible operating programs for handling searched. SYSTEMS DEVELOPMENT PRODUCES (b) Personnel and payroll systems.-A (4) Future ADP systems concept.-Expanding this category of input documents a* expected group representing the systems development, technological developments in the OPERATIONAL IMPROVEMENTS to be established within a rclativel~ short pe- field of ADP, personnel, payroll, and reports management which offer major riod of time. For example, a pilot magnetic improvements in the field of data functions was activated during 1965 to develop bank storage, along with recent developments in Systems development effort continued to be di- tape reporting was undertaken in fiscal 1965 the a system, or systems, to eliminate to the extent high-speed communication field, rected toward achieving four broad objectives: (I ) under which a small number of payers sub- suggest that re- possible the duplication of data common to studies are needed to Reducing costs and increasing efficiency of computer mitted 1964 Forms W-2 and 1099 information determine the potential both the personnel and payroll operations and utilization of these configurations in place or scheduled for installation on a magnetic tape on an experimental basis. newer developments and tech- to reduce manual work involved in maintain ing niques in the Service's data in regional service centers and the National Com- Analysis and evaluation of these tape reports processing and other I required employee records. One important ob- functional areas. These puter Center; (2) reducing costs and increasing ef- is expected to result in the establishment of an technologies could offer the jective is to develop a system which will permit means for developing a more fully integrated ADP ficiency in input preparation operations in regional operational magnetic tape reporting program easy access to information useful to manage- system capable of satisfying needs service centers; (3) improving and developing in- beginning with 1965 payment information to not met by the ment in such areas as promotion, recruitment, existingsystem. The formation systems for program managers responsible be filed in calendar year 1966. collection and enforcement ac- reassignment, and training. tivities, in particular, could benefit from such for the coordination and control of the Service's re- In addition, several types of high-volume system (c) IR-Manual index.-This project, initi- flexibility. Development of sources; and (4) developing a future ADP systems input documents handled each year by the the specific definition ated during 1965, is designed to provide an and scope of this project was started in 1965. concept to take advantage of expanding technolog- Service lend themselves to direct conversion to Work efficient indexing system which will facilitate on the project will begin during 1966 ical advances in the data processing field. machine language through the use of optical and continue complete and rapid access to the material con- over a considerable period character recognition devices. A number of of time, with 1968 being tained in the Internal Revenue' Service Manual. the target date for a comprehensive Major Attention Given to Four Projects in 1965 test projects initiated in 1965 and continuing report and Under test is the key-word-in-context technique recommendation for a into 1966 are expected,tg establish the practi- conceptually new ADP (I ) Service center and computer center equip- (KWIC) which produces an alphabetical in. System. cability of this approach. ment.-Two projects were completed which resulted (b) Inputs requiring transcription.-Input in a major change in service center computer equip- documents which require human transcrip- ment and the selection of equipment to supplement the computers presently installed in the National tion prior to conversion to computer language because of complexities of content or format are Computer Center. In each case, specifications were issued to equipment suppliers, proposals were evalu- principally income tax returns and other docu- at~d, and equipment was selected in a relatively short ments not suitable for magnetic tape reporting period of time. or direct optical scanning. Various transcription devices arc being tested, or are scheduled In the case of the service centers, a decision was for testing, as possible substitutes for the con- made to replace IBM 1401 computers with Honey- ventional key punching approach now used. well H-200's. Additional computer center equipment required to handle the master file workload (3) Information Systems Projects.-During the year considerable progress was made in furthering volumes estimated for the 1967-70 period was se- the development which will lected as a result of the evaluation of proposals sub- of information systems mitted by suppliers in October 1964. For more satisfy some long-felt needs of management, research, details, see page 13. and professional personnel. Development work moved forward in a number of activities, ranging (2) Input Preparation.-This project is designed from the highly complex legal and quasi-legal areas to develop improved techniques for converting in- to the nonlegal administrative areas responsible for formation from the form in which it is received to a the management of personnel, payroll, and the IR- form acceptable for computer processing. Reduc- Manual activities of the Service. Selected projects tion of the cost of the present method of key punch- partially completed or well advanced in planning ing, key verifying, and converting to tape by com- during 1965 are: puter is the primary objective. For purposes of this (a) Legal information retrieval system.-A study, inputs are considered under two distinct cate- system designed to assist Service attorneys in co- gorirs: (a) those which may be received by the ordinating their pending cases to insure that Service in machine language or which may be con- consistent positions are being taken on similar verted to machine language without human tran- issues, is currently operating in the Chief Coun- scription; and (b) those which require human tran- sel offices. Considerable progress was made in

58 59 1i MANAGEMENT ACTIVITIES

use in district offices and service centers. The small savings during 1965, and 161 man-years and volume of microfilm contrasts sharply with the great $643,200 for 1966 and subsequent years. Chapter 9 volume of paper outputs previously pecessary. Not Purchases of ADP Equipment Save $1,900, - only are savings in print time and space being real- 000-Advantages to the Government in purchas. ized, but data is more readily available, and easier ing computer equipment were demonstrated by the and faster to look up. Through the utilization of Lease-Purchase Study of November 1963. Accord- high speed microfilm readers especially developed Management RECORD HIGH SAVINGS FROM inily, the three computers at the North-Atlantic, MANAGEMENT IMPROVEMENTS for this purpose, any specific taxpayer data desired Midwest, and Western Service Centers and the two Activities can be made available in from 2 to 2Y2 minutes. In large-scale computers and support equipment at the Service executives strongly endorsed the Presi- 1964 the system was tested in the Southeast Region National Computer Center were purchased in 1964. dent's Cost Reduction Program and set a pattern and found acceptable. Beginning January 1, 1965, Depreciated purchase cost was equal to approxi- of increased personal involvement in carrying out its taxpayer directories, returns and documents indexes, mately 2 years'rentals. and settlement registers were provided on microfilm principles, policies, and aim. This personal involve- Bids were requested from manufacturers for for master file taxpayers in the Southeast and Mid- ment of top officials in the management process equipment to replace leased equipment (scheduled Atlantic Regions. On July 1, 1965, the system will fosters a management climate which encourages cre- for purchase) to do the ADP service centers' process- be in use in all district offices. Savings manpower I ativity and innovation, and highlights the theme that in ing job. Tle proposal which was accepted provides (4 man-years), space, paper, and personal stewardship of public funds and excellence computer printout nonrecurring savings estimated time are estimated at at $1 million over in the public service are expected of all Service offi- $298,700 annually beginning the next in 1966. 3 years. Because the multiprocessing capa- cials and employees. bilities of the selected computer require fewer com- Preaddressed Labels During the year, the Service compiled its most Expedite Processing.-A puter systems to meet operating needs, it now seems two-part "piggyback" impressive record of progress in improving its ad- mailing label is being affixed likely that $700,000 additional savings will be ministrative operations and reducing costs. Recur- to individual and corporation income tax returns. realized by 196 7. Both parts, one on top of the other, bear the tax- ring, one-time, and incentive awards savings from A lease-purchase study in 1964 also revealed that payer's name, address, and identifying number as cost reduction and management improvement efforts purchase of collators, sorters, and interpreters, with shown by the Master File. If the taxpayer does not and activities totaled $17.1 million, an increase of maintenance under contract, would clearly result in use the tax form sent to him, he is asked to remove 47 percent over the previous high total of $11.6 savings. The purchase of other key-driven equip- the top label and affix it to the return which he does million reported in 1963. ment also would be economically advantageous profile. Compliance with this request expedites process- vided the Service performed its own maintenance. ing under the ADP system and contributes Cost Reduction Actions Increased toward Expected annual savings are $166,000 on the further economics. purchase of 14 collators, 9 sorters, and 7 interpreters. Much of the savings realized resulted from com- Improved Library Cuts Tape Inventory.-A com- As a test, 108 kcy-driven machines also were pur- pletion of 25 individual management improvement puterized tape library system has been devised and chased and arc being maintained in the Southeast and cost installed to meet reduction actions, each of which produced, increasing demands for magnetic Service Center. Annual savings of $50,000 are or will produci annual savings in excess of $100,000. tape as the ADP Master File system is extended to anticipated. This constitutes a significant increase over the 11 more regions and districts. This permits better uti- Followup Notice and Revised Collection Proce- lization of magnetic tape inventories by promptly comparable actions completed during 1964. dures.-During fiscal year 1965, Service Centers Several representative releasing for reuse all tapes upon expiration of the examples of the most sig- began issuing a machine generated "followup" notice prescribed retention period. Purchases of nificant management improvement accomplish- addi- o individual income tax accounts. The followup tional tapes estimated at $303,000 were deferred be- ments effected by the Service are described below: notice replaces the notice previously issued manually cause of the improved utilization of existing tape by district offices. This form and other procedures inventories. Major Systems and Procedural Changes developed in fiscal year 1965 will save 128 man~years Simplified Key Conserve Resources Punching Saves Time.-Sub- and $587,000 in 1966 and ensuing years. stantial savings were realized by key punching whole The following major systems and procedural Processing of Large Refund Cases Simplified- dollars only and dropping key verification of certain changes illustrate the depth and wide range of ac- Section 6405 of the Internal Revenue Code of 1954 Form 1040 and 1120 tax return data not used in tions taken to effect optimum utflization of resources' requires reports to the joint Committee on Internal settlement of the taxpayer liability, Further cost re- Microfilm Replaces Paper.-A new system which Revenue Taxation of all refunds and credits of in- ductions were obtained by application of the variable transfers data directly from magnetic tape to micro- come, war profits, excess profits, estate, or gift tax length (in lieu of fixed) field input technique to film at speeds 15 times faster than printing on paper exceeding $100,000. Effective July 1, 1965, pro- business type master file returns. has been adopted for production of final printed cedures for handling these cases will be substantially The productivity outputs, such as indices and settlement registers for increase reflected by this change simplified. Reviews will be reduced and special de- is translated into 136 man-years and $542,800 in tailed documentation eliminated. 60 61 ANNUAL REPORT * CHAPTER NINE MANAGEMENTIACTIV ITI ES

Benefits include a dramatic reduction in review brandi, and post-of-duty levels to achieve more effec- Following are some of the most significant organi- briefings reflect analyses arrived at independently time, substantial curtailment of elapsed time in the tive and efficient utilization of investigative man- zational changes: by the Reports Division, bVt which are developed disposition of cases (4 to 6 months), and the savings power, or to maintain Or even accelerate present Consolidation of New York and Northeast Re- according to analytic criteria jointly conceived with of interest to the Government estimated at $2.0 enforcement programs with fewer investigative per- gions.-Effective January 4, 1965, the New York operating divisions. million annually. sonnel. Implementation of survey rec9mmenda- and Northeast Regions were consolidated into a Reporting Costs Cut.-Since the. Reports Program Because of the heavy backlog of cases in process, tions resulted in a net reduction of 35 rijan-years in single region-the North-Atlantic Region-with was established 5 years ago, reporting requirements full annualized savings of 69 man-years and enforcement manpower valued at $260,000. headquarters in New York City. The purpose of have declined 42 percent in number and 17 percent $841,000 will not accrue until 1967. Savings for Revision of Revenue Officer Trainee Program- this consolidation was to bring about a better bal- incosts. This decline, which is net of added require- 1966 are estimated at 35 man-years and $400,000. Ile classroom tr-aining portion of the Revenue Of- ance between the various regions and to reduce ments for new and expanded programs, is attrib- Decentralized Departmental Printing of Tax ficerTraining Program was revised extensively dur- overhead supervisory expenses. utable to: Savings in 1966 are estimated at 92 man-years Forms.-In 1964 authority was obtained from the ing the early part of the year, including the develop- Streamlining reporting systems to cut data and $893,000. When joint Committee on Printing to decentralize reprints ment and publication of new, improved training fully implemented in 1967, it gathering, transmission, and compilation costs. on tax forms in those regions serviced by the Gov- is anticipated that savings of 115 man-years and materials. The new course, reduced in length, is Meeting regional and district requirements Printing (GPO) field plant. This $1,150,000 will be realized. ernment Office designed to enable trainees to work independently for management information through vertically year authority was granted for decentralized com- on relatively simple income tax cases as early as Consolidation of Office Collection Force (OCF) integrated reporting systems developed at the mercial procurement in those regions not serviced by Organizations.-Consolidating OCIF organizations possible, in recognition of effective learning princi- National Office level. - a CPO field plant. ples, effective manpower utilization techniques, and in large metropolitan areas permitted centralization Outright discontinuance of nonessential With this authority providing a means for obtain- revenue officer job classification factors. Total an- of nontechnical functions and released supervisory reporting. ing emergency supplies of tax forms, other refine- nual estimated recurring savings of 28 man-years Revenue Officers for direct enforcement work. Sav- ments in estimation of requirements were made, and $223,000 are anticipated as a result of this im- ings of 19.6 man-years and $136,000 were realized. resulting in estimated annual savings of $350,000. provement. Technical Divisions Reorganized.-The structure UTILIZATION OF HUMAN RESOURCES Establishment of Taxpayer, Assistor Positions in of the Technical organization in the National Office HIGHLIGHTS PERSONNEL PROGRAM of Manpower was realined by type Emphasis on Management Local Offices.-Staffing of 206 selected local offices of tax rather than by function. Resources Continues with 271 full-time taxpayer assistors (GS-5 and GS- The new organization, to be fully implemented in The personnel program of the Service continued July 1965, is aimed at more effective to emphasize assistance to During the year, many actions taken by the Serv- 7) was undertaken to provide year-round assistance utilization of managers in achieving ice were directed toward improvements designed to to taxpayers, thereby releasing revenue agents and manpower and improved service to taxpayers. full utilization of human resources, and accomplish- Chief Counsel's Office Riorganized.-During the ment of program objectives by efficient and enhance the utilization of its most important and revenue offices (GS-9 and GS-1 1) for enforcement eco- year, the Office of nomical costly resource-manpower. Described below are work. Estimated annual savings of $250,000 are the Chief Counsel added the posi- use of manpower. One major step was de- a few examples of the many accomplishments which based on lower salaries of taxpayer assistors. tion of Deputy Chief Counsel. The Deputy Chief velopment of an improved position management Counsel will assist the Chief Counsel in planning and control system, designed to coordinate man- are concerned primarily with "manpower manage- Reconnaissance Manpower Study.-The firm of and directing policies and programs. power cost reduction efforts of line managers at every ment." Hendrick and Company, Management Consultants, A new division was formed to establish a more level with those of support staff organizations, in- Position Management Handbook.-A handbook was engaged to conduct a 2-week reconnaissance efficient organization for the administrative and cluding personnel. Additional highlights of the on manpower utilization and control (Position Man- study of a large district office (Boston) to determine nontax legal functions of the Chief Counsel's Office. 1965 program included the 10th anniversay of the agement) was developed and issued on June 25, if their unique fact-finding and analysis techniques 1! The division is known as the Operations and Plan- highly successful Executive Development Program; 1965. This handbook contains principles and ob- of payroll reduction and control could be profitably ning Division. the first substantive collective bargaining agreement jectives of a position management and control applied to the Service. The firm concluded that the As indicated on page 61, during the year the negotiated between the Service and an or- system. Internal Revenue Service had such a well designed employee Service adopted a procedure for expediting the flow ganization; attitude surveys decentralized to the Career Programs.-Career programs were de- and ,lean organization structure, effective work con- of joint Committee cases. As a result, the joint regions and conducted in nine different districts; veloped and implemented for the appellate, intelli~ Ir.ls and exceptionally good ratios of nonsupervisory gence, audit, and delinquent accounts and returns Committee Division of the Chief Counsel's Office outstanding gains in the suggestions and awards pro- to supervisory personnel that a full-scale study would will eventually be disbanded. Over the the (collection) functions. These programs are pat- years gram, signaling increased recognition of employee not be profitable. Division has earned terned after the Executive Selection and Develop- a fine reputation within the contributions to good management; and further Service, but the newly devised procedure makes a progress in the recruitment and redeployment prob- ment Program and, like that program, are key ele- Organization Structures Streamlined for legal review in every case unnecessary. lems assoicated with the continuing conversion from ments in the Service's continuing effort to build a Improved Operational Effectiveness professional staff second to none. manual processing and revenue accounting methods Status Analysis and Cost Survey to Evaluate Utilization of Alcohol and To- Several major organizational changes were made Reductions to automatic data processing. Highlight Reports Program bacco Tax Enforcement Manpower.-A manpower to improve operations and increase efficiency. IRS Adjusts Its Workforce to Organizational survey was completed which involved a comprehen- Among other benefits, most improvements resulted Commissioner Briefed on Status of Major Pro- Changes sive appraisal and assessment of the enforcement in supervisory and other overhead positions being grams.-In carrying out its status analysis function, branch organization and operations in each region to diverted to direct enforcement work, thereby reduc- the National Office Reports Division now provides The increased tempo of organizational change determine what reassignments, realinements, and ing requirements for additional manpower to meet the Commissioner and his top staff with quarterly within the Service over the past several years has re- organizational changes could be made at regional, increasing workloads. briefings on the status of major programs. These sulted in the development of a staff redeployment

62 63 ANNUAL REPORT 0 CHAPTER NINE MANAGEMENT ACTIVITIES program with the dual objective of maximum man- During the past decade, the Executive Selection ated a collective bargaining agreement covering all Incentive Awards Program Reaches power utilization and minimum adverse impact on and Development Program has progressed to the employees of the district except management offi- All-Time High employees. This program has been successfully appoint where it now represents the route to the Serv- cials, technical employees in the Personnel and 1965 outstanding plied in the continuing conversion to data processing ice's top level executive positions, and is the means Training Branches, and investigative personnel in During progress was made in fulfilling President Johnson's expressed hope for and in the recent regional consolidations and dis- through which the Service seeks to assure itself a the Intelligence Division. a stronger Incentive Awards Program throughout the trict mergers. staff of first-rate career executives. Amon the pro- This is the first substantive agreement negotiated Federal Government. With an across-the-board redeployment program based on a determi- gram's 120 graduates, for example, are 34 Assistant in the Service. Aside The is from basic provisions, taken increase of more than 50 percent in suggestions re- nation to retain and utilize the skills and abilities of District Directors, 33 District Directors, 7 Assistant mainly from the Executive Order, the Agreement ceived, adopted, and in estimated savings, fiscal year experienced. personnel, and a firm commitment to Service Center Directors, 3 Service Center Directors, contains substantive provisions on the scope of nego- 1965 set an all-time Service high for suggestion pro- plan and conduct necessary organizational changes 20 Assistant Regional Commissioners, and I I Na- tiations, grievances and adverse actions, supple- gram results. At the same time, there were note- so as to do everything possible to avoid adverse ef- tional Office executives. mental agreements, use of employee representatives, worthy increases in the numbers of honor and per- fects on employees. The key elements in the pro- and establishment of fact-finding and employee- Development Programs Extended to formance awards presented for services of an gram,are: ( I ) Personnel plans to identify and utilize Selection and management cooperation committees. All Leadership Levels exceptional nature. affected employees are made an integral part of the Arbitrators submitted advisory decisions in two The highlight of the year's program was the Civil initial planning of organizational change; sched- In the coming decade, continuing economic and hearings involving unit determinations in the Serv- Service Commission's 10th Anniversary Awards uling changes allows the lead time required for ef- technological changes will add new dimensions to ice. (I ) Arbitrator Robert 0. Boyd upheld the Cereinonv on December 4, i964, at which President fecting personnel adjustments; (2) full advance the size and complexity of the Service's operations, Service's position that a separate unit of revenue Johnson iionored 30 top cost-cutters in the Federal information is given employees and employee groups and its management problems and goals will neces- agents was not appropriate for purposes of exclusive Service. Among these were five Service employees regarding the changes, to insure support and co- sarily become more difficult and challenging. As recognition in the Los Angeles District Office. (2) who comprised a task force which was credited operation in making adjustments; (3) intensive a result, the Service's need for competent manage- Arbitrator Francis J. Robertson upheld the Service's with saving over $900,000 annually. placement and training programs are developed, ment and leadership at the supervisory and mana- position that Servicewide units, covering all eligible designed to open up new employment opportunities gerial levels will be greater than it has ever been. employees, were not appropriate for purposes of New Ideas and Accomplishments in Recruiting for affected employees; (4) special personnel pro- It is in this climate that the Service is moving exclusive recognition. cedures and techniques are developed joMy with ahead to establish more comprehensive and system- A training course was conducted in five central- A new program was initiated to develop a more maximum the Civil Service Commission, to provide atic programs for the careful selection and develop- ized field locations to acquaint negotiating teams in reliable employment source for hiring the thousands flexibility. ment of supervisory and managerial personnel. A local offices with the background, regulations, skills of temporary clerks who are needed each year dur- The major application of the redeployment pro- program for the alcohol and tobacco tax function and techniques necessary to successful, productive ing the peak load income tax filing season. Thepro- gram has been in the reassignment of personnel af- has been in effect for over a year and programs for negotiations. gram includes the stimulation of interest in such fected by the data processing conversion. In these the appellate and intelligence functions recently be- employment by an intensive recruiting campaign, efforts the Service thus far has accomplished a re- gan operating. As the year closed, moreover, each The Employees Speak: Attitude Surveys* in giving a Civil Service examination designed partic- duction of some 5,200 district positions in data pro- regional commissioner was vigorously engaged in Nine Districts ularly for this purpose, and making selections for cessing and revenue accounting work, without resort the development of programs for supervisors arid appointment on a strict competitive basis. Substan- to involuntary separations, transfers, or grade reduc- managers in the audit and delinqpcnt accounts and A continuing program of attitude surveys enabled tial improvements were shown by the result from a tions. The program has also been highly successful returns functions. These regional programs will be- employees to transmit their ideas and opinions di- test of the program in 18 district offices. in providing new assignments for personnel affected gin operating during the coming year. rectly to management, for use in improving opera- In addition to giving the Service a more reliable by the 1965 consolidation of the Northeast and New tion of the Service and its personnel programs and source of qualified people for this work, the program York Regions, and by the 1964 regional consolida- Employee-Management Relations Strengthened practices. also made it possible to hire a significantly greater tion and'district mergers. The Survey program was decentralized to the number of temporary workers at the GS-I level. The Service continued its efforts toward produc- regions, which conducted surveys in nine districts This program will be extended to all offices next year. tive and meaningful relations with employees and Executive Selection cmd Development: (over 5,200 respondents). Although there were In service center recruiting, the Service has again employee organizations under the spirit and intent A Decade of Progress exceptions in certain districts, divisions, or occupa- effectively demonstrated its capacity to recruit, of Executive Order 10988. Efforts have centered train, tional groups, employees generally reported satisfac- and make productive This year the Service marked the I Oth anniversary on maintaining the focal point of employee-manage- large numbers of employees tion with the work they perform, their coworkers, within a minimum length of time. The Philadel- of its Executive Selection and Development Pro- ment relations at the local level, where employees their immediate supervisors, district management, phia Service Center accomplished major gram. The program was established in 1955 to are most directly involved. this re- the benefits program, and the training they recruiting and productive placement achievement by satisfy a growing need for the identification and de- During the year, the number of employees in units ceived. Plans are being formulated to correct vary- hiring approximately 1,700 employees in about 2 velopmcnt of people who possessed the leadership exclusively represented by employee organizations ing degrees of dissatisfaction with promotions, com- months, as part of the massive buildup for processing talents and management abilities required for suc- increased by 1,787. At the end of the year, more munications, and physical working conditions. individual income tax returns. cessful performance in key executive positions. In than 20,000 employees in 40 offices were in units addition, the program was considered the founda- exclusively represented by 3 employee organizations. tion of an effort to build a strong and effective career The Newark District and Chapter 60, National system for the Revenue Service. Association of Internal Revenue Employees negoti-

64 65 ANNUAL REPORT 9 CHAPTER NINE MANAGEMENT ACTIVITIES

Man-ycars realized during each of the past 2 years Cleveland, Detroit, Manhattan, Newark, and Phila- gram. It is from these candidates that the highest tor of the Legislation and Regulations Division, in and employees on the rolh; at the close of 1964 and delphia District Offices were personally contacted to executive positions of the Service are filled, such as the Office of the Chief Counsel. The other two are 1965 are shown in the following table: determine their interest in relocating in the South. assistant district directors and assistant regional com- Clerk, Dictating Machine Operators, GS-4. A pilot seminar was planned for early*fiscal year missioners. During the last few years some lesser Another dramatic program was started-employ- Personnel summary This seminar, designaled as the 1966 in Arkansas. but also very important advances have been the as- ment of the mentally restored at die North-Atlantic parts of prototype for others to follow in varictZig signment of minority group employees, both male Service Center, Lawrence, Mass. This began in "'rel"'"roll,...'over of Year the lJnited States, aims to strengthen supervisory and female, to such Location and type positions as assistant division October 1964 when the Center arranged a visit with Equal Employment policy and pro- (GS-15), 1964 1965 1964 knowledge of director staff assistant (GS-15), regional officials of the Bedford, Mass., Veterans Hospital. ~~mistequirements at national and local levels and analyst, management analyst (GS-13 and 14), sys- As a result of this meeting, 21 mentally restored vct- 61,059 62,098 59,357 Service, total ...... ------supervisors in identifying and fulfilling their tems analyst (GS-1 3), internal revenue agent (GS- crans passed a civil service examination, and 18 were Pe nount...... _ ...... --- _ 02 57,444 56,594 513,345 personal obligations in carrying out the program. 13), group supervisor (GS-12), and other T.op-uy__ ...... _ ...... 5':, 0390 4,654 2,763 4,015 high selected for appointment. These employees perform National Office officials met on May 13 grade positions. National office I...... 3 611 3,614 Field and routine duties in the processing of tax returns. Field service, total I ...... _ ------57 340 58:217 746 56,746 and 14, 1965, at Gaithersburg, Md., in a "first" for The Service is proud of the fact that the appoint- Data ""est 1 let.. 577 107: 563 446 106:16 Collection. tt.11, 1 8:213 288 IpIS: 234 015 the Service-an Equal Employment Opportunity ments listed above, plus many others too numerous IN-SERVICE TRAINING MADE R....u, office...... 396 6 393 6 244 Workshop. Problems were identified and agree- to list, have all been made without any alteration in Oth ...... ,3:817 3:905 3:990 3,814 ment reached on plans for the forthcoming year, qualification standards to favor the minority group NOTEWORTHY PROGRESS 20,015 19,854 Audit, total ...... 11-11,1 including designation of Equal Opportunity Coordi- candidate. The Service is simply offering equal op- Supervisory and R..... alint-a- ...... 12 596 12 450 12 365 178 Management Development Office auditors an tax tocli,mans-... 3:4 147 3 126 3:081 3 18 nator-, in a number of Service offices. Each coordi- portunity-the minority group individuals are prov- 4,335 4,410 Programs Stressed Other I...... _. 292 4,278: nator will stimulate and oversee positive program ing that they can do the job. 2,320 2,318 Intelligence, --- _.. activities in his arra. In the conviction that those training programs Special agents---- ...... 1,718 1,714 1.712 Other _ ...... ____ 603 1'722325603 604 624 Additionally, the Service broadened and improved Utilizing the Handicapped aimed at developing better management are the Alcohol and tobacco tax, total-...... 2,779 2,737 2,665 its contacts with organized minority groups and com- most productive in improving service The Service continued to employ many handi- to the public Investigators ...... 2'709943 munity leaders, whose help has been found essential and maintaining high standards of personal integrity, n1pact...... 983450 459 970433 930456 capped persons, the mentally restored, the deaf, the St.r.keep-gamir ...... 461 435 443 420 to a successful equal opportunity program. The the supervisory and management development pro- Other _ ...... 986 872 891 859 blind, and the mentally retarded. Others on the active program in recruiting at predominantly Negro gram was both broadened and deepened. It was Appellate, total ...... __ ----_ _ 1,492 1,462 rolls included amputees, the physically deformed colleges was continued and emphasized. deepened by enlarging the number of incumbent Technical d,i...... L_434638 664 1' 533677 controlled diabetics, those with organic heart dis-' Auditors- . __ ~ ...... 1456 60148 153 Further breakthroughs were made in the employ- supervisors and managers to be provided training, Oftnu-_ ------50 I"677 666 703 ease, and some with history of epilepsy. The posi- ment of minority group persons in areas and job and by adding laboratory-type sessions, case study Adrnl.Ivtmtic.___...... __ ---- _ ,2,665 2 2,419 2,70475, tions occupied"by handicapped employees range R,gi.n:1 Counsel _ ...... 744 '639742 747 categories which heretofore were not occupied by material and other improved techniques to the gen- Region Inspection ...... 592 605 602 630 from CS-1 clerk ior those with very limited qualifi- them. Progress in this direction has been excellent. eral supervisory and cations through GS-17 for a highly qualified blind managerial training courses. R.,!..d to reflect t.oxf., of National rc.p.!., Carter 1roun Natiopatl Office to There arc no longer any Southern districts in Also, a university research group was engaged to Fie' d. and 99DO Activity Payroll Operations 1, Somme Center mun Data armaim to division director. Adons"istralm,ncl.d., terminal1*1 mporloul which minority group do not hold profes- make a thorough study of the organization develop- to, entire S.M- persons Since August 3, 1964, the Service has hired 60 11. td , ON. of International 0 - Do 1. sional jobs in the Service. In fact, stat4tics from ment program of the Southwest Region. overseas employees hu4 'aIocslly (3 in 1964 and 4 in 1965). mentally retarded persons in 25 different geographic this part of the Nation reveal a steady rise in numbers locations. It was found that the mentally retarded Management training was broadened in three the past as well as an increase The Non-Discrimination Program Moves Ahead employed over 2 years, employees perform repetitive tasks very successfully, major respects: Early identification and training of in number of locations where they are employed. potential first-line supervisors and managers; The Revenue Service continued to place special tasks that others may view as dull and unrewarding' I Minority group employees are being assigned to The Service employed deaf persons in substantial strengthening training of supervisors of processing emphasis upon the nondiscrimination program- or the posts of duty other than the district office numbers, particularly at the Philadelphia Service operations; and separate programs focusing on prob- the employment of minority group members, women, "headquarters" office in these States. The same Center. Plans also call for appointing, early in fiscal lems of supervision in individual functions. For ex- the physically handicapped, and the ment y re- parts of the country in that there applies to all other 1966, enough deaf persons at the Southwest Service ample, in a new course in delinquent accounts and tardcd. minority is increasingly widespread movement of Center (Austin, Tex.) to staff a complete unit in returns the supervisor-trainees study day-to-day group employees away from the district offices to problems involved in Progress for Minority Groups the office. assigning and reviewing the posts of duty. Five blind employees were at work in Washington. work of revenue officer groups, in providing coach- can be effectively Strong emphasis continued to be placed on the Progress in equal employment Two of them joined the Service late in the year as ing leadership, and in conducting field office visits Equal Employment Opportunity Program. A plan measured by improvement in the categories of em- computer-programing trainees and are enrolled at of appraisal and assistance. was inaugurated to facilitate the relocation of Negro ployment held by minority group members. The the Medical Computing Center of the University of New ground was broken in preparing and launch- employees, in selected northern offices, who wished changes are most noticeable in jobs at the GS-l I Cincinnati in a course designed specifically for the ing managerial training tailored for- the particular to accept positions at offices located in the Southeast level and above which require highly technical skill, blind. The Center uses special Braille equipment needs of the Offices of the Chief Counsel and Re- Region or in the Austin, Dallas, Little Rock, New managerial skill, or both. to teach computer techniques, and has found that gional Counsel. Approximately 50 headquarters Orleans, and Oklahoma City Districts of the South- The greatest single example of progress was the the sharpened tactile sensitivity of the blind makes and field attorney-managers participated in 1965 west Region. As an initial effort, Negro employees appointment of two minority group members to them especially apt for learning and performing executive seminars and supervisory leadership occupying certain positions in the Brooklyn, Chicago, the 1965 Executive Selection and Development Pro- thistypeofwork. Another served as GS-17, Direc- institutes.

66 67 ANNUAL REPORT * CHAPTER NINE MANAGEMENT ACTIVITIES The Training Center Experiment Progresses assistor program to improve and standardize the interdivisional training. The aim of the program Reports were in the National Office for evaluation. training of full-time assistors and a program In accordance with previous decisions, work pro- for is to increase the effectiveness of investigations re- During the year, 932 reports were received and 1,909 Office Collection Force interviewers and process requiring ceeded on three experimental centers: The National the use of joint resources. reports disposeq of. One hundred and thirteen of viewers which provides the flexibility reqpired by Training Center and the Central and Westem Re_ the reports disposed of were referred to the Office the varied backgrounds . Service Seeks, Better Writing gional Training Centers. The National Training of this group. 11 of the Chief Counsel for consideration in the legisla- Automatic Data Processing.-The firsi year of Center officially opened in June 1965, and the Cen- While enrollments in the two "Effective Revenue tive program and 28 for consideration of amendment Service-wide operations and the introduc'Uon of In- tral Regional Training Center was readied to receive Writing" correspondence courses set new records, of the tax regulations. dividual Master File processing into the Mid- its first trainees early in 1966. This center, located progress continued on ~le "Writing Improvement" Atlantic Region necessitated a comprehensive pro- in Detroit will serve the 5 States comprising the course needed for Servicewide use. This course was Field Surveys Serve Many Purposes cedures training effort, involving thousands of Central Region. The Western Region Center, lo- substantially completed and, in June 1965, a work- employees in district offices and service centers. "Field Surveys" is the term applied to the syste- cated at San Francisco with a branch at Van Nuys, shop was held for regional instructors, thus laying a Since service centers must perform their process- matic gathering of information from the field offices Calif., completed its second year of operation under foundation for full-scale field use in 1966. ing operations by utilizing a great many new, sea- in connection with the development of legislation, closely controlled evaluation conditions. Initial In the National Office there was concentrated sonal personnel, the need to train these employees reg lations, Revenue Rulings, publications, public- evaluation reports have been quite favorable. training for those who write and review Rulings. quickly to perform at high production with a low use forms and the like. They may also be conducted Eighty professionals were included in writing im- error rate is paramount to the successful operation in connection with requests by the Department of Operational Training Expanded and Improved provenaent classes. Tlc results were such that the of the data processing system. To speed the process, justice conceming review by the Supreme Court of Assistant Commissioner (Technical) has requested Changes in tax laws, techniques for their ad- a film, "Introduction to Service Center conflicting court decisions or they may include gath- Operations," similar training for 250 other employees. ministration, and the continuing effort of the Service was developed. ering of illustrative materials for use by Service or to assure that its employees reach the highest pos- Designated regional instructors and coaches met Training by Correspondence Improved Treasury Department officials in their appearances sible level of skill in administering and interpreting at the Southwest Service Center to study the expcii- before committees of Congress. At the beginning of Conversion to mechanical the laws and in dealing with taxpayers requires that ences of regions having full service center operation. grading of the four the year 20 surveys were in progress. Twenty-three operational training programs be re-examined, modi- Centralized instructor training- in microfilm reader most popular coursm in tax law and accounting was surveys were initiated during the year of which nine completed and the fied, and broadened to meet these challenges. Some installation and operation was also conducted. correspondence course staff was were requested by Treasury Department officials. reduced. Course completion rates of the more significant actions taken in these areas Audit.-The principal new programs in the audit remain high, av- Appropriate information was furnished to the re- eraging about 75 percent were: area were (I ) training district office revenue agents of all enrollments. Those questing offices in connection with 28 surveys which Alcohol and Tobacco who take correspondence courses must now Tax.-Two new programs in the examination of returns which report inter- take were completed during the year. monitored final examinations were initiated in the alcohol and tobacco tax area: national transactions, since this function was trans- before they can re: Some of the more important surveys related to: firearms training for ceive full administrative credit. Ninety percent of investigators, and orientation ferred to district offices from the Office of Inter- tax-exempt foundations and pension trusts, savings those taking monitored examinations during training for inspectors in automatic data processing national Operations; (2) orienting audit personnel the year and loan associations and savings banks, business ac- passed. equipment and records. The latter course became on the effects that the ADP system of the Service tivity of fraternal beneficiary societies, revision of necessary because of the rapid growth in the indus- and taxpayer use of ADP will have on audit major tax forms, and computation of bad debt re- proce- BOTH NATIONAL OFFICE AND FIELD trial use of such equipment in recent years. dures; and (3) development serves by banks under Mimeograph 6209. of specialists in the EMPLOYEES BENEFIT FROM Appellate.-Two experimental programs were examination of exempt organization rctums, INTERNAL TECHNICAL DEVELOPMENT, Field Conferences introduced for the benefit of employees who hear Intelligence.-As a result of careful surveys of Provide Two-Way GUIDANCE, AND COORDINATION Communication administrative appeals. Tile first is a 3-day course alternative course possibilities it was decided the for conferees in communication theory and practice unique needs of special agents for indoctrination in Technical Coordination Program Encourages Two series of field conferences are conducted each as they relate to taxpayer conferences. In the sec- the characteristics and capabilities of different types Exchange of Technical Information Between year to provide for consultation and mutual cx- ond program, conferees are encouraged to attend of automatic data processing equipment could best Notional'Office and Field Offices change of advice and information between field and night law school classes which will add to their be met by having potential regional instructors at. The Technical Coordination Program serves as National Office technical personnel. Problems aris- understanding of legal issues involved in their cases. tend the Army school at Ft. Benjamin Harrison. a medium for the exchange of information and rec- ing in the application of rulings and regulations and Collection-An extensive revision of the Revenue With this foundation these men will thereafter con- ommendations by and between the National and other technical matters are discussed. One series Officer Trainee Program was completed, shortening duct the necessary district office training. Field Offices in regard to tax abuses, inequities, and is usually held in the spring on income tax matters, the classroom portion and emphasizing in a work- With the guidance of a management training con- administrative problems arising in the interpretation the other in the fall on specialized tax areas. Con- shop approach, activities which incorporate job sultant, top intelligence officials, National Office and of the tax laws and other matters which are proper ferences are held in all regions each year. fundamentals-interviewing and investigative tech- regional, participated in a 3-day seminar in the ap- for consideration by the National Office in connec- niques, taxpayer relations, and integrity aspects. plication of management principles to intelligence Tax Briefs for Revenue Agents and Office tion with the clarification of Service Positions Preclassroom on-the-job training was included and operations. Ile results Auditors Has Proven Valuable were so beneficial, follow- amendment of regulations or legislative recom., a closer relationship established between classroom up sessions are being planned for 1966. mendations. Tax Briefs is issued every 4 weeks to revenue activities and associated periods of on-the-job Inspection.-For the first time supervisors from Technical coordination reports are used by the agents and office auditors in the field and to tech- training. both the internal audit and intemal security func- field offices to report such matters to the National nical personnel in the National Office. It serves as Other new courses were established: A taxpayer tions were provided the benefits of interregional and Office. At the beginning of the year, 1, 190 of these a convenient medium for keeping Service personnel 68 69 --,. -1- re -_n MINIM who are engaged in technical work abreast of the Now a, renovated space occupied in 1965 latest technical developments with a minimum of District office headquarters Malor 1-1 offices Other local time.- It permits them to readily identify those mat- offices ters which affect their particular areas of work and B-110ehoon, Pa. 47 locations lessens the necessity for reading commercial letters Ch.tt.roy:, Tern. New orlears Houston 1:~o.T Pittsburghforn and similar technical publications. It reports cur- Macon, Ga rently, in digest form, selected court decisions, pub- Wilonington Wnrecil.,Racheinn"N.Y.N.Y. lished rulings, and other technical developments. nts Anna, Calif. S.T..Pa, Fla. All important favorable court decisions are reported as well as important adverse decisions of the Tax In addition to these 62 locations, alterations and Court when acquiescence or nonacquiescence is an- improvements were made in 120 other offices. nounced. Also, important adverse decisions of other Acquisition of new space for the Wilmington Dis- courts may be included with a cautionary statement regarding the Commissioneris position. trict Office headquarters was a particularly grati- . fying accomplishment culminating several years Annual Technical Review Institute Proutdes work to end unsatisfactory conditions there. Reno- Continuing Education on Tax Law.-A series of tax vation of the Wichita District Office headquarters, articles discussing the more important developments another space problem of long standing, will be in Federal taxation are provided for use in refresher completed in 1966. Projected new Federal Build- course Institutes conducted in Service field offices ings in Chicago, Des Moines, Detroit, and Indian- for revenue agents and other technical personnel. apolis will bring relief to the unsatisfactory space Material for the 1964 Institutes consisted of three conditions of major offices in those cities within the parts. Part I covered provisions of the Revenue next 2 or 3 years, Act of 1964 applicable primarily to noncorporate Reconstruction of the Midwest Service Center taxpayers; Part 2 covered the other provisions of the building in Kansas City was completed. This is After entering IRS National Office Building, a visitor may use the now telephone 1964 Act; and Part 3 covered important court de- the fourth completed service center plant. Construc- Information service to quickly obtain directions to a sismific mom. cisions, regulations, and nrlings published during tion of service centers at Andover, Mass.; Covington, fiscal year ended June 30, 1964. Ky.; and Ogden, Utah, will begin soon. Final I design work is being completed on the IRS Data Switchboard of the now telephone Information service contains a map of the IMPROVEMENTS AND ECONOMIES PRODUCED Center and Regional Training Center in Detroit, corridors of the IRS National Building with positions of the booths indicated by light BY BETTER FACILITIES MANAGEMENT Mich. buttons. Flashing light aid, IRS employee in locating position of a visitor asking As an additional step toward overall improve- for directions. Space Improved in 182 Locations ment of Service space in the field, special seminars The Service continued As concerted effort to were conducted to orient space technicians in new techniques developed provide a professional and satisfying working en- space design and layout vironment for its employees. Sixty-two offices were jointly by the Service and General Services Admin- of these new concepts will moved into new or renovated quarters. Space istration. Application standards and occupancy guideshave been devel- go a long way. toward improvement in utilization and appearance of both existing and newly acquired oped which will go far toward improving space Service office space. utilization while also improving the appearance and efficiency of field offices. Furniture and Equipment Improvements These accomplishments reflect the success of the Give Taxpayers Privacy drive of the past several years to get Internal The Service continued its effort to improve effi- Revenue Service regional and district headquarters ciency and afford taxpayers adequate privacy for offices into good quarters. Although there are still discussing personal tax problems. Seventeen major a few major field offices in unsatisfactory space, in offices were refurbished under the furniture replace- almost all of these cases, firm plans have been made ment program this year in an intensive effort to for improvement. More attention is also being di- eliminate as many as possible of the remaining prob- rected toward smaller field offices. The following lem areas. This replacement program has also per- table reflects the increased emphasis on improving mitted refurbishing smaller offices with serviceable smaller field offices. furniture.. 70 ANNUAL REPORT 0 CHAPTER NINE MANAGEMENT ACTIVITIES I By continued use of consolidated procurement Total Service forms and form letters were reduced techniques and evaluation of common-use office by 1,417 or 7.7 percent this year. National Office machines available on Federal Supply Schedules, prescribed forms decreased by 8.4 percent, regional the Service saved $200,000 annually, or approxi- standardized forms decreased b~ 13.2 percent, and mately 10 percent of the office machine expendi- district prescribed forms decreased by 11.0 percent. ture. Installation of dictating machines in appellate However, service center prescribed forms increased and counsel offices has materially increased effi- by 39.5 percent. A comprehensive study is under ciency and reduced clerical support required. Sav- way to standardize and reduce service center forms ings over the past 2 years amount to $250,000. to the maximum extent possible. The summary result of this year's forms management activities is Tax Returns Increase-Records Holdings shown in the following table: Decrease Forms and form letters In spite of the fact that over 2 million more tax returns of all types 011"War.,.a 10.1 11mi-n. closing r Net were filed this year and more Prescribed by - d .. led a. hear. papers were produced as a result of automatic data Wry aped Wry processing operations, steady progress was made to- Total 18,305 2, 838 4,255 16,888 -1,417 ward reducing and improving paperwork. This National Office (used at headquar. to,. ad ... iseeid.) --- _ ------5.271 787 1.232 4,826 -445 was made possible by (I ) systematically disposing of Regam.1 fficas (used by regional headquarters components of 2 or and retiring records to the federal records centers; more district offices) ------...... 9,379 833 2,067 8,145 -1,234 Dist!ictt, offires (used by local dis. (2) developing and issuing new and revised records 1ct3 and the, subordinate offi. S ce$)..._._.------__% ... 2I : '41. 396 653 2,084 -257 retention instructions in addition to reviewing in- errice centers.. ------3 822 303 1,833 519 definite and long-term retention schedules; (3) simplifying correspondence procedures and stand- ardizing forms and form letters by improving their Travel Costs Reduced appearance and content; (4) establishing and in- Building, washingion, D.C., before moderni-ti.n. The Service is continuing to reduce mileage cost An office In the IRS stalling cost-saving and uniform systems for filing of automobile travel. This year, $535,000 was and maintaining records; and (5) participating in saved by leasing 1,500 can from the General Serv- programs to reduce expenditures by curtailing the ices Administration. Leased vehicles cost 7 cents modernization, with now furniture, purchase of filing equipment in accordance with A similar office aft., -.1-nditi-Ing and per mile compared to 10 cents per mile the Scrvi~, scientific spacing and lighting Yet.., and al-tiorl file loill-9- the President's moratorium on procurement of new pays when an employee uses his own automobile. conTespondence filing cabinets. A sliding rate of reimbursements tied to the rental By applying effective controls over creation of rate of GSA cars is being developed for employees records and systematic disposition of inactive records, who choose to use their own cars. Service wide records retirement and disposal activities resulted in removal of 244,724 cubic feet of Communications Studied to Modernize Systems records and release for reuse of space and equip- An intensified program for the management of ment valued at $1.0 million. Records holdings and communications was begun on September 1, 1964. disposition activities are shown in the following This program will take full advantage of improved table: equipment and techniques and technological advances and new concept% for transmission and proc- Records holdings and disposition acti,ities essing of data. Particular attention will be focused on communication problems growing out of con- Vclume of records (cubic feet) version to automatic data priocessing. status The matter is particularly timely since the Service 1964 1965 telecommunication costs reflect a sharply rising On hand July I ------_ 583,687 603,021 trend over the past several years. The increase Disposals------_ ------230,538 244,724 became even more pronounced in 1965 when such 119,458 costs reached $6.6 million, 22.8 percent above 1964. I'D10"496 125,266 These costs On hand 1-30_.. ------E03,021 599,342 are primarily attributable to recurring charges for telephone service and equipment.

73 790-388 0-66-7 ANNUAL REPORT go CHAPTER NINE MANAGEMENT ACTIVITIES

FISCAL MANAGEMENT ACTIVITIES INCREASED higher pay costs due to pay increases effective in OBLIGATIONS BY ACTIVITY January and July 1964, and the remainder reflects Most of AdditiciAl Budgeted Funds Applied the cost of the additional 1,000 man-years and gcn- to Personal Services cral maintenance costs for the carry-forward staffing. ne remaining $4.1 million consists primarily Combined appropriations for the Internal Rev- cnue Service in 1965 totaled $598.4, an increase of of an increase of $4.7 million in ADP equipment $46.4 over the 1964 appropriation. The additional purchases ($9.5 million in 1965 compared. to $4.8 funds were used primarily to finance the objectives million in 1964), and an offsetting decrease of about Tax fraud and special investigations of the Long-Range Plan; to provide for increased $1.5 million in funding of housing requirements. 5.2 cents Of the 62,461 planned cost of current staff maintenance, including pay act man-years (exclusive of rr- imbursable programs), 61,963 or 99.2 percent were increases enacted by the Congress; and for purchase actually realized. This is an increase of 1,002 over of ADP equipment required for the master file Alcohol and tobacco tax the 60,961 realized in 1964, and is related mainly regulatory work 5.8 cents system. to the conversion to the ADP master file system. The cost of operating Service (exclusive of the The charts on the following page reflect the distri- reimbursable programs) year was $595.0 Taxpayer conferences during the bution of each dollar obligated in 1965-by function and appeals 3.5 cents million compared with $548.5 million in 1964. This and object of expenditure: is an increase of $46.6 million in actual cost financed The distribution of obligations in fiscal years 1964 All other- 8.1 cents by funds appropriated by Congress. Of this increase and 1965 is shown in the following table: (For in overall cost of operation, about $42.4 million was more detail by appropriation by activity see table 28, for personal services-$30.0 million represents p. 131.)

Obligations incuffed by Internal Revenue Service -includes rulings, technical planning. and special technical ... 1.7; legal services, 2.4; inspection. 1-5; statistical reporting, 10; executive direction, 1.5. (in thousands of dollars)

Total Parsorn.1 =.b m.n.tin Other .ad Activity 19CA 1965 1964 1965 1964 1965 OBLIGATIONS BY OBJECT OF EXPENDITURE Total...... __ ------__ ...... ------...... _ ------549,692 597,387 479,055 522,490 70,637 74,897 Appropriated funds, total __ ...... _ ... _...... _::::_ :: 543 482 595 047 478 154 520 607 70 328 74 44D Rulings, technical planning and special technical services. ---_------8: 590 9:265 7: N03 8:198 ' 787 1:067 Collection of ------...... --- 2202,11111 246 Bit l84 39 141 41 976 Audit of tax returns ----- _ ------_---- _ ------215:922 as87:056'50 204201: 120 15:225 14: 802 Tax fraud and special install ations.------_ ------29: 2289of 31 235 25 057 27.029 541232 4 206 Alcoh o l and to bacco tax .gu fx tory work . - _. ------3 3 ,239 34: 773 27: 579 28 990 661 793 Salaries Taxpayer conferences and appeals...... 113: %119 211.:6121 172: 38 9:585 1:075 1 2387 87.5 cents 30 2507 37 543 949 1 08 statisticalInapset.!Dn ---- I ------1_1 ... :-:.::: ------304 9,D04 6,929 :734 1,375 1:270 :-: --- ...... 6,:64 72 35: 897 940 743 1,888 "xecutive directMartin ------_------...... 78 07 7:507' 647 '6: 394 1,140 13 Reimbursements. total...... ------1,210 2,340 901 1,893 309 '457

Service Reimbursed for Help to Other Agencies countries in technical assistance programs of the Travel 2.9 cents Agency for International Development. Most of During 1965 about $2.3 million were received for this effort was directed to Central and South Amer- services provided other agencies, an increase of about ican nations within the Alliance for Progress. $1 million over 1964. Costs to the Service for providing these services (provided at cost, therefore con- All Other 9.6 cents Savings Accumulated From Available Funds sistent with amount received) are in addition to costs shown above that are applicable to the appropriation During the year the Service was able to accumu- enacted by Congress. A total of 135 man-years was late about $5.7 million savings from available funds, realized in providing these services. These are spe- while substantially carrying out program levels pro- cial services performed chiefly for other Federal vided by the Financial Plan. Significant factors in agencies and for Puerto Rico, various States, and the accumulation of the savings are described in the others. The primary increase in 1965 resulted from Management Activities Section of this report. the continuation and expansion of programs imple- From these savings the Service was able to reduce mented in 1964 for tax advisory services to foreign its supplemental appropriation requests for funds

74 1 75 ANNUAL REPORT * CHAPTER NINE MANAGEMENT ACTIVITIES to finance the Pay Act Increase by $2.3 million, in lance in its role as an independent fact-finding body Program Emphasis on Collection and ground investigations. These investigations consti- addition to the mandatory.absorption of 10 percent reporting directly to the Commissioner. The activ- Enforcement of the total cost of the 1964 Act. The remainder of ity is headed by an Assistant Commissioner and en- tute one of the basic steps in the Scrvicc's preventive maintenance the savings was returned to the general fund of the compasses the internal audit and internal security Internal Audit's continuing goal is to bring into program to assure integrity. . Treasury. functions. Major investigations, such ais those in- proper focus' those conditions that require corrective Breach of Integrity Investigations volving fraud on the revenue, are subject to close action as well as those activities that have been con- o Major Importance Orderly Reporting Identifies Merger Sarvings interfunctional coordination. The organization ducted effectively and efficiently. Program empha- consists of a National Office Inspection Staff and sis is on the examination of those organizational seg- Of The merger of the Northeast-New York Regions major importance is the program for detecting seven Regional- Inspector Offices under the direct ments which are most closely connected with the into the North-Atlantic Region was implemented and investigating breaches of integrity on the part supervision of the Assistant Commissioner (Inspec- collection of the tax revenues and the enforcement of without major fiscal problems. Experience gained employers acting independently or in collusion tion). of the tax laws. Particular stress is placed on iden- during the 1964 realinement of field offices facili- with others. These investigations range from ad- tification of potential integrity problems. Approxi- ministrative tated orderly reporting and accounting of merged misconduct to violations of the Federal Internal Audit Provides a Protective and mately 75 percent of the direct internal audit staff laws. Of equal importance arc the investigations resources and savings resulting from the merger. time was spent on Constructive Service to Management the data processing, collection, based on actual or suspected attempts by taxpayers audit, intelligence, and alcohol and tobacco Services Automatic Data Processing Handles tax func- or their representatives to bribe employces of the Internal auditing is an integral part of the Serv- tions. An additional 23 percent was spent on in- Service to influence their actions in tax exaniina- Payroll of Other Treasury Offices ice's management control system. The program tegrity matters. tions, tax collections, or other tax matters pending As a further step in implementing the Secretary's provides for an annual independent review and ap- before the Service. Results decision to automate the department payrolls praisal of Service operations as a protective and con- Contribute to Maintenance of a through the Service's automatic data processing fa- structive service to the Commissioner and all other More Effective Organization Service Assists Other Government levels of management. This broad program covers Organizations With cilities, the payroll operations for the Savings Bonds Action taken by management Internal Audit, all field organizations and activities of the Service officials to correct Internal Division in the Office of the Secretary and Coast conditions reported Security Work and includes a determination, of whether the policies, as a result of internal audit ex- Guard Headquarters in Washington were convertedthe aminations continued to practices, procedures and controls adequately pro- represent a very impressive Internal security inspectors were called umeupon to to the automated payroll system. contribution to the maintenance tect the revenue and are being efficiently and effec- of an effective In. furnish assistance to the Secret Service in n ternal Revenue Service. tively carried out. Although internal auditors have Some of the actions taken assignments involving protection of the Presi dent.rous New Handbook on Travel Regulation Aids are susceptible no responsibility for correcting operating deficien- of measurement in terms of addi- I nternal Revenue also assumed from the Secret Travelers and Supervisors tional revenues collected cies, they do have the responsibility for reporting and or savings effected. A con- Service responsibility for conducting many personnel servative estimate of the results of these The Service's travel regulations were completely evaluating the corrective actions taken by operating actions investigations for other Treasury bureaus so that during 1965 totals more than rewritten and published in Handbook form. The officials, and for making suggestions for improve- $30 million. Included more Secret Service manpower could be concen- are such items as new Handbook provides travelers and supervisors ment where appropriate. These evaluations and management's action on specific trated on protection of the President. Another tax cases, interest and penalties not with clearer and more usable instructions for direct- suggestions have assisted in substantially improving properly assessed, new program initiated during the year was a special and accelerated collection actions. ing and performing official travel and preparation the procedures and controls necessary for an effective investigative program for the Office of the Comp- troller and review of reimbursement vouchers. and efficient Service. of the Currency involving about 1,200 investi- Internal Se6rity Programs Strive To Assure gations. Several of these Additional audit responsibilities have resulted investigations were made Employee Integrity during the year. AIM OF INSPECTION ACTIVITIES IS TO from the Service's adoption of automatic data proc- Successful The Service also occasionally lends GUARD INTEGRITY OF THE SERVICE essing. To effectively evaluate the electronic proc- administration of the voluntary self- assistance in internal audit work to other essing of tax data, each prtices~ing program must be assessment system of taxation depends to a large Government bodies. "The Price of Integrity Is Eternal Vigilance" extent on theintegrity and good faith of the This year the committee established by the Treasury revicwed as it is carried out. In order to accomplish Ameri- can people, which in turn is based on their confi- Department to audit the Exchange Stabilization this, resident auditors have been stationed at each In President Johnson's first meeting with top offi- dence in the integrity and impartiality of the offi- Fund was chaired by a Service employee. The im- service center to maintain day-to-day contact with cials of the Service at the White House in February cers and employees of the Service. To aid manage- portance of this assignment is indicated by the 1964 he stated that taxpayers "have a right under fast-changing conditions and to test the accuracy of ment in maintaining this public confidence, internal Fund's purpose-to maintain the stability of the our democratic system to be treated reasonably transactions while source documents and output security investigators provide management with U.S. dollar in the world currency market. and they have every reason to expect from the men data can be conveniently matched. This constant timely, factual, objective information on any mat- Another internal audit assistance assignment, one of the Internal Revenue Service total integrity, and field contact is complemented by continuing liaison ter that represents a potential threat to the integrity that has continued over the past few years, involves integrity in tax administration is something we take with the National Office, permitting data process- standards of the Service. supervising the development and installation of a for granted, but the price of integrity is eternal ing officials to promptly consider the systems or pro- modern tax system for the Virgin Islands, at the re- Preventive vigilance." cedural flaws disclosed by internal audit as well as Maintenance Practiced quest of the territorial Governor. Adoption of the recommendations made has enabled their Tax Di- the recommendations for improvement. This has All persons appointed to positions involving Inspection Maintains Vigilance tax- vision to make substantial improvements in its oper- proved to be an effective method for meeting inter- payer contact, handling of money, and other key ations and has substantially increased revenues. For Inspection's mission is to maintain constant vigi- nal auditing responsibilities in the ADP area. jobs in the Service are the subject of thorough back- example, tax collections in 1964 totaled $14 million 76 77 ANNUAL REPORT as CHAPTER NINE MANAGEMENT ACTIVITIES compared with $9.4 million in 1963 and $8.9 mil- tions, involving the coordinated efforts of both in- of the Treasury, or to appropriate Service officials Mr. Nathaniel Goldfinger lion in 1962, a 60-percent increase over 1962. ternal audit and internal' security functions, have depending upon the relative significance of the AFL-CIO been conducted. In numerous cases, assistance was findings. Washington, D.C. Statistics Show Rise in Investigations rendered by agents from the audit and iptelligence Six reports on Internal Revenue Service opera- Completed divisions. These investigations have rev6ded a num- tions were issued during 1965. One report was Mr. Bruce Greenfield ber of schemes by persons within and, ;utside the Internal security investigations of all types com- issued to the Congress of the United States and cov- Bankers Securities Corp. the Government of millions of pleted during the year totaled 8,825, a 7-percent Service to defraud ered excessive interest costs incurred on certain Wyncote, Pa. increase over the prior year. In addition, police dollars in tax revenues through bribery and other income tax refunds. These costs are primarily attrib- corrupt means. checks were made on 6,510 employees considered utable to an existing provision of the Internal Prof. Vance N. Kirby for short-term temporary appointments, compared Since 1961 nearly 300 persons have been arrested Revenue Code (26 U.S.C. 6611 (e)) and the Gen- Northwestern University Law School or indicted for bribery and other crimes involving with 5,075 such checks the prior year. eral Accounting Office recommended that this pro- Chicago, 111. corruption of tax administration. These prosecu- A tabulation of the types of investigations com- vision be amended. The Assistant Secretary of plcted during the last two years and the resulting tiont are evenly divided between employees or former the Treasury for Tax Policy agrees with the prin- Miss Nina Miglionico employees of the Service and persons outside the Attorney disciplinary actions follows: cipal recommendation and has initiated action seek- Service. Over 50 of the persons against whom pros- Birmingham, ing the necessary legislative change. The other Ala. and individuals out- Investigations disciplinary actions ecutions have been initiated were five reports concerned payroll and other selected side the Service who tried to bribe honest Service Mr. Ream V. Miller Type of 1....ligation ad action 1964 1965 administrative operations at various field offices. reported these attempts Shell Oil Co. employees who immediately Corrective actions on these matters have been taken Total investigations Cliculd 8,221 8,925 to Inspection. Guilty pleas or convictions of 135 by responsible officials. New York, N.Y. Personnel investigations persons have been obtained in the past 4 years for Number at cases closed, total...... _ .... __ ------6,928 6,162 conspiracy and other crimes calculated to defraud Mr. Raphael Sherfy NEW ADVISORY GROUP Turner, Charxvcte~ and security investigations... ------_._ 3,354 2,1742 7 the internal revenue. Prosecution actions were APPOINTED Major, Markham and Sherfy SpecialConductmetairinvestigations...... _._ ------698 2,876 17464' pending against another 150 persons at the end of Washing-ton, D.C. In keeping with the practice of periodically Actions taken by Service management officials as a result of the year. if personnel in...ligation changing the membership, the Commissioner ap- Mr. Sam. G. Winstead isciplinuitr actions, total_ ...... 797 pointed a new Advisory Group in April 1965. Tbe Remedial Action Has Been Swift Jackson, Walker, Winstead, Cantwell & Miller Sanalliflirel, total I ------340 Group's purpose is to provide constructive criticism Dallas, Tex. Bribery, extortion nrth ar lusion __ ...... 121 In addition to separating employees involved in of the Service's policies, procedures, Earlecillment or sit of Government funds or property. 1115 51 and programs Failure of employee to pay proper tax ...... 14 2 these schemes and initiating prosecutive action and suggest ways in which the Service can improve Mr. Robert E. Witschey UFalsificationetc... or distortion.....of Government__ .... reports, records, 1219 against them and the nonemp~oyees involved, vari- its operations. The Advisory Group nauthorned outside activity 110.0 appointed Witschey, Harman and White Failure to discharge duties properly --- ...... 2 I I2 ous remedial measures have been taken. They in- March 1964 and shown in the 1964 3 Annual Report Charleston, W. Va. at meta,.be areof =;wi;l-[Wf- -: ------of met on October 1-2, Acceptanceiv.I's of fen of gratuities ... 7I 18 clude strengthening of supervision, tightening 1964, and December 17-18, S. Personal and other misconduct ------59 internal controls and safeguards, and an aggressive 1964. The newly appointed group Mr. Peter Isnesim. (,am duty ad pay ..... ------53 35 met twice this Yosinoff grorrimands, warnings, reassignments. transfers, or demotions . 467 422 program of alerting Service managers to recognize year: April 29-30,,1965, and June 14-15, 1965. Public Accountant Nondochilimary actions ---- ...... _ ...... 6,137 5,365 indicators of integrity breakdowns. Inspection is The members of the new group are as follows: Providence, R.I. Other investigations vigorously continuing the program, established the Number of c...a el ... it. total ------_ ------1,293 2,663 preceding year, whereby any indicators of break- Mr. Richard H. Austin Mr. Andrew B. Young Aptications for admission to practice before the Internal Richard H. Austin & Co. venue Service.-...... 498 662 downs in integrity involving actual or potential Stradler, Ronon, Stevens & Young Charges against enrollees. ---- ...... 370 Detroit, Mich. Federal tart cle ...... I"13B 122 fraudi on the revenue, committed through collusion Philadelphia, Pa. Attempted0 bribery...... 55 78 I i'mineirati...... ---- _ ..... :.: ------5 between Service employees and non-Service people, 1,566 Mr. Mortimer M. Caplin minestritaitions for other Treasury burnuis ------336 are investigated jointly by internal auditors and in- Mr. Hilbert P. Zarky Caplin, Battle & Harris Includes resignations, retirements, or other separations while employees were ternal security inspectors under the personal direc- Mitchell, Silberberg & Knupp under.he'.I havearblutimninvestigation or before administrative decision was made on disciplinary action Washington, D.C. disclosed derogatory information. tion of the Regional Inspector. Los Angeles, Calif.

Joint Integrity Program Has Proved Effective SIX GENERAL ACCOUNTING OFFICE in Ferreting Out Corruption REPORTS ISSUED A concerted drive to ferret out corruption in the Service was initiated by Inspection in 1961 as a Under the provisions of the Budget and Account- result of continuing complaints and rumors that ing Act of 1921 (31 U.S.C. 53) and the Accounting some Service employees, tax practitioners and others and Auditing Act of 1950 (31 U.S.C. 67), the Gen- were conspiring to defraud the internal revenue. eral Accounting Office reviews Service operations and During the past 4 years a series of special investiga- reports it findings to the Congress, to the Secretary

78 79

ANNUAL REPORT * APPENDIX

of the Commissioner's program for more effective exempt status as to the proper procedures for estab- taxpayers' assistance and education. Income taxes, lishing such status. Thc pamphlet contains general excise taxes, and employment taxes are explained in instructions for all organizations covering items such Appendix plain language and numerous examples are used to as the proper method of applying for a ruling or de- illustrate the application of the laws. A Check List, termination letter, including the forms to use and the TAXPAYER PUBLICATIONS The student's workbooks contain sample*problems of particular interest to new businessmen, shows at information required. In addition, it provides spe- followed by blank forms for the students to use in a glance the taxes for which different kinds of busi- cial instructions needed by various kinds of organi- ne&g organizations and business activities may be zations Your Federal Income Tax, Publication No. 17, is preparing the necessary returns. Both the teacher's such as cemetery companies, mutual irriga- tion and telephone written for individual taxpayers. Because of the manual and the student's handbook for the general liable and what the business should do about them. companies, credit unions, and numerous provisions of the Revenue Act of 1964 course also contain a brief history of taxes in the A Tax Calendar for 1965 is also provided to assist many others. which affect individuals, and current Revenue Rul- United States and a discussion of the Federal budget. businessmen in keeping track of when various Highlights of 1964 Tax Changes, Document No. things should be done during the year with respect 5552. This document was added to the list of ings, Revenue Procedures, Regulations and court Alcohol and Tobacco, Summary Statistics, Pub- to all their Federal taxes. As in the case of Your free taxpayer information pamphlets this decisions, which were incorporated in its 1965 edi- lication 67, released each year, usually in February, year be- Federal Income Tax, changes in format were made cause of the many tion, new typography was used and the booklet's presents comprehensive statistical data relating to changes brought about by the which included the use of 3-column pages and a Revenue Act of 1964, new regulations, Revenue format was changed. The booklet was printed in the alcohol and tobacco industries. new, smaller style of type, and the size of the booklet Rulings and Procedures, and Court decisions. The 160 pages and contained 50 percent more text than The publication contains 94 statistical tables sum- was increased from 144 to 160 pages, in order to pamphlet briefly describes each important change the 1964 edition. In addition to covering prob- phases of the distilled spirits, marizin pertinent explain the many important provisions of the new and refers to the number and title of the Document lems common to the average taxpayer, the 1965 beer, wine, and tobacco industries by States and by law contained in the Revenue Act of 1964, and where the change in tax law, procedure, etc., is edition contains simplified explanations of the more months introduction defining principal terms, an changes brought about by regulations, Revenue Rul- explained in detail. complex problems which even the average taxpayer andan~mdex. Comparisons are made with the pre- ings and Procedures, and court decisions, which Income Averaging, Document No, 5553. The will occasionally encounter. A new chapter on in- vious fiscal year and historical data are shown for affect the businessman. This 160-page booklet is provision of the Revenue Act of 1964 which allows come averaging, for instance, which contains simpli- the years 1934 to date. Tables show such details sold to the public for 50 cents a copy through the any individual having an unusually large amount fied explantations and a comprehensive example, as the number of establishments, materials used, same outlets as Your Federal Income Tax. This of income in one year to average it over several years, appears in the 1965 edition. The volume of new production, taxable and tax-free withdrawals, stocks, year, 300,000 copies were sold and 70,000 copies and thus to use a lower tax bracket rules, caused by the Revenue Act of 1964 and other imports, rectification, bottling, enforcement activi- in computing were printed for internal use by the Service. his tax, is fully explained and illustr-ated. A com- current developments, required the use of a rapid ties and internal revenue collections from alcohol Tobacco Tax Guide, Publication No. 464, is a prehensive example and sample filled-in Schedule* finding Est with key words and phrases to help the Q tobacco taxes. compilation of basic reference materials to assist G, the reader locate new items in the booklet. A filled-in form to be used by taxpayers who average Recent issues can be obtained from the U.S. Gov- manufacturers of tobacco products and others con- their income, is included as a part of this pamphlet. sample of the individual return appears in the front ernment Printing.Office, Washington, D.C., 20402, cerned to comply with Federal tobacco tax laws and Sales and Other Dispositions of Depreciable of the book. All parts of the return are keyed to at 50 cents per copy. regulations. This compilation, including asubscrip- Property, Document No. 5534. This pamph.let ex- page numbers in the booklet where detailed ex- The Farmer's Tax Guide, Publication No. 225, tion to changes, may be purchased for $3.50 from plains the extent to which a sale or any other dis- planations and examples can be found. The 1965 is a 64-page booklet which explains the tax prob- the Government Printing Office, Washington, D.C., position of personal or real depreciable property may edition was sold for 50 cents a copy by the Govem- lems of farmers. This booklet features a list of Im- 20402. be subject to tax on ordinary gain as the result of mcnt Printing Office and local Intemal Revenue portant Dates to Remember devised especially for Highway and Motor Fuel Tax Pamphlets explain certain depreciation claimed on the property. the Service offices. This book was the best seller among farmers, to help them keep track of their tax obliga- latest rules in regard to the various Federal Tax Benefits for Older Americans, Document Government publications this year, with over tions throughout the year. It discusses income, em- motor vehicle and fuel taxes. Tliere are three such No. 5569. This pamphlet was published through pamphlets: 1,250,000 copies sold. In addition, 100,000 copies ployment, and self-employment taxes and contains the joint efforts of the President's Council on Aging Farmer's Gasoline Tax Refund, Publication were used in the Teaching Taxes Program, the Tax- numerous examples illustrating the rules. An iflus- and the Internal Revenue Service. It explains the payer's Assistance Program, and in various training No. 308. special provisions of the income tax laws applicable trated sample farm return, with the schedules farm- Federal Use Tax on Highway programs. Motor Vehicles, to older Americans, and tells how tax dollars can ers might nonrially use, is included at the beginning Publication No. 349. Teaching Taxes, Publications No. 19, 21, 22, and of the booklet, with complete explanations for each lye saved, especially by those who are retired and liv- Federal Gasoline Tax Refund for Nonhighway ing on a fixed pension or annuity or by those who 27 include a teacher's manual and a student's work- entry. Also illustrated arc sample farm records and and Transit Users, Publication No. 378. have incurred the more costly medical bills so often book for use in conducting high school and college depreciation records. A total of 1,250,000 copies sustained by older persons. classes in the preparation of Form 1040A and Form of the Farmer's Tax Guide were distributed through NEW FREE TAXPAYER INFORMATION Information Reporting Requirements of Sponsors 1040 and a teacher's manual and a student's work- agricultural ex- Internal Revenue Service offices and DOCUMENTS of Contests or Sporting Events, Document No. 5572. book for an additional course in the preparation of tension agents of the Department of Agriculture. This pamphlet was published at the request of field fann retums. The teacher's manuals contain step- Tax Guide for Small Business, Pubfication No. How to Apply for Exemption for Your Organi- offices because of the apparent lack of knowledge by-step explanations and illustrations for the prepa- 334, is written especially for sole proprietorships, zation, Document No. 5551. At the request of field on the part of many such sponsors, especially orga- ration of returns of imaginary taxpayers who have partnerships, and corporations. This booklet, like offices, this pamphlet has been published to provide nizations such as civic and business leagues, social the more common types of income and expenses. Your Federal Income Tax, is an important segment instructions to any organization eligible for tax- clubs, religious and charitable organizations, etc.,

82 83 ANNUAL REPORT * APPENDIX ANNUAL REPORT 9 APPENDIX as to their liability for reporting prizes and awards payers by Service personnel. The materials arc! NEW TAX FORMS ISSUED 1965, relating to minimum standard deduction and given. It explains under what conditions the In- used as inserts by the National Office and by field related provisions. formation Return Forms 1096 and 1099 are rc- offices in replies to requests from taxpayers and art: The following new forms with filing instructions Treasury Decision 6796, published February 2, quired to be filed by sponsors of contests or sporting available upon request in local offices. They are were issued during the year: 1965, relating to moving expenses. Treasury Decision 6828, published June 17, 1965, events and when and where these forms must be also used as supporting statements for adjustments. Form No. Title filed. Illustrated Forms 1096 and 1099 are also made in revenue agents' reports. These - publica. relating to capital loss carryovers for taxpayers other I 1040-- Income Averaging than corporations. included in the pamphlet. tions and documents are: (Schedule Income Tax Deductions for U.S. Government Publication G) Civilian Employees Stationed Abroad, Document Title Number 3903 Moving Expense Adjustment Revenue Act of 1962 No. 5S83. This pamphlet explains to Covernment Tax Guide for U.S. Citizens Abroad ------54 3920 Tax Computation Schedule for Component A Guide to Federal Estate and Gift Taxation ------448 Members of Controlled Corporate Group Treasury Decision 6752, published September 9, I employees stationed overseas which of the special al- Travel, Entertainment, and Gift Expenses------463 Interest Equalization Tax Act Forms: 1964, relating to amount of distributions of property lowances they receive are or are not taxable; what Document 3953 U.S. Commercial Bank Weekly Information by certain foreign corporations. expenses they incur as overseas employees may or Number Report Treasury Decision 6754, published September 9, may not be deducted; and what records they must Personal Exemptions and Dependents ------5013 3954 U.S. Commercial Bank Monthly Information 1964, relating to consolidated export trade corpora- keep to substantiate information on their tax returns. Employee Expenses, Educational Expenses ------5014 Report 5016 tions. U.S. Tax Guide for Aliens, Document No. 5589. Sick Pay------3964 Weekly Information Return With Respect to Selling Your Home------5017 Foreign Commercial Banking Subsidiaries Treasury Decision 6755, published September 9, The alien is told how to determine whether his sta- Retirement Income and Credit------5018 3969 Notice of Acquisition of Original or New Japa. 1964, relating to income of export trade corpora- tus is that of a resident alien or a nonresident alien, Medical and Dental Expenses------5020 nese Debt Obligation What Is Income------5045 3973 Receipt of Part I of Notice of Acquisition of tions. and the, requirements in each case are explained in Tax Calendar and Check List for 1964------5046 Original or New Japanese Debt Obligation Treasury Decision 6759, published September 25, detail in this document. Also explained are the re- Self-Ernpl.yment T ------5047 1964, relating to receipt of minimum distributions. porting of trade or business income by the nonresi- Sales and Exchanges of Assets------5048 Depreciation, Investment Credit, Amortization, De- SELECTED REGULATIONS PUBLISHED Treasury Decision 6764, published October 27, dent alien; the availability of tax-treaty benefits; piction ------5050 1964, relating to earnings and profits. special rules for nonresident alien seamen; the re- Business Expenses------*------5051 Revenue Act of 1964 Treasury Decision 6765, published November 3, quirements concerning withholding of income tax Child Cam ------5052 Contributions ------5053 1964, relating to sales and exchanges of patents, etc., and social security from wages; special exemptions Retailen Excise Ta------5054 Treasury Decision 6758, published September 10, to certain foreign corporations. in the case of employees of foreign governments and Manufacturers Excise Tax ------5055 1964, relating to the allocation of certain foreign Treasury Decision 6766, published October 31, international organizations, diplomats, and consulate Excise Tax on Communications------5056 traveling expenses. Occupational Stamp Taxes ------5057 1964, relating to definition of domestic building and officers and employees; the necessity of a "sailing per- Tax .. Admissions and Does------5059 Treasury Decision 6761, published September 29, loan associations. mit;" and the proper manner of filing annual returns Rents and Royalties Income------5060 1964, relating to limitation on medicines and drugs. Treasury Decision 6775, published December 2. and claiming refunds. Losses From Operating a Business ------5062 Interest Deductions------5074 Treasury Decision 6768, published November 4, 1964, relating to definition of U.S. person. Retirement Plans for Self-Employed Individuals, Taxes- 5075 1964, relating to acceleration of corporate estimated Treasury Decision 6779, published December 22, 5107 Document No. 5592. Public Law 87-792, The Filing To_._1_T~_R_et_u tax. 1964, relating to gain from certain sales or cx- Self-Employed Installment and Defecred-Payment Sales ------5108 Individuals Tax Retirement Act of Alimony------5109 Treasury Decision 6770, published November 17, changes of stock in certain foreign corporations. 1962, which is effective for years after December 31, ------5110 "Page 2" Deductions 1964, relating to sick pay exclusion. Treasury Decision 6781, published December 23, 1962, was enacted to enable self-employed individ- Estimated Tax and Tax Withholding------5111 Casualties, Storms, Floods, Hurricanes, Other Dis- Treasury Decision 6772, published November 24, 1964, relating to insur-ancc of U.S. risks. uals to be covered by qualified tax benefit plans asters, and Thefts------5174 1964, relating to timing of deductions in certain Treasury Decision 6784, published December 24, which had previously been available only to em------5175 Accounting Periods and Methods cases where asserted liabilities are contested. 1964, relating to rents or royalties derived in the ac- ployees. This pamphlet defines the master, proto- Bad Debts ------5176 Withholding ------5177 Treasury Decision 6773, published November 24, tive conduct of a trade or business. type and bond purchase plans which cover self-em- From Wages by Employer Repairs and Improvemenn------5178 1964, relating to bank loan insurance. Treasury Decision 6794, published January 26, ployed individuals, and explains the general and Partnerships ------5179 Treasury Decision 6777, published December 16, 1965, relating to expenditures by farmers for special rules for these plans. Corporations ------5180 Sale of a Business------5181 1964, relating to dividend credit and exclusion. clearing land. Forty-nine other taxpayer information documents Community Property------5192 Treasury Decision 6778, published December 17, Treasury Decision 6795, published January 29, and publications were distributed free to taxpayers. If Your Return Is Examined------5202 1964, relating to child care. 1965, relating to amounts included in income; sub- These publications range in size from I to 24 pages. Documentary Stamp Taxes------5286 Condemnations of Private Property for Public ------5383 Treasury Decision 6780, published December 22, part F income; definition of controlled foreign Distribution of the various documents ranged from Decedents------5446 1964, relating to denial of deduction for certain corporations; and exclusion of previously taxed 1,000 to I 10,000 copies. Each publication contains Tax Tips for Homeownen ------5447 State and local taxes. earnings. detailed explanations of the laws applicable to a In,vestment Income and Expenses------5448 Cost or Other Basis of Aisets ------5516 Treasury Decision 6786, published December 29, particular problem area. Objectives of this pro- Treasury Decision 6798, published February 4, Foreign Tax Credit for U.S. Citizens and Resident 1964, relating to casualty losses. gram are to expedite and increase the effectiveness Aliens ------5517 1965, relating to foreign investment companies. Treasury Decision 6791, of the Taxpayer Assistance Program, and to mini- Importance of Adequate Records and a Guide to In- published January 6, Treasury Decision 6805, published March 9, formation Available for Preparing Federal Tax 1965, relating to retirement income credit. 1965, relating to domestic corporations receiving mize the necessity for individual assistance to tax- Returns ------5518 Treasury Decision 6792, published January 15, dividends from foreign corporations. 84 85 ANNUAL REPORT 9 APPENDIX ANNUAL REPORT e APPENDIX

Treasury Decision 6814, published April 7, 1965, Treasury Decision 6803 amended the regulations A decedent creates only one estate for Federal contract are not excludable under section 101 (a) of relating to foreclosure on property securing loans. in 26 CFR Part 275 to provide procedures under income tax purposes even though he leaves two valid the Code (Rev. Rut. 65-57, I.R.B. 1965-11, 7). Treasury Decision 6819, published April 20, which, domestically produced tobacco products ex- wills, one disposing of property located in the United The manufacturers excise tax on tread rubber 1965, relating to appearances, etc., with respect to ported from and returned unchanged to the United States and the other disposing of property located applies to the sale or use by a recapper or retreader legislation. States may be released from customs custody, within a foreign country (Rev. Rut. 64-307, C.B.'1964- of a "rubber ribbon" which is produced by a special Treasury Decision 6824, published May 11, out payment of that part of the duty attributable to 2, 163). extrusion process for recapping or retreading tires 1965, relating to records and accounts of U.S. the internal revenue tax, for delivery to the factory The value of a survivor's annuity does not qualify of the type used on highway vehicles (Rev. Rut. shareholders. of a manufacturer of tobacco products under the for the marital deduction if upon the decedent's 65-75, I.R.B. 1965-12, 11 ). bond of such manufacturer. death any portion of his contributions is payable to A revised method is provided for computing an- Other Signillcont Regulations anyone other than the surviving spouse or her estate nual additions to reserves for bad debts by banks for (Rev. Rut. 64-310, C.B. 1964-2, 342). taxable years ending after December Treasury Decision 6745, published July 9, 1964, SIGNIFICANT REVENUE RULINGS AND 31, 1964 (Rev. In determining the applicability of the communi- Rut. 65-92, I.R.B. 1965-14, 8) (T.I.R. 707, 3-15- relating to meals and lodging fu~nishecl for the PROCEDURES cations tax, a musical program service transmitted 63). convenience of the employer. wholly or in part by wire or cable comes within the The manufacturers excise tax on gasoline applies Treasury Decision 6783, published December 24, Where a taxpayer's method of accounting is definition of "wire and equipment service" even to "natural gasoline" obtained as a residual by- 1964, relating to employee annuities and miscel- changed to use inventories and his inventory on though it may be used in the conduct of a trade or product in the processing of natural gas to produce laneous amendments. December 31, 1953, exceeds his opening inventory business (Rev. Rut. 64-321, C.B. 1964-2, 444). liquefied petroleum gases,(Rev. Rut. 65-132, I.R.B. Treasury Decision 6797, published February 3, for the year of the change, there is no adjustment to Where an insurance policy is purchased under a 1965-21,16). 1965, relating to rules for the tax classification of income under section 481 (a) of the Code (Rev. so-called "split dollar" arrangement the employee The procedures for processing requests regarding professional service corporations. Rut. 64-191, C.B. 1964-2, 132). must include in his income the value of the insurance the qualification of pension and Treasury Decision 6806, published March 5, Amounts paid or incurred in satisfaction of treble profit-sharing plans protection in excess of the portions, if any, of pre- were brought up to date (Rev. Proc. 64-30, C.B. 1965, relating to collapsible corporations. damage claims under section 4 of the Clayton Act miums provided by him and no deduction shall be 1964-2, 944). and attorney's fees and other expenses directly re- allowed to the employer for premium payments Areas of the Code in which the Service Alcohol, Tobacco, and Firearms Regulations, lated to the maintenance of defenses against such generally made (Rev. Rut. 64-328, C.B. 1964-2, 11) (T.I.R. will not issue advance rulings or clainks, except amounts paid or incurred in satisfac- determination let- Treasury Decision 6749 amended rrgulations in 659,11-27-64). ters because of the inherently factual nature of the tion of or directly related to damage claims of the 26 CFR Parts 186 and 201 to provide for the adop- Saline minerals extracted from the waters of the problems involved were set forth in United States under section 4A of the Clayton Act an up-to-date, tion by a successor of a predecessor's approved for- Great Salt Lake are not subject to the allowance section-by-section list (Rev. Proc. 64-31, C.B. or the Federal False Claims Act, are deductible as mulas, to provide for the alternate use of a portion for depletion (Rev. Rut. 65-7, I.R.B. 1965-2,'6). 1964-2,947). ordinary and necessary business expenses (Rev. Rut. of a distilled spirits plant premises for making cus- Expenses incurred in obtaining and filing semi- An optional procedure is added to the guidelines 64-224, C.B. 1964-2, 52) (T.I.R. 615, 7-24-64). toms gauge or as a Class 6 customs manufacturing annual reports required by the Securities and Ex- relative to acceptable sampling procedure for com- For purposes of certain excise tax exemptions, the bonded warehouse, to permit production gauges to change Commission in connection with an employee plying with the special rules under section 1.453-2 educational organization" includes be made by average fill methods, and to make a term "nonprofit stock option are deductible as ordinary and neces- (d) of the regulations covering sales of personal Bible school, or similar school number of other liberalizing changes. a Sunday school, sary business expenses (Rev. Rut. 65-13, I.R.B. property under a revolving credit type plan (Rev. which meets the statutory requirements relating to Treasury Decision 6762 amended regulations in 1965-4,10). Proc. 65-5, I.R.B. 1965-9, 45) (T.I.R. 685, 1- faculty, curriculum, and enrolled student body (Rev. 26 CFR Parts 175 and 201 to eliminate the requi - Payments in kind (or cash in lieu thereof) re- 28-65). Rut. 64-276, C.B. 1964-2, 399). ment for the words "Federal Law Forbids Sale or ceived under the cotton equalization program must The provisions of Revenue Procedure 62-21 and Reuse of This Bottle" to be marked on liquor bottles, Crop shares or livestock received as rent by a debe included as items of other income in the tax re- its related documents (Depreciation Guidelines and cash method of to include less'than one-half pint containers in the cedent (who had employed the turn of an accrual-basis taxpayer in the year in Rules, Publication No. 456, Revised August 1964) definition of liquor bottles but to exempt such con- accounting) prior to his death and owned by him which the applications for payment-in-kind certifi- are supplemented to include three liberalizing meas- crop shares or tainers from indicia requirements, to permit liquor at the time of his death, as well as cates are approved by the Commodity Credit ures and some limitations on depreciation calcula- bottles to be used for display purposes without alter- livestock which he had a right to receive as rent at Corporation (Rev. Rut. 65-17, I.R.B. 1965-4, 32) tion techniques (Rev. Proc. 65-13, I.R.B. 1965-20, ation, and to make other liberalizing changes. the time of his death for economic activities occur- (T.I.R. 674, 1-4-65). 3) (T.I.R. 727, 5-7-65). constitute income in respect Treasury Decision 6769 implemented Public Law ring before his death, In computing the ad valorem manufacturers and of a decedent which is reportable in the year in SIGNIFICANT 88-653 which authorized the use of volatile fruit- retailers excise taxes for purposes of assessment and ANNOUNCEMENTS concentrate in wine, and the transfer of such which the crop shares or livestock are sold or other- flavor collection, the total price charged by the vendor for The Service discusses the new section 170(f) of concentrate from volatile fruit-flavor concentrate wise disposed of (Rev. Rut. 64-289, C.B. 1964-2, a taxable article is deemed to include an amount the Code relating to transfers of future interests plants to bonded wine cellars. 173). equal to in the tax (Rev. Rut. 65-41, I.R.B. 1965-9, tangible personal property in payment of charitable Treasury Decision 6799 amended regulations in Unless requested to do so, a winemaker is not 29). contributions (Announcement 64-77,,I.R.B. 1964- 27 CFR Part 5 to prohibit the use of the wording required to take a complete actual inventory of the The proceeds of a life insurance policy which 28, 29) (T.I.R. 604, 6-12-64). "Bourbon" in the type designation of any whiskey or wine on storage in his wine cellar to report an identi- could not have been acquired except in combination The Excise Tax Rate Extension Act of 1964 post- whiskey-based distilled spirits not produced in the fiable operating loss, such as filtration loss (Rev. with a nonrefund annuity contract purchased for a pones until July 1, 1965, the termination of the Rut. 64-299, C.B. 1964-2, 574). United States. premium equal to the face amount of the insurance taxes on general telephone service and transporta-

86 87 I ANNUAL REPORT a APPENDIX ANNUAL REPORT * APPENDIX tion of persons by air, and the reduction in rates A brief summary of the various records required SUPREME COURT DECISIONS U.S. 998, has been deferred until the next term of on certain motor vehicle articks, distilled spirits, to be retained for Federal tax purposes has been court. The issue involves the disallowance by the beer, wine, and cigarettes (Arknouncement 64-78, published in' the Federal Register as the current Civil Cases Service of a claimed depreciation deduction for the I.R.B. 1964-30, 19) (T.I.R. 608, 7-1-64). Guide to Record Retention Requirements (An- year in which the property was sold In Commissioner v. Est. of Marshall Noel, 380 for an amount Revenue Procedure 64-21 is amplified to provide nouncement 65-27, I.R.B. 1965-14, 2~). in excess of its U.S. 678, the Court reversed the Third Circuit's adjusted basis at the beginning of the for the use of the single composite basis by electric Special instructions dealing with the interest year. decision which had held that insurance proceeds and gas utility companies who filed returns prior to equalization tax, as it applies to certain commercial In United States paid to a beneficiary by reason of accidental death v. Atlas Life Insurance Com- May 11, 1964, with respect to a year when Revenue bank loans made to foreigners, may be obtained were not includable in the gross estate of the dcce- pany, 381 U.S. 233, the Supreme Court reversed Procedure 62-21 is applied (Special Announce- from offices of the District Directors of Internal the Court of Appeals for the dent. The case involved insurance paid to a wife Tenth Circuit and held ment, I.R.B. 1964-33, 29) (T.I.R. 616, 8-3-64). Revenue (Announcement 65-43, I.R.B. 1965-22, that the Government by reason of her husband's death in a plane crash. had properly applied a statu- Taxpayers may now secure their tax account 33) (T.I.R. 722, 4-22-65). tory formula under the Life Insurance In reaching its decision the Court attached great Company of The current revision of the Cumulative List of Income Tax Act of 1959. (social security) numbers from any local office importance to the consistent administrative construc- The Court of Appeals Exempt Organizations, Publication No. 78, is had the Social Security Administration or Internal tion of the statute for more than 30 years. concluded that this formula, as applied by the (Announcement 6"7, I.R.B. available on a subscription basis from the Superin- Government, had the effect of imposing Revenue Service Paragon Jewel Coal Co., Inc. v. Commissioner, a tax on the tendcrit of Documents (Announcement 65-44, receipt of 1964-34,59). 380 U.S. 624, presented the Court with the oppor- tax-exempt municipal and State bond I.R.B. 1965-23, 26). interest. The Supreme Court held The Service discusses the filing of consents by tunity for clarification of its prior opinion in Parsons that there is no The review procedures for cases which are re- statutory or corporations excepted from the "collapsible corpora- v. Smith, (1959) 359 U.S. 215, relating to the al- constitutional barrier to the application quired to be reported to the joint Committee on of the formula provided in Section 804 to arrive at tion provisions" under section 341 (f) of the Code lowance for depletion of coal mined for a lessee of Internal Revenue Taxation have been revised (An- the taxable investment (Announcement 64-103, I.R.B. 1964-41, 81) coal lands by contract miners. The Government income of a life insurance nouncement 65-47, I.R.B. 1965-24, 28) (T.I.R. company. It (T.I.R. 621, 8-31-64). supported the lewe's claim to the entire depletion held that such formula does not result 728, 5-19-65). Individuals who accept wagers for profit or on deduction, and the Court sustained in the direct taxation of tax-exempt income but Certain substantiation will be required with re- their contention behalf of other persons are reminded that they must that the contract miners had no economic interest merely charges exempt income with a fair share of spect to any excise taxes that may become refund- the burdens properly allocable to it. register and pay taxes imposed by the wagering tax entitling them to depletion. The Court rejected the able as a result of retroactive repeal under H.R. On the same day the Court decided Waterman laws (Announcement 64-11 1, I.R.B. 19641-44, 68) argument that the right to mine a particular area 8371 (Announcement 65-48, I.R.B. 1965-24, 26) Steamship Corporation v. United (T.I.R. 636, 10-5-64). to exhaustion for an agreed price for each ton of States, 85 S. Ct. (T.I.R. 730, 5-28-65). 1389, upholding the decision of the Court of Appeals For social -security and unemployment insurance coal delivered to the lessee constitutes an econornic for the Fifth Circuit in favor of the Government, and purposes, the definition of "wages" is amended to interest. The miners claim that they acquired an overruling a prior decision of the Court of exclude remuneration paid for moving expenses ALCOHOL AND TOBACCO INDUSTRY economic interest in the coal by reason of their ex- Claims in Socony Mobil Oil Company v. United States, which qualify as an income tax deduction under CIRCULARS penditures for equipment and in preparing for pro- 287, F. 2d 910. The decision involved the proper section 217 of the Code (Announcement 64-117, duction of coal, was also rejected. It is hoped that Industry Circular No. 65-15 (June 23, 1965) determination of the tax basis of ships purchased I.R.B. 1964-47, 85) (T.I.R. 653, 11-5-64.) this opinion will end a vexatious issue which has advising manufacturers of tobacco products of the from the Government during World War 11 where Detailed statements should be submitted in lieu engendered much litigation, particularly in the amendment of the definitions of "cigar" and "ciga- there was a subsequent reduction of price and a Computation of Amount Includible Fourth Circuit. of Forms 3646, rette" by Public Law 89-44 and of the procedure refund under the Merchant Ship Sales Act of 1946. by Shareholder of Controlled Foreign Corporation In Commissioner v. Clay B. Brown, 380 U.S. to be followed when reconstituted tobacco is to be The Court's decision in favor of a lower basis affects 64-122, I.R.B. 1964-50, 99) 563, it was held that a transfer of a lumber business (Announcement used as a wrapper for rolls of tobacco. a number of shipping companies. (T.I.R. 651, 11-5-64). to an exempt organization for a specific sum payable Industry Circular 65-16 (June 24, 1965) advis- only out of the future earnings from operation of the On May 3, 1965, the Court decided the cases of Recipients of dividends and interest should United States v. Midland-Ross ing proprietors of distilled spirits plants of the business constituted a sale, thus entitling the sellers Corporation, 381 ordinarily report on their tax returns the amount of U.S. 54, and amendments to Chapter 51, I.R.C., by Public Law to report the gain as capital gain. The Court held Dixon v. United States, 381 U.S. 68, interest or dividends shown on the annual state- each 89-44 which removed the requirement that distilled that the phrase "sale or exchange" in section of which involved the question of whether cer- ments they receive from the paying organizations tain gains on the sale of spirits must be returned to the bonded premises of 1222(3)' should be given its ordinary, rather than notes issued at a discount (Announcement 65-5, I.R.B. 1965-3, 59). a distilled spirits plant within 6 months of their with- a restricted, meaning. The Court rejected the Gov- should be treated as capital gains or ordinary income Temporary rules have been issued for deterntin- under the Internal Revenue Code drawal in order to be eligible for allowance of credit ernment's argument that there was no sale because of 1939. These to certain decisions ing whether charitable contributions or refund of the tax and which authorized the re- there was no risk shifting from seller to buyer, inas- resolved a conflict between the appellate organizations qualify for deductions to the extent courts. The Supreme Court held that the turn of taxpaid spirits to the bonded premises of the much as the purchase price was payable solely from gains in of the donor's adjusted gross income question represented the of 30 percent distilled spirit% plant for immediate destruction. earnings of the business. Other tax aspects of such equivalent of interest and (Announcement 65-9, I.R.B. 1965-4, 49) (T.I.R. Industry Circular 65-17 (June 24, 1965) advis- bootstrap sales are still pending in the lower courts. should be taxed as ordinary income. In the Dixon 667,12-21-64). case the Court also rejected ing proprietors of bonded wine cellars of the amend- Argument in the pending case, Fribourg Naviga- a contention that it was an One edition of the Bulletin is devoted to an index merit of section 5041 (a), I.R.C., by Public Law lion Co. v. Commissioner, certiorari granted, 379 abuse of discretion for the Commissioner to tax to administrative and procedural matters which 89-44 which increased the permissible carbon diox- the gains as ordinary income because of his prior have been published in the Bulletin since 1952 ide content of still wine from 0.256 to 0.277 grams ' All sectional citations refer to the Internal Rewnue Code published acquiescence in a Tax Court decision in- (Announcement 65-12, I.R.B. 1965-7, 4). per 100 milliliters of wine. . of 1954 unless otherwise indicated. volving similar facts.

88 790-388 0-66-8 89 ANNUAL REPORT 9 APPENDIX ANNUAL REPORT 9 APPENDIX On November 23, 1964, the Court decided the within the state. Hence, the injunction was proper. the jury should have been given instructions which Fifth Circuit, norn Barrett, el al. v. United cases of United States v. Powell, 379 U.S. 48 and On January 18, 1965, the Court granted the sub would have permitted them to find him guilty of States, 322 F. 2d 292, declaring unconstitutional Ryan v. United States, 379 U.S. 61 in favor of the Government's petition for writ of certiorari to re- lesser offenses, namely, of either having willfully the statutory presumption (Section 5601 that United States, reversing the Court of Aj5peals for view the decision of the Court of Appeals for the (b) ) failed to pay tax in violation of section 7203 or hav- evidence-of defendant's unexplained presence at an the Third Circuit in the Powell case and affirming Sixth Circuit in the case of United Statis v. Speers ing willfully filed a false return in violation of sec- illicit still would be deemed sufficient to authorize the Court of Appeals for the Sixth Circuit in the (In re Kurtz Roofing Co., Bankrupt)". 335 F. 2d tion 7207. Sansone conceded and the evidence a conviction of possessing an unregistered still and Ryan case. The Court held that the Commissioner 311 (1964). The question presented-is whether a established that his return substantially understated of carrying on the business of distiller without hav- is not required to make a showing of probable cause trustee in bankruptcy is a "judgment creditor" income and tax as alleged in the indictment and ing given bond. The Court found it necessary to to suspect fraud in order to obtain judicial enforce- within the meaning of section 6323. Ile Sixth hence was false. Thus, only the question of will- consider only the presumption contained in section ment of a summons to produce taxpayers' records Circuit held, in effect, that by virtue of his powers fulness was to be determined by the jury. The Court 5601 (b) (2) which relates to the offense of carry- for years for which further assessment is barred by under section 70c of the Bankruptcy Act, a trustee ruled that whether one offense is included within ing on the business of a distiller without having the statute of limitations in the absence of fraud. in bankruptcy was a "judgment creditor" within another must be established by comparison of the given bond. Thus, the Court did not pass on the The Court rejected a contrary interpretation of the the meaning of section 6323 of the 1954 Code, and elements of the several crimes as disclosed by statu- constitutional validity of the presumption which per- applicable Code provisions because it might seri- that therefore the liens of the United Stairs for Fed- tory definitions, indictment allegations, and the mits conviction of the crime of possession of an ously impede investigations the Commissioner thinks eral taxes are invalid as against him since no notice proof adduced in court. If the lesser offense con- unregistered still warranted, and because the legislative history of sec- of Federal tax lien was filed prior to the filing of the on proof of the defendant's tains some but not all of the elements of the greater unexplained presence at the still site. tion 7605(b) (prohibiting "unnecessary" examina- petition in bankruptcy. offense charged it is included in the greater offense. The tions) indicates that no severe restriction was in- The Court, on March 15, 1965, also granted a silence of the Court as to the latter of these However, even if the greater offense charged in- two presumptions has already been construed differ- tended by Congress. The Court did not absolutely taxpayer-bankrupt's petition for a writ of certiorari eludes one or more lesser offenses the jury should ently in the circuits where the issue has arisen. In preclude judicial inquiry into the underlying reasons in a case in which the United States is not a party. only be given an instruction as to the lesser included the Fourth and Sixth Circuits, the decision in Gainey for the examination, but stated that such an inquiry Segal v. Rochelle, Jr., 336 F. 2d 298 (1964). The offense if there is some rational view of the evidence has been interpreted as upholding the validity of is justified only when the taxpayer shows that en- Fifth Circuit has held that refunds resulting from on which the jury might acquit of the greater offense section 5601 (b) (1). Wagoner v. U.S., 346 F. 2d forcement of the summons would constitute an abuse the carryback of losses incurred during the year of and convict of the lesser offense. The Court held 995, of the court's process. bankruptcy were assets of the trustee in bankruptcy C.A. 4, decided June 4, 1965; United States v. that, while under rather than of the bankrupt. Although the United some circumstances the lesser in- Sutton, C.A. 6, decided June 18, 1965, unpublished. In United States v. First National City Bank, 379 cluded offense instructions would have been appro- The First Circuit, however, in Pugliese v. United U.S. 378, the Government had contended that the States is not concerned in this case as a litigant, the priate, in the instant case there was no disputed issue States, 343 F. 2d 837, decided April 13, 1965, con- U.S. District Court had jurisdiction to issue an in- cleci~sion of the Court will have substantial effect of fact except willfulness, and there was no rational strued the failure of the Court in Gainey to pass on junction pendente lite to prohibit the First National with respect to the collection of taxes from bankrupt view of the evidence on which the jury might have this presumption as an implied declaration of its City Bank from disposing of deposits held in a for- taxpayers. acquitted of the evasion charge and convicted on invalidity. eign branch of the bank in the name of Omar, S. A. In the alcohol and tobacco tax field, the Court either of the lesser offenses. Sansone was either While Gainey was pending before the Supreme The Court of Appeals for the Second Circuit re- declined to review the decision of the Court of Cus- guilty of the felony or not guilty of any of the three Court, the Court of Appeals for the Second Circuit, of the Sec- toms and Patents Appeals upholding the validity of versed the District Court. The reversal offenses. The Court noted also that the crime of in a case involving the presumption relating to the ond Circuit by the Court was based on the narrow computing the distilled spirits tax on each proof willful attempted evasion is complete when a false possession of an unregistered still and the similar procedural ground that a preliminary injunction gallon, or wine gallon if below proof as applied to return is filed, it being no defense as a matter of law presumpiion in section 5601 (b) (4) which relates could be granted by a Federal court against a third imported spirits. China Liquor Distributing Com- that a taxpayer when he filed the return may have to the unlawful production of distilled spirits, dc- party under the court's jurisdiction, with respect to pany v. United States, 52 C.C.P.A. 1,343 F. 2d intended to report his true income and pay the clared both presumptions invalid, relying on the property of a taxpayer situated outside of the court's 1005-(1964) ; cert. denied, 380 U.S. 962 (1965). understated tax at a later time. decision of the Fifth Circuit in Gainey. United territorial jurisdiction, but under the control of the This is the latest of a line of decisions rejecting the In Jaben v. United States, 381 U.S. 214, the States v. Romano, 330 F. 2d 566. Certiorari has third party, where reasonable expectation of obtain- contentions, made by importers of under-proof bot- Supreme Court upheld the legal sufficiency to toll been granted on the Government's petition in ing personal service over the tax debtor exists. The tled spirits, that this method of computing the dis- the running of the criminal statute of limitations of Romano (380 U.S. 941 ) and the case is now pend- Government contended that the injunction was tilled spirits Federal excise tax violates the General the type of complaint which the Department of proper, even though personal service had not been Agreement on Tariffs and Trade. ing argument. Thus, the conflict as to the validity justice has customarily used for a number of years of the section 5601 (b) ( I ) presumption may shortly made on the taxpayer and secondly, that deposits Criminal Cases in income tax evasion cases. The decision resolved be held in a foreign branch bank are subject to a fore- resolved by the Court. in the Government's favor a conflict between the In United States v. Ventmca, 380 U.S. 102, the closure of lien action when the main bank is within In the case of Sansone v. United States, 380 Eighth Circuit's decision in Jaben and that of the Court reversed the Court of Appeals for the First the jurisdiction of the U.S. District Court. The U.S. 343, the Supreme Court*ruled on the problem Ninth Circuit in United States v. Greenberg, 320 Circuit which had declared invalid a search warrant latter question was not answered by the Supreme of jury trial instructions in criminal revenue cases F. 2d 467. The form of complaint sustained as based on an affidavit which did not specify what Court. The Court held that it was probable that which would allow a jury to convict of a lesser sufficient to support a finding of probable cause was information, urged in support of "probable cause", the Government could perfect jurisdiction over offense (for example, a misdemeanor) than a felony based on the affiant agent's statement of his investi- was derived from personal observations of the affiant, Omar pursuant to the terms of the New York Stat- charged in an indictment. Sansone had been con- gation and the pertinent details discovered by him. an tax investigator, ute (Long Arm Statute) providing for service of victed of the felony of willful attempted income alcohol and tobacco and what In U.S. v. Gainey, 380 U.S. 63, the Court re- information was furnished to the affiant by other process on nonresidents who transacted business tax evasion under section 7201. He contended that versed the decision of the Court of Appeals for the investigators assigned to the investigation. The 90 91 ANNUAL REPORT * APPENDIX, ' ANNUAL REPORT * APPENDIX

Supreme Court stated that the Court of Appeals had rata equities of the stockholders had not changed, ney-client privilege. The United States moved for a and concluded that section 2410 did not establish any new taxpayers to litigate given the affidavit "an unduly technical and restric- the Court of Appeals nevertheLess held that they contempt citation. The District Court ordered the remedy for their lia- attorney to answer the questions, holding that the bility or authorize any departure from the anti- tive reading." were in receipt of income. This reversed the Tax attorney could not now injunction provisions of the Internal Revenue Code The use of illegally obtained evidence in proceed- Court decision where the Government hold lost both raise the attorney-client privilege because it had been waived and additionally or the Federal tax exception in the Federal Declara- ings to forfeit property was barred in One 1958 Ply- sides of the transaction. .1 tory judgments Act. mouth v. Pennsylvania, 380 U.S. 693, decided The Court of Appeals for the Secora Circuit en because questions concerning the identity of a client April 29, 1965, a case involving the seizure by State banc overruled a prior opinion of long standing and are not subject to the privilege. The attorney again The Third and Fourth Circuits, by per curiam refused to disclose the identity of the taxpayer. decisions, officers, without probable cause, of an automobile held that legal expenses incurred by a securities reached similar conclusions in Quinn v. Thereafter, the district court transporting into Pennsylvania liquor on which the dealer in the unsuccessful defense of indictments for held him in contempt Hook, 341 F. 2d 920 (3d Cir. 1965) and Broadwell State tax had not been paid. While the United violations of the Securities Act were deductible as and fined him $100 per day until he purged himself v. United States, 343 F. 2d 470 (4th Cir. 1965). of his contempt. The States was not a party in this case, the decision is business expenses. The Court declined to follow attorney appealed and the In McGuire v. United States the Court of Ap- applicable to seizures for forfeiture under the inter- precedent in other circuits as well as its own prior Seventh Circuit granted the attorney's motion to peals for the Sixth Circuit affirmed a conviction for stay execution of the $100 a day fine until reviewed nal revenue laws and will probably have significant decision that allowance of the deduction would income tax evasion, overruling the contention of conditioned upon posting of a $5,000 effect in the future on the Service's liquor, wagering, frustrate the public policy declared by the statute. surety bond. McGuire that the money taxed as income had been and firearms cases. Tellier v. Commissioner (C.A. 2), 342 F. 2d 690. In the case of United States v. Franklin National embezzled by him in 1955 and 1956, and therefore, Bank, 342 F. 2d 5 (2d Cir. 1965), the Court of he could not be found to have had the requisite in- The Supreme Court denied certiorari in all 13 In Eber Brothers Wine and Liquor Corporation Appeals reversed the District Court and held that tent to evade in view of the 1961 decision in the case alcohol and tobacco tax criminal cases where the v. United States, 337 F. 2d 624 (Ct. Cl. 1965), cert. the Service is not required to notify a taxpayer when of James v. United States, 366 U.S. McGuire, defendants were the petitioners. Certiorari was den. March 29, 1965, the Court of Claims resolved 213. it issues a summons to a third party to produce books who was superintendent of the county school board, denied in the one forfeiture case (involving coin- a novel and significant constitutional question affect- arid records belonging to the third party. The Court caused the board to order its treasurer to make pay- operated gaming devices) where the claimant was ing the validity of legislation and the veto powers of reasoned that under such circumstances the tax- ments out of official funds for ostensibly legal but in the petitioner. The Court, however, granted the the President. The specific question was whether a payer has no standing to object to the summons in fact fictitious obligations, which he contrived to only petition for certiorari filed. by the Government presidential veto of a private tax relief bill was timely an enforcement action, and therefore, there is no pocket. The appellate court distinguished the facts in an alcohol and tobacco tax case. when the bill was vetoed more than 10 days (excluding Sundays) after it was delivered to the White need to give him notice at the earlier stage of the from those in Commissioner v. Wilcox, 327 U.S. examination before the 404, holding that Actions of Lower Court House but within 10 days after the President re- "hearing officer." The McGuire was not an embezzler but a turned from abroad. The court upheld the veto. Court. reserved opinion on whether notification to manipulator who procured funds by fraud In Commissioner v. Lyon Tyler Matthew (C.A. In the case of United States v. Shurbet, 15 AFTR the taxpayer would be required on a factual situa- and deceit, and, therefore, could be found to have 5), 335 F. 2d 231, it was held that taxpayers were 2d 1149 (June 7, 1965), the Court of Appeals for tion more clearly within the reach of the holding in had the requisite criminal intent to evade his taxes. not bona fide residents of a foreign country and the Fifth Circuit has allowed a Texas farmer to com- Reisman v. Caplin, 375 U.S. 440 (1964), i.e., where McGuire's application for certiorari is now pending could not become with such because of the terms of a pute cost depletion on underground water extracted the documents in the hands of the third party belong the Supreme Court. treaty between the United Kingdom and the United for use in farming. This novel decision has been to the taxpayer or involve the work product of the A recent decision of the U.S. District Court for States. The decision should be applicable to several the subject of wide publicity and affects many thou- taxpayer's attorneys. the District of Columbia upholding the 30-year-old thousand missile range workers stationed in the sands of farmers in Texas. A decision whether to The Courts of Appeals for the Second, Third, regulation prohibiting, as misleading to the con- Bahamas and elsewhere, and will prevent the loss of apply for certiorari has not yet been reached by the and Fourth Circuits have held that a taxpayer can- sumer, labeling age claims for neutral spirits, con- substantial annual revenue. Gov~rnment. not test the merits of his Federal tax liability in a tained in the Distilled Spirits Labeling Regulations A significant assignment of income device was The case of Tillotson v. Boughner, 333 F. 2d 515 suit to quiet title to real or personal property on (27 CFR 5.39 (c) and 5.39 (d) (5) ) has been af- nipped in Van Zandt v. Commissioner (C.A. 5), (7th Cir. 1964), is one in which an attorney trans- which the United States has a lien. In Falik v. firmed in a per curiarn decision of the Court of 341 2d 440, which United States, 343 2d Appeals for the District of F. involved a trust and leaseback mitted a check to the Service for over $215,000 and F. 38 (2d Cir. 1965), the Columbia Circuit taxpayer (Joseph of business property by a doctor. He created a trust refused to divulge the identity of his client. The instituted suit to quiet title to certain real E. Seagram & Sons, Inc. v. Dillon, et al., for 10 years and 2 months in favor of his children, Court of Appeals affirmed the District Court order in property encumbered by Federal tax liens. The 344F.2d497). However, the decision was affirmed taxpayer contended without transferred his offices and equipment to the trust holding that the Internal Revenue Service had the that the assessments were ille- prejudice to the right of Seagram to re- and leased it back. The Court disallowed the authority to issue a summons to an attorney in sup- gal because she was not a responsible officer of the submit its label to the Secretary with a proffer of corporation and the evidence which claimed rental deduction because the transaction port of an investigation to ascertain the correct tax hence not liable for the failure to it deems sufficient to establish pay over the withholding lacked any business purpose. liability of an unknown taxpayer upon whose behalf taxes. jurisdiction was the facts requiring or justifying approval. The In Commissioners v. C. Leo Fender, et al., (C.A. the attorney transmitted a check to the Service even based upon the provisions of 28 U.S.C. 1340 and 28 Court also stated that the judgment would not bar U.S.C. 2410. The a later 9), 338 F. 2d 924, stockholders released their claims though such an investigation could conclude with Second Circuit reversed the civil action to enjoin, annul, or suspend any District for accrued but unpaid salaries. The Government a recommendation for criminal prosecution. Court and held that a Federal district court action of the Secretary taken thereafter upon the does not have jurisdiction under 28 U.S.C. 2410 to label as resubmitted. contended in the alternative that either the corpora- After the U.S. Supreme Court denied the attor- determine the merits of the tax tion realized income upon cancellation of the debts, ney's petition for a writ of certiorari from the Srv- liability in a suit to Since the wording of the per curiam opinion, al- quiet title instituted or the stockholder-employees realized income upon enth Circuit decision sustaining the validity of the by the taxpayer. The Court though in form an affirmance, has the practical noted the legislative history of the waiver of the receipt of additional stock as consideration for re- summons, the attorney still refused to divulge the effect of virtually nullifying the decision of the Dis- Government's sovereign immunity linquishment of their claims. Although the pro identity of his client, raising for the first time attor- in 28 U.S.C. 2410 trict Court upholding the regulatory provision, the 92 93 ANNUAL REPORT * APPENDIX

Government petitioned for a rehearing by the same section 5603(b)(5), Internal Revenue Code. panel of the Court of Appeals. Certain distilling Michaels Enterprises, Inc. v. United States, 340 F. companies who had intervened in support of the 2d 1.(8th Cir.) cert. denied 380 U.S. 95~' regulation, petitioned for a rehearing by the full court. Both petitions were, however, denied. STATISTICS OF INCOME REPORTS PUBUSHED Significant decisions in criminal cases were handed down involving the following issues: Individual Income Tax Returns, 1963 Prelimi- (I ) Possession of jars customarily used in illegal nary (23 pp., 15 cents). whiskey business by defendant who tried to conceal Individual Income Tax Returns, 1962 Prelimi- the jars and who chose an indirect route of travel nary (23 pp., 20 cents). was sufficient to support conviction for possession of Individual Income Tax Returns, 1962 (214 property intended for use in violation of internal revenue laws relating to liquor. United States v. pp., $1.50). Denton, 336, F. 2d 785 (6th Cir.). State and Metropolitan Area Data for Individual (2) A search without a warrant of open fields Income Tax Returns, 1959, 1960, and 1961, Sup- adjacent to defendant's house is not illegal. United plemental Report (82 pp., 55 cents). States v. Hassel, 336 F. 2d 684 (6th Cir.), ccrt, Corporation Income Tax Returns with Account- denied 380, U.S. 965. ing Periods Ended July 1962-Junc 1963, Pre- (3) Operation of sham liquor club by a country firninary (29 pp., 25 cents). club not licensed to sell liquor at retail resulted in Corporation Income Tax Returns with Account- Trend Charts violations of the Internal Revenue Code and the ing Periods Ended July 19617-June 1962 (362 pp., Federal Alcohol Administration Act by a country $2). club and various individuals. United States v. U.S. Business Tax Returns with Accounting Mirror Lake Golf and Country Club, et at., 232 F. Periods Ended July 1962-Junc 1963, Preliminary Supp. 167 (W.D. Mo.). (35 pp., 25 cents). - (4) Where evidence showed defendant possessed Statistics of Income publications may be ordered certain liquor invoices, his failure to proditce them from the Superintendent of Documents, U.S. Gov- for inspection by agents was a violation of ernment Printing Office, Washington, D.C., 20402.

94 SIGNIFICANT INDICATORS OF GROWTH N ALL MAJOR TYPES OF TAX COLLECTIONS CONTINUED UPWARD SINCE 1959 N

I MILLIONS S MILLIONS s MILLIONS

In 1965 compared with 1930- 66289 1955 31,650 1955 18,265 NS', 90:172 1117.959 39030 19571 21,5311 1.733 1959 79.798 4035 8,092 Over 17 times as many tax returns 19611 19961 46,153 1961163.. 21.765 Processed by little more than 5 63 52988 22:131 1965"1 114,43592 1965 53:661 170 965 26 31" times as many employees 167 Bringing in over 37 times as much in collections 14 143

123 i gin III 416 464 425 415 325 Ir----i F-- 141 117 ISO 1930 131 EMPLOYEES ---,F- ==-- ~1L--- I-- - 1535 1940 1915 1650 1055 im 1365 1935 1940 1145 1350 1953 1869 M

INDIVIDUA 7.9119 INCOME --F` r,,Increase in collections and returns Increase in refunds LL [-~ L ad Influenced by- due primarily to- 1155 1957 1959 ISFI 1963 1955 1957 ]111 1261 1163 1905 Broadening of tax base Withholding of individual Continuation of wartime increase income tax under the in excise tax Current Tax Payment Increase in social security Act of 1 943 and the $ MILLIONS I MILLIONS tax rates continued growth 1955 6,220 1957 7:118 191 7 10,653 Population growth IN14 of individual 959 1 959' 10,7GS 961 12, 854 9619 12.01410 Expanding economy Income tax withheld 963 -15, 63 3,4 1965 17,10400 965 14,793

161

'Data for 193D-1935 unavailable. 1940 used as base year.

1955 1957 IISS 1991 19113 1965

96 97 IN 1965 FEWER RETURNS WERE EXAMINED WHILE ADDITIONAL TAXPAYER DELINQUENT ACCOUNTS TAX AND PENALTIES RECOMMENDED CONTINUED TO INCREASE Issued and pending patterns declined sharply in 1965 due to follow-up notice procedure. Amounts continue to reflect increase in 1965.

THOUSANDS THOUSANDS NUMBER AMOUNT (MILLIONS) 17 1955 1:71512 1955 Z0647 1957 62 2:124ES1 R59 2. so THOUSANDS 19"59' 2 R91519 073531 259"I ':G"2 56 R61 91 19166 3:84,119 19961 61 Z931 963 ':2967 19551 54 13 3 13 2': 1 .. 1963 2.879 965 2. 843 957 !:488 1965 3,472 1965 2,729" 1965 Z417 1,202 MISS, 960 968 965 530

14Z He I F;1 117

1955 100 ffE ToW F7

ISSUED I

1955 1957 1959 1061 1993 1985 1053 1057 1159 1961 Him i9cs 1955 19" It" 1961 1293 1395 1957 1958 1961 9E 1995

$ MILLIONS RECEIPTS AND DISPOSALS OF APPEALED INCOME, ESTATE, AND GIFT 1955 6DO i9957 TAX EXAMINED-CASES INCREASED SHARPLY IN 1965 1 59 1 961 L114 $ MILLIONS 963 1:551471 19551 1.866 965 957 321 19591 $ MILLIONS Ep~] 19961 1L:4%1.517 63 D 1955 650 1965 1.528 1957 1:1561 NUMBER HD6 NUMBER 26111 02 19957 16,285 19631 1:0411. i957 361 1 59 965 182 959 21:50217.85" 160 1961 208:2799. 196119 963 19.760 IM 63 21,431, 1965 25.127 1965 3 D04

1057

100%

1155 70;;

CLOSED

1957 1959 1961 1063 M IIS7 91E 1961 1993 1915 1155 1157 1159 1961 U1113 1165

98 99 INTELLIGENCE INVESTIGATIONS COMPLETED LEVELED OFF WHILE PROSECUTIONS RECOMMENDED CONTINUED TO INCREASE (91 NUMBER NUMBER 2710 3R111 '3:R 1:1 1961 i9fil9 2,64 19113 3,6438 63 2,21)8"' 65 3,64 1965 2,382

105

92 17 Statistical Tables III so 90

PR~SECUTI~NS INV SYIGATIONS CONCLUDED RECOMMENDED

I 1951 1951 1961 1963 1965 1557 1953 1961 1563 1965

too STATISTICAL TABLES

COLLECTIONS, REFUNDS, AND RETURNS FILED Table Page I Intemal revenue collections by sources and by internal revenue regions, districts, States and other arem ...... 105 2. Internal revenue collections by sources and by quarters ...... 113 3. Internal revenue collections by sources ...... 114 4. Internal revenue collections by principal sources, fiscal years 1940-65 ...... 116 5. Internal revenue refunds including interest ...... 118 6. Number of returns filed by internal revenue regions, districts, States, and other areas .... 119 7. Internal revenue tax on manufactured products from Puerto Rico ...... 120 ALCOHOL AND TOBACCO TAXES Notes: All yearly data are on a fiscal year basis, unless otherwise 8. Establishments qualified to engage in the production, distribution, storage, or use of specified. For example, data headed "1965" pertain to the fiscal alcohol and alcoholic liquors ...... 120 year ended June 30, 1965, and "July I" inventory items unde 9. Establishments qualified to engage in the production or exportation of tobacco products. . 120 this heading reflect inventories as of Jul), 1, 1964. 10. Permits relating to distilled spirits under chapter 51, IR Code ...... 120 In many tables and charts, figures have been rounded and 11. Permits for operations relating to alcoholic beverages under the Federal Alcohol Admin- may not add to the totals which are based on unrounded figures. istration Act ...... 121 Internal revenue districts are listed in this section by the names 12. Permits relating to tobacco under chapter 52, IR Code ...... 121 13. Label activity under Federal Administration Act ...... 121 of headquarters cities. Each district is identical with the Alcohol boundaries of the State in which the headquarters city is located STAMP TAXES except for the States recapitulated at the bottom of tables 1, 5, 6, 14. Number of occupational tax stamps issued, by class of tax and by internal revenue regions, and 14. A map of the districts appears on page xxiii. districts, and States ...... 122 CASES RECEIVING APPELLATE CONSIDERATION OR IN LITIGATION Appellate Division 15. Receipts and disposition of protested income, profits, estate, and gift tax cases prior to issuance of statutory notice (pre-90-day cases) ...... 126 16. Receipts and disposition of protested income, profits, estate, and gift tax cams in which statutory notices were outstanding (90-day cases) ...... 126 17. Receipts and disposition of income, profits, estate, and gift tax cases petitioned to the Tax Court (docketed cases) ...... 127 Office of the Chief Counsel 18. Processing of income, profits, estate, and gift tax cases in the Tax Court ...... 127 19. Results obtained in income, profits, estate, and gift tax cases disposed of in the Tax Court. 127 20. Receipt and disposal of Tax Court cases in courts of appeals and in Supreme Court ..... 128 21. Receipt and disposal of suits filed by taxpayers in Federal courts and actions by the United States for recovery of erroneous refunds ...... 128 22. Decisions of courts of appeals and Supreme Court in civil tax cases ...... 129 23. Receipt and disposal of collections, injunction, summons, and disclosure cases ...... 129 24. Receipt and disposal of insolvency and debtor proceedings ...... 129 25. Receipt and disposal of miscellaneous court cases, lien cases not in court, noncourt collection litigation cases, and appeal cases ...... 129 26. Caseload report ...... 129 102 103 COST OF ADMINISTRATION ANNUAL REPORT as STATISTICAL TABLES Table Page I 27. Obligations incurred by the Internal Revenue Service ...... 130 Table I-4fitternal ronrenue collections by sources and by internal rervenue regions, districts, States, and other areas (in thousands of dollars. 28. Obligations incurred by the Internal Revenue Service, by activity ...... 141 Sea table 3, p. 114, for tax rates and further breakdown of national total$ by sources] 29. Quantity and cost statistics for printing ...... 132 Individual income and employment taxes Internal revenue regions, clistricts, States, and other arm I Total int .... I 1-h.. Corporation Income tax (States represerrbidto the,by Sursinl.la districts. indicated in p... nthests; callatkma income to. I net withheldUs withheld and Railroad Un-pi.y. Wul, hown at bo ttom of ta ble) Total and sell. t old-orI and mUr.m.nt 6 art smgmnsma n dis, 1111 Imumam'. --co Is

(1) (2) (3) (4) - (5) (6) (7) theltecl stelae, mad. ------*------134, m,m 216131, 114 T", M 17, ISO, IN Is. us, sass am 7" afam, HerthAtimatI. real...... - 1, 694. on go, an 2411. W ,urrhutAlImmy j ------(Sea (c) below)- - 13:2 1115462 :"1 274 464 719 951 131,730 579 279 1 942 Mine) 217 000 ------1' 02 2 85 1 9 a-0-4-911 48% sa 36 SK59 "o77 11 132:900 2:441 1: 739 Boston. Massachusetts) 332 4'7:092 2. 1 NO : 145 5M: 8915 .523,649 3,304 1 11,S. (c)(.) blb:jgw~------, "1: 131 257,284 1,2:1 12353 13129: 11107 1"if 569 4,313 6:8552 907 ""Y"80.1, 14: 903 552 547 133 5. 52:325 710 urlin V...nt) 543 16 495 86 29 17:121 57 702 799 676 H.rttoM lconnuticuu- 340 401:763 1,238:1377 387 549 ful: 576 7 516 9 496 inhottan---- ... (Sea W below). . 1 157 235 695 382 6 812 Us 1.445 350 235,0901 60:365 72:081 Portsmouth ------(New ftrnp,hlre). 228:077 37:663 ' 178:945 50:385 26,963 371 Fravidence------(Rhode Island)------...... 473,681 92,285 329,976 81,200 2", 6u 1 13 :096' M.11s.1d...... MlN.M 3,1~t M 10 : 4"012: 1all, Baltimore. ---- (Maryland------and D.C.). ------::::: 2:77612,: 3797 20 064 454: 9"96 1: "50'5, '542 771 nO, 3 862 '522 22.437:317 7116: 14237 1:0612 60:63,74 5:2513 29.345113 S:.*f'.') T2Lj 4 1215, 5 .9731 : I'll116 11: 7so82 998 64 3d,7 649 22.987 (See (a) below) ------:7 :31SS7 4 is 77161 161 :,717 PIZU""1H,immod - : 21,742,990 273,203 998: 1137 2'82': 71 9 " '7 :'6 756 wil.ingtor.:: ------'5.055 442,930 171,795 6167,3117 3 3,720 Isauthewet milwas "I", , 45.637 Atlanta------~All. 16M:&M1,478 : 33 ".61"M3101 362 S'ZMM976,643 1"'I'm247,96S X'm717:659 2:41159 III -Irglarn ---- Zu.I, CarmilCam . 740 6201 33 ' 117107:,g712 656 3 '1:147"I Cal-bri ------: 531,643 108:77"81 3.7": 224'"' 7 275:568"' "" m9 3,869 Greensboro ------2. 842, 79 101 65 1 Juk------33 :2.7IN '41' : Z31. 2677: 67 5 :92: '0'17 172:93 3737 '2 :343 Jacksonville.- 71.. :1 11 1712 18 1,3 756 822 : 93 56 Nashville ------(Tennessee)------239 199: 7 7064: 165656 2324:1 '68 5211:0 '13' 2575 a 618 ------I'1':9961 101: top C 11 o g"2. 4''ID: '30"1 141:131a 1:011:316I ". .0 38,112925 11:628 C1.1" rd ~'S:: ~2) t2w~ ... 49: 7 361400 : 5 2: 11179.: 11 1 21,11 flat"i- t. ------!Michigan).... 191: 677 2 17 '1:632 13:6"d37: "6784 3076 38 572 40 lmcfifm~.vUr. _ .... 11.1K n ------2.S412': 21.. : 1 : 17.. 181373 437 1.101:3923 1 951 15,'7' 7'757 to "191 90'873 ""556 : 223 2 660 4 19 Parkersburg------West 61,187 300,697 811,645 207.56 54 4: 039 Md- mi ------MU7 Aberdeen------(South Dakota)----- 142,686 17,9'50 .'114: '711 15:41'4 61:646 1 :717 IIIcsD. (11. ~Ib) below)------:.351: 311,99 1, 11,7: IU3 72 4,11:71630 117 9924411,72923 3,469.7643 92,207 41 056 861 3:728. 116f:1771 531 4 125 127 01 75 4 10,747 109.272 7 33 20 636 MII..;kargo ... (Wisconsin) ------'992:3 63,239 1,266,341 313,234 942, 464 0111,L.uj; ~1111,1~kxMl_ )! Sir 657 108,487 444,120 27,18032' 13:081'38 St. 373:221 1.110 661 131 2":$"is s7, 16 711to St. Paul Mrmeartsxl- 1.2: 4' '2'41.: 1f: '1911'5:254903 267,314 884 140 32,939 13 ...... Iss 1b) b.l.w):: 373,6"575 237, 1-29 736,912 247,415 483 587 791 3,119 S-,h-X ------9. M. M 1. 4". Ing a. M. M 3,= 12,1, M fS"'s,as (fMe,)be..Iro,) ...... 237,111 24: '39: '21 7 "' '6 317 Au='.!r"'"u ...... 1,1117: 111 401 263 ,401:425 95,11455 898 987 6,534 ISO Ch 790 7,424 76,466 32,621 43:410 3 432 D. ~ SW .(f) --- 1:031351: 93 1: 4241 15: 3901 10,460 ------d ... 11: 1321:104N IN M131: 212 734 157 3 2 $851: 'M07 36 4:24 Little Rock --::: ((Zk`.`m'I 352,993 : 271 11 226103: 171322 166: 420 28, 0 2 27? New ho Cl ----- (Louisiana).- 1, 974, 866 194'6 18165 703:549 471 492 73179, 5, 007 Oki. It.____11, Ity ~Okuh.- 02 963 63 948 581 317169 76 8104 399 698 4: G39 Wifh Kansas) ------717':503 1132: 496 540: ifill 718 321:587 749 3 114 14. 255. 611 2.2". W-Arc ------19: 71Me797 10'3"'M1 74 112 2~ "S" M T."T M Wage "gag6315 setse ------iiA'd: b-) ! : ...... 214:144'01 3 646 63: 67 15'7:957 1 '15.667 Z77 1.36 180,188 28 793ing 142.017 53.292 187 : 650162 222LID hf-lw~ 3: 1,422"2 11 A,njx~l .. .)b_!II : ...... ' :::: --: 5, IN'90: 16420 1 877 4 4, "'37 :.1717 1, 257: .0'5 3, 012, 939 49 Ph (Adurm') 427,14- 935'40, 2 5 336.311 116.690 216. 1no- 125 2: iM16 , 711:91117 7 I'lls: 06,1 1 11I's: 1IS97 17 1:71%1 111:1 .217 I.)2,645 4: 273 Porth"'d--R- =: ------(D"n".ad.)): - : ------220 52 1 208 SellS. F. cor 94 2,1f17' 177 : S ------4 5"06: 59749' 71'2: '71' 3,053:117. 963 .417 7: .1 44, 466' 291 411176 satt ------(Washington) ------1, 307, 0016 211,339 960,765 267,069 685.726 719 7,251 .. a 1.1wasaussaal olsotle,we...... :__ 1711, 30 in P art. Inor...... ------114:0'91 M '216 66:056 . Iso"' ...... '416 Other...... ------292,772 52,238 223 355 In 117 50,710 815 33 Undistributed: D sitary receipts 7...... ------2,1214:.155 2. 40,954 ...... TAeonansferredth to Government of Guam.. - 4:- '1'51 . ..::: ' ,052 hold taxes of Federal arnployees-..... ------6,536 ...... -6,535 ...... 4 &M Totals for States not shown above (a) California- .... ------: 0.443,242 12 644.593 ~ 175 38 : 957 21: 120 41,101 1 711,3110 ~Cb)) 1,11hols ------8, 2725,054 :154,166 :3342 668 246: 1'44 '3 : 17'53:325'1 22.998 46,17 d) Oh York------1. '23:1177 1 174:022181 4:11 2103: 2 1 7319 7 111:'2013 1139:71164 6, 098 96 605a1' 61:7' :307 7 2 1'43 ,n",,I,I" 6a : 11 7 : 122 go 26 3 298 41 . 645 ------I'-, 334:678 ...785:916" .. a2:77 If05 318 92 81 : 5371 1:744 986: 507 "15: 9284 2139 350 104 See factrartes an P. 116. 105 ANNUAL REPORT go STATISTICAL TABLES ANNUAL REPORT go STATISTICAL TABLES Table I-4thternal revenue collecilons by Sources and by Internal morning regions, districts, States, and other Table 1-finternal menu* collections by souries and by internal rarmenue regions, districts, States, and other arectur-contintsed areas--continued 11.1hou-cisefdollsm. Suitable 3, 1. 114jortax rates breakdown at national totals by sourcul 11. thousand. of doll... So. labl.3, p. 114, for tax miss and further broakdown of national totals by scurces] and further Alcohol U.-Carthruml I Alcohol to.. Internal revenue regions, districts, States, and other Internal romerm. no, disth' ts, Stiet., and Excise taxes area, I V.... co,dhda, is.. taxes Bear tax. other.St. areas I total (sum , Dirtilled spirits to.. Estate to. Gift to. of column, (State. r.p,-rtd b algh, districts Indicated 1. 1. had O..p.1km.I martic , Occupst,on,I (Star. represented by lost. district, Indicated In 11.26.31, Parentheses' totals 4,r of or States; shown at but. Tota l le d Dwrosti , t ... 11 To us. Is gerarthousiI totals for other Some, shown at 34.42 47 t.. of thbli~ by(EI IN-) Lot thore of to W) and 16i; "' Total (,.,= Domestic I Restill- Occupa. Other 10 C.,jnu)b "time - boost (18) (19) (20) (21) (22) (23) (24) (25)

(12) (14) (S) (9) (10) (11) (13) (15) (16) (17) usuftool Slaston, mosed ...... am I'm Is% Us 2~ 211 sism S,m soo.du &,an komt~tlsvouc mosem, ------Area 4, in thatted mass, rowlael_...... 2.494, 932 M = K 712.771 STMM 2. 1". ZU 9MM 4 M 24.4211 K M Ul I'm ses. Albany ~SstMain(,i. b!lw ----- 2428 1 7,5 7 95 ...... 7,481 94 Augusta N~t~A~. .0on...... ----- 235...... F 'I. -34 ------... '. a IM...... 67 a" Boston ...... 1I,MN hb.s.7 ...... 1 011, .0 .4 11,686 135 14 Albany 12t884:8X62,18 "'I'd.,8'71 ".a12 CIA '"'.9 953 -M] , $4.9 M.- 561 vr S, 282exce - BUR.I.Imm 0: 11 ...... 102 IS 786 322 Aug., gcr. -o--, 2 94' ' 5 550 21 26 1 ----- 915 112 798 5 24:074 799 .... 23, 068 207 Boston------it.: 2 6:3,587 99: ' 1 861 : 11111360 __7.!l7.. 1 2219 BullHe notom------491 5 mok" C belowelowI _i---.. RUhu rrcnps~,ira~.Island)..to .._ 94,678 6,241 114 6 176'369 3: 3:2551' 144' 495 rtf.rd ------CIrmacil),05 1,36496 (') 117 ------Dili- 894 to1 - ---iii- 749 uff...... bic 0I box 64 316 5 012 177 :956.. 67': 21 32 703 32,132 1 0 IN 2 Manhattan .... I". ..(11*re,Iw ...... 5, 1, 1. 1: SH ...36 , 15,267 ...... 2. 32 1 ...... 12,756..... ISO 1,617 958 ...... :.... BurlingtonHartford------...... ------.... 3:9% 140 4 .... Portsmouth ... ::::::: - _------44 ------ornmeam" ..... 93,461 6,771 173 :6200 724:717"1 721:9"18 842 3 47 4 mos, Providence ------(Rhode [,land) ------151 55 95 (9 11.641 22 Ii.617 442 Aderhold ------as ee~ctb.low)a ...... 264.391 55,733 1,328 843 2D9 C02 88 342 138:141 411,931) 427 4 I ass. mos 1'. Six ... . lose,an, m I Portsmouth-.rest ...... 6:878 4:299 ' 269 ' 225 ------_ 176 15 33 (-) ------N :r,w I.~...d andr,) ..EI ---- t 2 593 31 29,23645,:27 ...... iii_122 27 12 : I (iC 1,644 ...... P dwic...... NR d --~:... 28 (134 392B73 23,513 14,185 2,393 639 7 103 Newark------:::::: .... - 6.1122 ------jj_ 12:677814 1 71: l.36 3D ?I a dIh,1Lu"fi. 99 413: 1"a Beutlmum -1N:wlyflrdemoIndr) .D.C.?:::.. 111:19192 3,5 1:1 77047, 1,0,5:3 3N25I 219,367 OM 095 903 3,80517 372 10 P'It'"bb IS b:l '.*w)):: 1'5 3 4 ------1 211: 1 i lia1 12-1 Richmond ...... N..,k ..-- ' _` , F 112.1' 618 4 994 20 (Virginia) ------1,593 ------35 ------1,364_ 194I 435I ...... (*) 20 . _ ...9,312.... 103 JSI ::~a b:l*l 11. 615 12, 6504 498 ,2U 2'156: '3149 107, 394...... 2 91 4" 6: 111 _1,013111 1487 4511 Wilmington ---- (Dole...) ...... ------I P=P1 swo=T!! ...... ------2."1 452 Loss an us 232 U, 4" 1 Richmond 431: 079.1 '2: 2161 fflo: 037' '17: 923121 1 , 31210 621 :::: 532 379 ...... 453 42 "5:290 7 5,240 43 1 11 67,491 12,046 4,162 55 53 ------(!ja, .. 1,If 1, ----- 10 1 110 2310 ...... 87 seneuvesock meton------M is Us 497 ... Igurtt~ICI:rorcj~n 21 184 _ 1391 186 13994 94 Atlanta. ------If21:893- Stagg I'"S. "'. at'. I, . . :MB 94 13 92 85 amCcl,1b"`W__.__be 162 53 15 124 Birminglar J~A.~_Ij..x 17.111 1,017.. I'M "76DO 1:9 4' 1' 71 31: '291" 1,17'75 1 49 ------38 29 Joe 9 ...... 9 Be ...... ------so cohmobi---...... ------4:416 1,30~,11111 1,205 872 754 _------60 IS I.k Mi.i.ipFludd.)-pi?------1,534 iii" ' ------RK 286 19,513 (.) 167 19,226 120 Gmmnsbom_.__ NorthCarolm ...... 251:312374 IRS . 6732 1,371225 1,084 49' 25 215a scoamundNuh I Termus") ------_--- 7 7 ...... log ...... 108 891:948 3: 901 13 US I 34 73 reston -----_------M amarr no 102~ M 27s J.cl=n,il 1, 354 994 105:462294 40,11282 19,071 1~'0'06 704 290 49 Cincinnati ------,~)-i;w~ 5:: : - "T716 ...... m. " 45N7O 147 13,619 ...... fi . 13,594 25 N.Wil.._ ------Tenn.-.)------2 615 404 60.337 15,329 15,213 1:202 is1:931 --- 47 32 Cl... lud_-- ImeIMI,-bd)below.. 261 goo 2 1 11,21 1216 C-mm! I.S~...... wa~m 145 2,41J at5 Detroit...... :------: - : 11: 772 277 21!_ _ jig7 ...... 4151 IS36:216 Circimmill._ If b:111~::::::: =38,' SM64 1.' 0=44 4'92%, 027I6 2207-M 1. 012"4. M3n ?: 178 8 11 ledmos)_ ------151 32 ...... Ii 11:907 21.872 Clemlimd_ ::::::: J'S: ,~d~b 3,33I IN:"'39 517 52 - ii, ki" 1141:'2312' 5 '369 L.ul.11Indian""'--- 1mrtuc11ry)1,fjj._.:War, 117IS 51 846 37 13.96 '668 11.1holt. ---- Mich San)_ ------:: 1612 :ON 102:,: '2,2516 2.1,141:537,7l4.U6530,5 152,6382,,:3IRS 6,44, 114: IW696 1 278 912 31 Pmrk..b"urg___---- Is "110 315 25 India..)...... 32,148 263 961:310995 212IS: 2925 2 - 318- 18 I'- gal 794 Imitucky,West vi 26 1 1,596 51 32 :2415 ~ 12 975 558,537 1,74 138 lkoad=~_. ------nthmur,)- DI_ _ _D)ksislo...... - 3 ...... 'I'D ------In ...... W 40 Parkersburg "As12: 50 :" ...18,633a" SoLue2,708 W.go - 2,235ass I's IN"1)as fZfr,,,: .:.:. b)n -. :: ------* ------3,-5"7-278,- 'F5 23,498 ...... 277 23,1262 Mid- mass vor ...... 26 83"0 hot '. IIN3 ------~qm...... 353 .... 12731 Aberdeen Di 3 .D08 55:6 55 ------Fag------allNWM aakota)_t.)i-ow_w5~__.....----~.. 170 13 Chicago .... 71 115 7 82079 126,33495 93,33055 .36__17 Milwaukes------...... 192 ...... 160 30 125 IB3 I's 561 71 D. MoinIs------i-- u '.!k`I') 1210': ON9' OZO 33,067 2,059, 1,123 "I: N13 IM40 0 Oumb------: 11, ------" :047 i s Fargo.------No 1,11 ------2.181 259 4,559 63 --- St Louis 1,7352 123 1,612------:i - B1. $61 3 : 4 122 Mil-A.-__...::: 1 37: 1 3.302 2152: 089 1-1!).1 0, 3.l.10317 ...... 2,-39 ----...... ------1 ------...... 1 - St Paul. ------:::::::.- asI b.( 63 ...... 94 178I 31:I, OU992 ...... -7 '135' 711 27 Ornals_ ------"Ibrul, 12 549 8, I .. 115 3 Springfield ------n-tka I $78 24,856 21 5.,953' 4,098Bdu 301,7 : 41716 2,1 : ;g 73: 1&59 1 13:9192 41319, 3717 16 11 In ------2.171 420 K Zia goo u'ur "4 25 122 42 44 S,It Paul.:::::::::: -- ml=mj----- 2 Aub.of 4 0232 4 V) gas Springfield ------~MSo. (b) 27:"7989 27: 733'D 319:089to 275,71904 250,939 __jj ___ 247.315 3,287 228 9 A Pn-a 449 217 33.2741 90 (9,745 431 sewthweat reason ..... 'k. ". 11T." W 272 ,. 11, ng) ------'519 738 es, all I., 111 16,-6 ...... ou , 193, 3 Delta.Cho"'n ~SW.ln ('1)' ------6 - 1212 121 ...... Austin- ___ - _N adIr"bal',veI 56,465 8,696510 613:717 23 200 35 4 D...... Ch Col do)-'V!!) 201,4 - 55 147 151 33,202 9 33,H7 36 be. 2,690 290 35 ------~ :: 35 V) 2 Little Rock----- I.-`u 307 ------292 ------...... JAI.1uk1isn,: ))_ Dall.-your' ------iffIbih.m.)";orhIsm(M'I . 59,267 6,921 97:223 43043 242 ------ISO _---- go ---- no 142 HY 9 725 ...... 18,586 103 I Denvoi 149:3216, 1 : US176 1 21 31 : 1 35. 536, 2,130 1,965 ------165 ------ONk,`s,0,rm1-,W1, City.-::: I.)_ ------".803- 6 136 Little k;W~...... IW_ 06 56 ------_ 6 ----- _ 40 hit------...... 96 ::: ------__-- 96 No. O'las ...... 20,880 1,643 34,506 15,639 7,332 7,929 1 362 64,362302 ---- 196 Wrovessens MI ------_------. m 219 103, on 4V am 424 Oklahoma City ...... ---: 21:1741, 4 2I: I 253 878 833 90 A.,hanu ..... :- :::::: :1kahe)! ------...... - V) ------Withits------I ------712 24 629 989 793 -----:::: 7171 :::::::: SI IS Bois------A'Id ------::: ...... 474 ------...... 447 Is sees...... 42% 2, a, "a 2.2n."s 417,711 211, 241 77,211111 IN.On 2.5411 2. an 38 - . ~ .133 1 1.108 25 Anchorage------237 6 125: Honolulu"ehma------HmwsIl)!M.nt'n !::::: _ : --- 33 . 31 F 1 105 165 740 2 Bon,...... I .t e 31 367 M 1 5 9 13505 109 ---- 'dI-w l OT 7 7 5 ------46 ---IIII - - 11Pbmrd._.7::::::::Aram! 1A%xmii)(1) 1.1.1*w)- :::::::: 5.173 1 1.211 41,829 1111 41 : 1"1 14 12115 Helena...... Monte ':4284 335 41: 614351 12:,11 1. 17 ------F :::::::: 3805 ------1.) Humol.1. 74 21 ...... Newell) ------584 so 1,797 48 1 V) Po~and N=)) ------160 23 19 ...... 1'181 11:5149 20 3,485 44 Los A.S. ------S. (a) below)- .... 16139:4435,388111 221: 153411 439,7212 125,797383 78, 082920 5,622 ...... 41.367 220 B63 Rs ------...... 5 ...... Ph .. I------Arizona)------181 9 172 ,k, So. .... , .... Ed..:, ..... 1.1 7...... 2 2.2 ------2 :31 32 Portland------Oregon). . 25,352 664 299 :31 708 7': SOO 4,091 1, 446 2,561- - ::::.:::- 84 ts rf y ii 9:685 i6i 1, '97 87 gone...... 96 Nevada)-.- 5,649 141: 562 13. ... Svsttlo~ ------Washingtor)-___ 1,237 33,3812 ...... _ 41 33.302 38 a, 7 7 4~5- ~. 0 Irnown-b"""' 0.~ ...... ------6 20 I .... a ...... 'itSo. ""Fruds-'"y__ :::::: SU',Is'?1)-6eh" j 14 1:' 58"2 5 IRS" :4818'05 245:02912H 170,94Big75 241,:799i 177 144.628 1, US Puerto Rim-, 1 2 ...... 2 ...... Seattle------Washingtor) .... 25,247 975 107,680 51,04 11,456 11319 33213 7 Other ------[ =- of I oponvolows,...... I I I I47 , . 366~8113 797 SCM ...... 2i- iFkas5 iii] ...... Undistributed: Puerto Ri to ------778 36, 795 .... 815 ----...... 979 ~_ : : -- ] 7 -jFj - D periftry -.1pt, I------:::~: ...... 69, 2 967 2 2 Transferred to Go-momt of Guam-. ------Undistributed:Oul------Withhold taxes of Federal employees ------...... ------...... 210 T.n be Go. Withhold inn of Federal employees...... ------Totals for States cut shown above

Totals tar Star. act how. above 1,141 I593j512'1 61 ED 21453 c 14: '507 933 73 1052 41:375'1' 7"277 48:046" California--.. 119: 175071 ~ 1: 11074 : 1 2168 37,0, :052825 234349: 927 ~ 1 5396: 791, 185 547 Now 264 1 , 587 47 10629:024856 813 b) Minot------331138: 130K 13: 739 1 : 10 19 d) Ohio ":2 gag0. 261 369 131 3' 12071 29:329 257 ') Now York._ 448,B47 17352,770 22617.7119 7.,272.57 -j27489"41 986 1 :0 .)f) TomPennsylvania- 3,126 347 2,778 6933:39779 139 69 416 43 d?a Ohio- ...... II1 9,5 662 6:0 1273,:043 1,442 ~1 . 7"21 ...... 514 232 92 7 90 32: 745 561 f) P one an, 237:549if !"U:626 13 '19'7 GOD 2j - 56 Taxes 733 45 2Z2 .) 012111 6 Sao None" on p. 116. Sao tmbwtn on P. 116. 107 106 ANNUAL REPORT a STATISTICAL TABLES ANNUAL REPORT ax STATISTICAL TABLES Table 11--firtsurnal revenue collections by sounces end by internal revenue nagions, districts, States, and other dreco--Continued Table I.-Internal reversue collections by sources and by internal revenue region, districts, Studies, and other crause-continuand linthouandsofdDllarL See table 3, p. Its, for tax rates and further breakdown of natIonal labels by sources] Ilathousandsofdollses. Sea table 3. p. 114, far tax at. ad further breakdowns .1 national ttla by so-I Tobacco taxes Sharp team on documents and other Internal revenue regions, districts, States, $ad other Instruments -I Manufacturers' exclse taxes Internal revenue rgions,, districts, $farm .ad (States represented by single districts Indicated In Ms... S.Ii6 b 0 -1 11res (wholly Motor Radio and R.Mpasturs, panther"; totals to, other States bovs. at bottom Total Cigarettes - Cigars I fa.uad the, - Total Sales gft 01cles, - Wal,lort freere. air. by dl*1,7 (States reprearmatts! by last. district. indicated in otal e.lin. ubricating If.'rulbIn 0, chiefs, sets, photo- conditioners, ther of table) tobacco - portrait directors parentheses;of hotels tat other States shown at bottom oil, etc. tubes, bdies. r1a, graphs, cona. tc.; electric, an (26) (27) (28) (29) (30) (32) (33) table) ad' tread sap parents, tc. a., and .11 (31) rubber accesectries *polls..

34) 35) (37) (38) (40) Unlead ltsmv~ astal...... 2~ 1AI,M 2~ 00, 03 so, on Is. 716 1. M Imm K Z12 13294" (36) (39) 41) .0we...... *74 as 419 Is se ni'm a.= 74,M thslasel Shafts, Inacal...... ". "a ass, say 2~ M, M Many Maines (,~- below) ------34 ------34 ------209 ------209 9.412.145 2. U7. us ze. M iskm =,m I A ------I ------...... a 1 229 219 Boston ------(Massachusetts) 11 Nkwth~tbavxaw .5sesx, ------_------_----- SK "I see, agr is. ass 07,057 st m 711212 is, nz 141. an III ------2 fe, 362 1 359 3 004 All",lanti ~SaIhtM ,~. .bftw) Suits,. ------4 292 1 339 3 6 461 19 1 205 23 3D6 10 1 1:000 A ------1:942 1:596 ------89 ; 3 11. 196 Ras ~cC~ Mla . ~ ...... 36 ---- 91 241 ------ODD ----- ...... HBuriln&n-. ------11 1 044 1,044 BMD- Massachusetts) 29 031 11 526 129 105 2, 653 431 299 US Vermont)------V) ------0 ' 133 30 Buff.,. S:: '~ bb:1 ------26:646 2:318 67 2: 487 996 4: W .Mad.... 233 ... 2132 i' Go4,,236 045 63e 191 1.., M IfS,' S .2 M.M.U. r. (g"t"ba"I. to. 94,04 7 799 13:338 359 2 969 V 638 32 41 *) 406 031 2 G32 999 B.rIia1tan..::: ------rount)------::::::: 678:260, 459', 'K...... 117 ...... I~ ------Portsmouth . Ne w sminthi m)...... ------. 228 173 C) 44 . I ) 55 Hartforcl_-. ------Connecticut). _ 15:4 227 20: 4"120 P-ld...-- Rhode Island)...... 2 ------I ------395 276 109 Manhattan ----- :::::-: SNew11 %b*m p1*w)r,)at ... ~tbxwtia aseva.------_- m W'M SLM S.Sag "S443 ...... 16,155 511 '109 15761a 49. US1 '2: $55 67 a W I'M s, ass Portsmouth- 1 , 249 1. 633 V) 46 2,1671 6 Biltinsom-----:::::::: J11N w, d ~'ad 2 29 2~ 407 319 1,037 54 Newark------Me 2: P.,Id.a...... NSRhode Island)--- 4,704 741 332 M 8 1a 451 658 5 922 716 is1 395 12: 399 996 M~1xawvtl. -swe------amass 221111111. Philadelphia : be 872 ...... 4i_ 2 : ,470 397 196 1 524 3 663 B.Itint.------_:::::: 1 862 M1.T36',. '"1 117 11 2 Pi 998 New "S'"'416. n'3 '"2" M M88 070 998 0 671 , 671 Newark------610 973 822 S"99 73,01510, 6:1338 1,454 9,311 If,hurn" - Irzial.) 3801, 527 384,77 718 _ ...2 028...... 2 941 202 delu, 1:231 2~ 1 VAlminglan : ------11:944 1'739206 1,639 ificlurronP.-b Sawthesent Mln------__ rCases ~'4a i bebel-L"' -:::::: 2":4 7"46 113,110 38: 7 1: 7T: 376 3: Is 02 ------...... 2.272,4511 2.213, U'M i:isi say Has 7.711 4 M F____d :::::: 7,493 5,59 99 9127 206 412 A rm 600 ------a" 597 ------871 1,389 43 4901% At, 4 492 vKhrialits------493 395 0 ------20 ...... 77 !.) 71 1116 se,stiveast affeen ---- ...... 49'M I-mb ------Wth C. W I'm1, 91 an 8,243 8.422 41403 2': M14 I'M 614 4 72 42 1' 1 3M05929 9,159 60 1, 234 769 7 58 992 ,M,.,W111'p,)1" __ 1.256,957 1 013 4,788 ----568 1,379 1, US 1505 S J:~kvsoI ...... ------325 1 5 27716 1 903 15 291 242 - 498 383 0 C.. 187: 003 6 027 S2 134 4 333 336 :kr,IIt._. Florida)- 9,967 64 9,887 31239 21: 302 I937 North 350 77 30 1,617412 24 ------517 669 amuans;~:::::::::::.- 1,537 3 464 70as5 1,435 12B 307 I11 I':4 I '5"l' 592 3 1,921 62 casenneal mulaw...... Is 5. &kM J. MF101"d'd.)V!? 7: 71 7' ...... 5, 23, 227 96 113 21 5. 1 1. 819 C ci~ " 133 M114 &'M65194 __ ...... 7,929 I, X 6: '127 N massurce)...... 914 7,130 1" 24611 1 :77"57 7 927 328 482 ~d below)------21: 8 1,902 22 - . 1,522 C-lawl .0...... 10, M 1,521 M, In 1, 274 Detroit...... Mich am) ...... 193 533 655 5 3~1. ---- 2,204 Cincinnati ')b "; 5771ass 931 ------(Indl...)------92 'D 75 1" "T254 121 'B, "'422 788 799 ------V) 7"474 1:033 "1 Cl . . .nd ..... 1. ~d b2w~ ::: ---- 219063 26is 2415 294, 1" 91: 4 1"360 41:11 8121 1.71 11W.1 It"1V1k r,), ------11 666 433, 179 2,437 3 1 990 507 493 D.I.It ...... Michigan)-.-...... :: 2, 2N861: 29,2 93 20532 2,154 7191 ,406 ------1,058 242 ,050817 ------M 441 7. 313 ik 128 Indian polls Indiana)------49,289 18,590 405 I1673I 1663 ~-P, ------P a 23 Z 2. M W . M keul.111a ------Kentucky). ..-. ---- 97,978 73,395 2,639 `61 '71:211.. 2. 17 2 8, 34 222 At"ardean outh D.k.6j._::::::::- ...... ~!! _ ------i-iji------j6- IL 176 162 15 P.riamburg...- Wait Virginia) 2, 40 7,307 112 261 250 (-) 40 1,170 35 8 9 "S 1.697 11,298 Wildwsst neelen ------smear, 410.M I'm 1, an in, M 99. M U 238 33, uds Des Melaka...... vraT.~below)------971 954 17 Atr.adsem------F------M 141 1 ...... ' 2 N.I -I ------(-*-) 165 148 17 few,*U'(b) Wo.)j. 4653:67471 2637:933D50 7,2240 700I 67 73,354 ------17,697 26.707 Milwaukee..... _ ----- (Wismasin)------57 33 14 9 2, 1,335 1.523 Ch"'on Mfr. ::: Ia-)------17 116110 10':27'ISS 96 2:2142" 1,052 2,795 957 ------85874D 432 303 Fargo------North D.1ant.).__ ------...... 2: S'21 749 52 St. U. tM"ab-Ur")!::::::::::::: ii;i ------iii- IV 2: . Mll-ukas ------415: 5431 214:363 262 56 13,508 (') 56 i'563----- 2,156 St.S Paul------Minnesota). ~ ------3 0 ------1 2 975 767 2 07 Omaha. ~------Nebraska)--- 426 pringfi.id..------222 1 21 314 6 as (b) below) ------(1) ------12, 76 76 .M1=t). 19: 11 43S:.I.S31 1,041952 91511 7.295SU 278 2 spriest ...... :::::: ( 11 ...... 2 507 M St. P. IS 3 G 71:4372 1:0115 . 637 3, .17 Allm.at V) 373 226 146 Springfield ------(Sea (b) below) ----- 29,046 18,663 33 7 30 50 3 1111 l.""92 A in"'T Lee ...... ,, i 6- F; ...... 4 2,370 ------2,370 h-bUAa.~"adwe -----_------22.551 M. 1.6. X.229 1'. clury...... its) ------162 139- 22 I,,UsA ...... (New Mexico)----- :::::. 2't W7 79 Mesa4,72 Dall as ------5, 8 45 1 2 :::::: ------:: 4,0561. 2,30, as --- 5C3, 235 493: ll,~ 71, 060 (,) 012 1 631 11 524 430 Dan ------ID"-, ------236 92, 1""415 1 Little Flack------fCA k.(rI) '.I..);------iH------4Fi --- I ------ii------:: ------621 356 165 C" ------48'576955 36,98 24 271 :79OD .1,800 ------431 0 1,757 1, 1327 62S Deaver ------.11d.).as be'_!~-:: ------24 : 641 12 10,351431 2' 87 109 1157 Oklahoma Cl~~ ~Oldabso...... ------1,2769 60 50 Utti. R.,k_ ------~AIt ,. Was.) ...... ~:::::: 14 705 1113: 991 20 3 63 76 Wich't------Kansas).------65 SM 173 New Orl es...... Iku0 .bI 1 120 4.523 40D 4 1. 856 35 287'2 ------...... 143 ------i ------ii ------216 M We" Oklahoma aty------2,,:354 24910: 1196 9.07 3 1, 964 44 13 97 Ancla,mg... ------.... (Alasks)------(1) --- V) 105 294 1'."21 VVIchita_------(Kansks)_------12, 24a 632 249 5 236 3 62 60 11M. ------2. 38 7.443 36M n'M 4.724 ( ,an 17. gas =-): ------257 237 20 W_Aa,baMi. =_. _ :------(IMI"ha)ilk-l')------:::: "'14 '1 ------8 2 Honslul------SAamli)------13 V) I ------:::: ------5, 408 19 389 d 2 , 029 6'2 *) ------...... ;goa w ------69 i2 ------6 40 7,778 ----- 7.778 areas).... ------194 126 49 ------4 15 V) 1, U5 iW fill 0...... 362 7 21 236 24 56 ------091 893 1 La~ fsna.)as (a) be[.-) 208, "1 167 506 3 985 2 044 14,819 4,11181 4.195 11,874 He daa)):: ...... I ------46 288 Ph 310 20 64 1'1L or) ------349 08 241 n) 9,263 509 1'11 7,22'1" 11 1.- 388 a ------(S. I.) below). 52 i i 28 18 14.912 Iz 585 327 P' 446 433 M 12 1') ...... S : file... ------(Washington) ------8 2,020 675 345 36: 717" 21 17 346 5 2 am" 'I opeasseve, ::::: .1 0 ii~iii IsS . Fnraclsco ------13 123:170 1. 664 1,08, 4:077a 05 66 3,679 Puerto Mox. ------8,331 ----::::.... 8,331 ------"------$.am------(Washington) ---_----- 14.078 5,142 14 11 359 41a 103 407 Other ------_------IS am-Pu a I as W 2 ad Istributed; It am ------i...... i...... 5 DgpoAtary acxfpt; 7~ ------the,-- 11 i3 ------z ------ia Transferred to Governmental Go------Undistribui;W.------Withheld taxes of Federal employers.------1.D.T,starydam.0pa1 ------to Goarnmentof Guarm Withheld taxes of federal -play- as ------. - ...... Totals for States not shown Move Total, to, Star" act he- above b~ California. 121 2 27 33 58 M 607MI 12 595 ID1M7 11 --- 9 1, 51 21:697 374104 --- Big117 211:4197'286 7 3,1297 188% 4,624 15 553 Na"W Y"ork- - ::::------' 71'1 178 66 4108 170:2933 b)') ":494 7 7: 254 07 68:691 7e83 179 26:789 9164 3911 7 37 22 9,451 1: OWN 111 2d Ohio ------27'61170 ------27 67 2 5,857 Sol523 41 334I New 243 482,258 16,266 68,401 27.506 4D4722 2101:01D 112,080 Tax 104 d.? Ohio 7'492: 179:8217 2: 294,340 63 485 12I~ i ) 99 4 ,426 1:2 2! P. msy .at------422,8210" 34 73 12, 0165541 3~' 4 58 18:3629. 2,128 '"259 N: 2'as661 f) T.~..., I. ------552,19D 520, 120 12 493 335 1.222 Seetachortau on P. 116. S..finotrasteran p. 116. 108 109 ANNUAL REPORT as STATISTICAL TABLES ANNUAL REPORT as STATISTICAL TABLES Table 11-4riternal revenue collardans by sourmore and by Internal mentrat regions, districts, States, and other areal-Continued linthousand-ld.flars, Table 1--internal revenue colledions by sources and by Internal revenue regions, districts, States, and other areal-continued linthouundsofdoliam See table 3. p. 114. for tax rates and further breakdown of national hotels by Ounces] Retailess'exclsetaxes Miscellanea. excis. is.. Admissis. Ifil-II.C.u. ..,I. t..-Cotirud Internal revenue regions. districts, Brain, and other.reas 3 ; internal menus regions, districts, States, and other Toilet Total Theaters, Roof ~Phtb due. arm oll tole. n .11.2. nut and (Stites represented by single districts Indicatid In paron. Total )..I . F.. PNp. ..art,, .:.,I"d phoneko. t.107.so wt. eral nsport.. lear. pth-z iesel and theses;totals for other Statax shown at bottomoltable) Or tons athletic . be tion (Brain represented by single districts Indicated In telephone tinn of deposit tabl..l . up, ..Wis.arc. "111"k..etc. fees parentheses; totals forother States shown at bottom .In,tell-~tc.,athis,o "'actT"'....1'. SONIC* P.-I -1 boxes pro-nd special or table) .-on.radioredin,ft. motDrfu,ls (42) (43) (44) (45) (46) (47) (48) (49) (50) (51) (52) (53) (54) (55) (56) (57) (50 uestraid seatia, twes!...... Us.= CLm M. M 31. m Imm 12.78k= I M M 43,6211 y%na trunwas states, Sweet_------_---- assen 24.4" 20, m M 'nor 9 .10 n Deston_AuamStl_Afla"U,any -----_Ir------"as__..7s,..._ ------__ ...... ---- an 10,231 MISS 4114, 4111 MM 7,583 27, 225 kawt~Atlwalft MI------".m 0, ago I r n M A b ------__.... 296 309 1:007 181 799 5 348 466 510 823 rikapon..Alb1n,A.B.'s ------..... BDD 81 776S V)t m67 92 Min ------...... ~: 038 144 546 48 703 93 155 168 163 5 ts ------0 ------, 65 7 : Messechlasbe in,us3" 'a,2,173M 7,628 99 , M300 7111:6I 12 1:111 Dial41 1:42 653 -II. 22,38428 768 3,4769 , 4 2 8744 538 B ff. as (1) b'li w 10,387 666 3:6505 715 3 355 33 4 Ilmoklyn ------2 6 ::::::::: ~n ~cC~ hot..)...... 54 1:1 395 64 54 77 14,41 937 9157 1,904 Buffalo ------2,25296 90 11 110 171 4 NO"I ------armnit ------4143 59 2439 153 920 8913 62 3 104 BustinHe amC. ----::::::: .on 6 5 3 Rhse halo Be7,,14 11 22~, 11 , 438 126 22 755 11, 474 3. 392 89 rthord ------MstAM`Corma.Soa-R(CI) I ----- .255 72 461 ) 4 5 : 1 915 Manhattan_ 447 fS.V2 546 7 Ml 47:4 nI M 447 $45 277 1 3001 Mentreft------,360 134 : 16 .130 4 0 Portsmouth- Now ampthiral...... ------723 DO 386 29 208 1:723 256 238 57 P r twou th . ------5 5 4 03 ...... '109I 1 Pro.w.w.. Rhode land)------2,5n 374 1,133 48 966 1 652 342 is 429 nNid.w.------____ M~'iIhat.below)Mmd)_~~Cut)------P w----.---- 0 32 4 3 .... 20 ads 3 4 ------. _. !2"7,7811, 760 5 312 4.179474 113. '911 130: '165 0'95 614 B~ftimorle.717------. Newark-_ :::: ~h" .::.... 12. 1'f,1, 826 4,e an 1,263 4:326 t M 242 N:wly n1. .1. 1.?. 496 023 M47 n1: 6 'm a7 3 n5 "" dour 2 1,431 4:3 02.3 54,94472 1:767 1:644 it1. "'913 Newark----- ...... 8 :8 2 ,525 21 71 5 8 '9 P%bB._ so' be 203 3 347 346 ,:MlUp 1,411151 144 1 b:l.w 7"77 B : 0667&8 2 116~ 2. ""'rrd (Do. -~ p`1' 6,71354192Or 2: '7157696 297 :932S`7 phC h. ~'S:: b ------1,927 58 3 321 91 14 72 125887 296 2,206 19.902 264 n L__. ~ 0.1. ,563 04 3 2 8 1 29 339 54 255 1.347 369 IS41 3457' Wilmington 1 1 21 11n ------134 '. 4.024 7e, 477 "rethawat werew..... ----- IO 01 See ------(Gw,gl.-) ------359 1:,3 174 3 1 21 1466:1 1 Sit 011 AtIanta.. ---- 6 ------C,,041 0:772 ':33 ,491 ----- 193 568 76 1.3 :4S7 144 93 fS4 769 JA".bM"1am .5::: ...... 91 7 , 7 1; 125 193 514 337 034561 82 1,061 14,09 7 169 122 438 ...... 420 58 510 0 904 G,..abC.,. :...... North C :::::: 99 017 ':3 209 2,802 6,155 317 95 1,262 Grvenb.i6 MNorthwin1. Issipp,Carolina)C. It..) ------3,634o 71, VA J.Ckn__.:, lininhol) ...... 058 325 $76 78 2, 77 2e,2 729 28 fig 378 Jacksonj )------1 I1'395 l J.clummill 91c,lds) 1'"503 I'M7168 We"5,048 I""364 a294 gap,8.96 1, 9M 2,885 391 Florida)-- 4,631 2,70D 16 0 7671 ...... musee) ---_------6,100 ':1 86 2,497 223 193 2619 257 179 ,1:168 Nm 874 48 12,7 9 1 3 1 02 :2 24.197&59 1. 7= 179: 4,433574 Craig702 10,478 Central NOCIals,------43, an , On 3 C_"`IClOcirm.SeesT------((d)) bl.,11.~::::------12, 142an 2 212IS 4. 456n 204,615 17 Cincinnati ~d) b ----- ,410 91 6 59 4 2 Cleveland-- 11:119 21.21 5,001 1, 596 4:17 13:6127 J"1 125 21:611'16 Cl...land --::: (Sas 115 490 7 ,915 7 45 s 6s 6'f 9 Detroit ---- 0.. 1215,2 1: 114DO, 1:4411, 37 423 171 56 1:917 393 Olt.F.:::------no) :934 269 27,322 47 282 19 1, 5 India ~1' I 54 2:6 40 31:110 692 41 1 1: Indi.n.a. 7 780 70 2.339 52 0 7'2 1: '0 I.C.N." ------3 517 1, 64'1 34 17' 327 942 Lepintil I ...... (.11.,t,Ik,~) 11 s 1 0 6 4008 Poll I (IN at I I,-):: ...... 2:41"94 29a 97 Bit .7 9,448 245 100 492 Police 924 :3971 3 ------3 1 ...... ------I 1 111,111 M 752 $37 SM.log. 1. 2115 9,120 31.917 an 3,3841 M 7, in . M M n s 1.11 Abordean_ ------(South Dakota) 41: 39 .8 334 049 49 96 IdAb.rd:,:.!------ZC.asith "Do'ki 8 6 8 5 6 M 37 Chi 39,352g42 7,772S2 1 723 313 12 (144M CS11355 2,719121 2,2581 4,612397 or _-----... ': I" 6below) ...... 21,077 of6 571 63 2 2 289 kI...... 3,652 481 773 170 31 D .64 2 3'2: 9 2 9 ) 5 14 5, 718 90 347 1. 30 15 3081 11 75 SS 1706 5 326 ...... 23 ------347 M ------799 2,537983 532 998 to:304 49 851 1,059 Inj ------6.364 88 ,256 8 9 49,86 Omah "verneurMi_urD!:::: ------Ik2,584&16 343 123 135 35 66 1935 236 401 ...... 1337: 2315 33 is St Louii:::: ------261 5,472 6,069 091 1:5 251629 12 .319 In 767 Missouri).------58 9 : 039956 .7572 7'9 3 9 St. Paul ---- Innowt.). al 1,393 41,,322 491 875 281 673 992 11: 375 St. Paul ------(Minnevots a3l 52 139 3 2:022 isiss.-Springfield ------(S. (b) 3,3411 381 603 145 ,1: 213 20: 565 166 545 1,379 Springfield------(S. M '2 101 99 '2 1..77 1 0 295 swes-...... ------swglww~ ...... ZLM 144 ,.n als CM A a. 1:' ' '130 'I 'SI5 ' '33 "'6'14 '3, T 's37 '117 433 248 Albuquerque.- 26 1 6 7 0'5 _------2 :'29 A. ~.Zlff1, below) I 1, 6271 1,645 5,464 456 :,106 11 Ul 411 564 1, In Awn ...... fS . (IM)lb.Z.. --- 668 116 57 ...... 59 IS, ...... ,380 57 ------495 53 252 13 176 4 92 2. 71 35 7 9 3 ...... IS' 9 3 Dallas.!!-.:::::::::::"'T fs'."(N)'" ------17,529 1,513 11,369 664 gas 14,377':- 503 361 450 M"'M --- 949 85 ,2027 ,926 D (Colorad.)___ ... ------3,139 112 1,417INS 205 1, 065 6,, 9411 31 Ul IN 0.... r------T ------__ 14' 74 4 .850 7 80 ...... 9328 a: 4471 LIM R------A~.Mnxxra) ..... ------2 408 335 66 042 1 469 116 134 422 ------: t%, nano):al) ------M 11 58 2 4 1 14 Me.0,12 ------_------593 $26 2,278 262 21:1 226 49, 139 222 668 1, M"On.."';;:.------53 3 43 4 4 02, Oki.h.m.i.,h" 4:1582 603 654 136 766 611 124 36 22 Oklahoma City------Oklahoma)_ ------413 5 94 7 1 3 1 3 903 373 1 148 106 275 7,754 74 197 1,041 W,Wichitawa1wn.::::::::::----- rInsas) ------1,468 3 ,440 ...... 04 0 ...... : ...... ___ ...... 71. an 2, M 31, M Cout 32. On 309.730 ...... 78.273 2. 142 10.09 2.227 , 212 ) 173 M nchoriqla._ ...... :: ~Aiiii;;i__ _------_ 435 31 233 47 12 CM26 1% IM41 1" IsIs Anchorite ------(Alaska)------674 2 818 1 6 ------6 Bois------ld.lulli...... 1,081 110 432 I'M2 SM na)...... ::: 908 403 2341 3.. 2' 1328 13H 173 1MIS IDS161a A IS' - 1 '2 6 NrCqI.w:::::::--- 977 27 557 811 179 949 199 Honolulua ------New.[[) --- ...... 9 9 9 32 2 2 N ...... 3523 5611 4,948323 4, 2"069 2. n558 13, S5 61,3' 3~ 678 5,167 Lee Ans,l..-- `w)_...... 12,5277 584 li:6751 11 628 29 911 342 296 064 966934 4 712537 C222660 522 634 Phoenix- A 43 3 7 7 9 ...... 477 443 1:431 1 100 1,503 6: 572 226 891 620 Portland.::::: ...... ------$49 7" 96 ------Be. jo=)). I 19D 113 592 4 103 R-no ------Nevada) 92 10 1 94 9 5 Like City 1 222~ 340 233 718 64 1,320' ":9 2.53 109 105on 326 Salt Lake City------_ Utah) --- : 129 V) 7 5 2 _- 60 262 0 SanSoftgoatia.Frraw ...... 6. 123 2,469 9,136 047 9,470 In, 926 2,174 2,809 1561 S n Fran ...... ------5 897 , 05 ,612 6 0 .... 7 99 018 737 Z 5117 1 1 1 714 1,002 S%tti..." her)- 1 138 4219 15 M 616 121 1 124 Oftk-. 0.IntanSestieval...... cownsidere...... I 1, --- am- a OpOSSISSO,...... ------...... 2 ---- 2,650 ---- Puerto Rlco_ ------_------...... ------,643 Obier------j- an F; ------:: : 40 ------..... Undistributed: Undistributed:Other~ ------Depository fmipts I ...... ------Transte red to covernmentof C ------TmDoP-oill-its ryecir-pbtv Mernment of Gum..------Withheld toles of federal amph ------_: ------Withheld falls of Federal Mployan_ ------...... ------...... Totals for Star. net Shown above Tousle for Brain wt shown above 1741:.1.391 1:417Ir W 116:34211. 3:SO2. 113:425731 11:120 MI I 1 1.1 11 2~ 1 DO7B59 3 17,2,935 BOD 16. 003 1, C.Ilfml .... .64 42 93' 10,267 J'~~ - aw --_------20:67,3, , 223:.77ISI 319: 3 1:2 443 1: 709 611 b?C Illinois...... 23: 1748 11: 0."5 Q: 2.`17 211:6262' 584 2 11; 958313 Ohio_------f: 013 Be~"66 '7~ '1739 557 827 '.4 429 d? Ohl.Newyork...... ------11:"jIs 1,1 127:73DO 41,254 f, In 251sin 21,62329, 3,195 9.059 778 7 591 91,89156, 214 041 go 738 74 311 340 218 IS:7 210 3, 163 16.834 1:120 925 4. 603M f) I mirWanta-::::::: I 804 966 50D 311nit 23:212 8: 094 236 923 Is To,...... 49: 617 301 14:11674. 4. 585 304 13: 378 So. hotb. p. 116. Sao foctri.t. on P. 11G. 110 111 ANNUAL REPORT * STATISTICAL TABLES ANNUAL REPORT e STATISTICAL TABLES

Table I-4nuerral revenue collections by sources and by Internal revenue regions, districts, States, and other arech-Corstinued Table 2--firstemal menu* collections by sources and by quarters fin thousands of dollars. Sea table 3, p. 114, for tax rates and further breakdown a I national totals by sourcul [in thousands of dollaral Miss-I ll2ass-, --is- tanne-Conlieuel Quarter ndW- I Miceli Bowling Internal revers. nVons, district,, Was. ff tax. U . tax 4.d.. Sen.* of reveriu. Stites, and other ansis and Coin- Co ln. alloys, n -Ih..., operated operated Sept. 30,1964 Des, 31, ISM March 31,1965 June 30. INS (States isprarented bg singto districts Indicated in pm. including arrusennen il pool high Other 11 th ases; VD Isis foro jeenles lab]. 0-P.- lot*.7 taxes 6tSI-m-hn-n.tbftamoft1bl.) DaUpation. devices vvic. , urinal Wage. .Id,les (1) (2) . (3) (4) .1 is.. Grand Intel------_ ------(59) (60) (51) (62)te. (63) (64) (65) (66) (67) 24, 8W. 479 21.954,323 30.763,931 36.920,901 Cor'n rstl.. in... to. I ------5,015.301 973 380 7 838,248 8 304 4DS United lassess, award ------...... Individual Income and arnployment taxes, total __ ------2,= 4, 4,77s Sol k0611 1011.032, 14.223 -32, Us ------15, 549, 78D 124:637:996 18:665,239 23:911: M FlarthAdes". -1aw ...... lisse.. tax net withheld ...... 523 in 7a To 145 2a.on go'sal and ..11--pisymart is. I ------...... ::::: 1 2 795 OD9 810,608 134: 810 70S, 079 - (Sea~Msc(s~ below) ------4= income tawithheld and old-age and disability insurance ------Aug., 65 50 ------49 4 111 794 164 32 2:591158, 697 11.674,903 13S9.."joy7767 14:1 029 973 . - 2 23 4 ------Railroad , ron.ist ------:4 167:617 Gel lert------(Men.ch. settle)_ 22 1 lineroployinent Insurance------IN 2Ij1 90 416.S'9 148'5813,293 604,576 9.315 lit ------1 52 2 ------IS .4 '4'9'9 1 14.4 436 Estate tax. . ------192 M 1 1798 71 64 INI 9D 32 Gift I- 119: 556,134 666,770 636 71 69 1 5 9 ------6'433 77 36,931 ------196 71 False taxes, total. ------: He ------11 58 7 19 1 8178 1:729%72 if 17 3,721,307 3,677:0459 7 3,561,843 3,293352,59459 San(2 be,..) ::::: 264 99 7012 V) 9 52 207 11 418 Alcohol tax., Intel ~ _------_------Iflaw anninshir;j-1: 2 14 13 622 222 to a ...... 914,717 1,081,579 314,294 962,058 Frovidon------(Rhode Mind).... ----- 5 25 ...... 28 Mid Afl ti 16 12 348 11 64 Disfilled spirits I.. ------...... - an , reason------272 042 t067 847 41 3711 M 70 sale 9"51 V6 687 MlrlllldNew in. ledI_D.Q----- 15 99 721 Win., cordials, she ------::: '27 191 '32: 4"05' 26: ----- . 117 11 66 1,592 100 7 Bear ------_------' :,M Newark 154 155 65 144 1 13 3,379 __---- 262,494 211,732 198.264194 2?467,456 delr 68 182 211 1:3 617'6 Must, In 9 34 4 413 146 21 Tabs= taxes, total ------I., ~:~. bebele=~ 113 132 140 11035 20 9 2: 455 227 -41: 1"127 ------M0, 069 552,903 $03. M9 552,583 9 65 89 ------(DaIr-)----- 3 99 3 203 _ 968 Cigarettes _. ------_------Hweat Ins, ...... 6 3096 1'50343 3 340 519,793is, 531 ~6,17412, 532.553 1 'we an 2,039 656 17:1731 A 1. 403 n m itm 23's _ M. ------...... fin 505 All am 10 44 370 58 4,616 4,600 4,235 ":525 tin,."Inbgsi----- 3 56 770 10 651 9 34 ...... 45 15 69 1 , 393 28 1 u is 7 34 564 29 2 45 766 Starni, tax. an chicurrents, other instinereents, and playing cards, total... ------47,485 47,&26 47.233 GtZ Ith Care 12 1 2:"4 1 '9 I .k., 45 32 so 35 14 2,832 12 3.485 Issues and transfers Allut iss! is I ------5 31 411 20 15 94 596 1 4 3: 135 of bonds of Indebtedness or capital Stock, foreign Insurance 1I kran";FG:::: Flodda)p . l------17 91 111 110 P1Il1jS. .". b1,ndd@at1dl. it1.1.0 "1.7!nl.: ...... 4 238 2.725 41 3 539 Nastirvill . _------12 48 624 60 7 111 1,494 13 11: 16'1 ...... us 1, 54A 12 3,762 pin Samcarbi. district directors---- 27: '954 ------nnm") am 1121 in 1, ago is. 72B 779 2~yfrr 2IT7: SM 34 14 33:B M S 11 d)d 1 b:j.vv*w~::::::::: I2S 1 17 210 2141,6 171 167 1, 914 69 94 vi ng , silv e r bulli o n transfers : ------:: ------2,130 2,434 2, "If 1,117 .. ----___...... ------17074 D.I. , 21110 4 71 -13 Manufacturers' excise taxes. total. . . . ------i1g.-M~ I.------33 '39 21 17 4:90' in 1,665,521 1. 470. TW 1.597,205 1,695,113 Indianfiselix.-_ ------lncll.ra)'~_. ------44 94 317 251 Uriblvill ...... Kentucky) ...... 127 37 16 75 3,095 191 961 Gesell" ------8 62 528 fie 12 217 1, 033 10 1 385 ------692,661 1211,: P.rk,nb.rg ------(Wait Virginia) 5 so 416 34 15 L.brIcstiti 'i all, at------_------...... :::::::: 110 217939 T 20jillCS ' 18:21". ITIS "Idwsat -1 ...... 171 68D 1 44 Tim (who 1 o I a t f bb 115 2`14 1171 us 1, r n p r o ru er), Inner tu bes, and fruit rubber------17: 976 292 Maclean ------S.ti 43 as 146927 "D , e6lisp ------I ne.f~? 3 17 130 15 3 W3 4 17 Alet.-thleftis h p ------698. 124 462 :017681 "149: 755115: 826259 Sea D'btlk tw)- :::::::: 38 210 121 Radio and : n.ntn, . tc-! ------41,794 58 55,561M' 66, 346 D. 195 12 140 41: 3" 367 472 Rafril-bors,Dre.r i ...... f-ra, .11-ruilti.n... at,. electric 7 1116 (1) M 1 137 124 12 111, and oil entries...... 42 54 147 34j, 1771 45,105 2 1 23 224 1 -23IS ------62:2423 1367 : 569 7 a 60,069 69 2 3 21: 512 53 59 Reason' exxiss tax., total. ------SLfa r"'I.. heWI: rf`g")7 329 190 38 42 7 057 93 112 1116*5 IID,759 171,916 113.961 11N'~M 1-om):" ------471 115933 141 14245 64 22:989 60 359 St. Paul------(M1rr-ot.)__1:,.-.::_,:: Losses.. 0-_ ------_------7 121 65 1. 215 62 46 29 13:6633 1.1"111weve "Id (b) below)...... Jewelry, she--- 61 2986 23D 82 a 47 313 29 43 R:47 '222 41:560IS 2 72:0M9D9 4 756 471 l.M M a M 1,M F------631 srsfin_ M M Toilet preparations------15 50,6.53 14 1 3 10 67 4e,3 99485 415: 207 54:638237 005 A 9_!I(lcn,~slow I 12MI 396 11245 241 29 3, 339516 39 19, 554 Mix..11.1100111 Ill. taxes, coal------D.an..,, 111 ,a----- : ----__ :::: 1801 ...... 72. 11 5 6 au 31 7 547,074 404,641 412,373 421,964 be w_:_ 23' - 94 20 26 31: 837 145 I's166 P!*Io'.d1) 7 40 iii Admissions: 53 2 3 593 59 91 Theaters, conce% &tlustle contall, ------LN-Cri.... na) 4 38 246 13 87 715 2447 215 ISO65 1'01 01 7 443 1,612g20 Roof trdsin, ca arsts, etc. ..._...... _ ------.: 10:7,7,0 1'1:537 11:013 110':322 olifters City- Okinh... a 3 Club does and Initiation fees------22,492 17,111 17,535 22.533 Wlihit ...... log12 N 7 1.42 1, - 88 -Z3,406 Tell telephone servi,., I nsa.) ...... 6 45' 60 2 3915 16 70 telegraph, his, radio . aft.; whe asilling. -le., Mr. and recowns iscien...... IV n2 131. 1 13151: 452411 115171:93D 'A 171 172 l.. 17,32S 16M 1, My 93 7 ...... 1 31 11 6 5 General""I pnot.l.plue.'I ------96.037 24 111:468 13 169 17 2 560 72 459 TranTortation of persons 11 . ------:------33 311:717471 2 553 4181 26 34 462 . r gj ...... ------1: 7"916 1:76D 31:2 56 H...... w lu ------: ------2 Coconut and 11 PhoLos A n 3 10 98 3527 1 3 402 1012 5 Sugar ------5 7 ve (.) below) .... ---- 59 206 35 261 31 67 4,960 459 330 ...... ------23 2 2 25 1557 Ad-)------11-1 led 110.tD 0 6 42 96 29 26 S96 25 193 he 43: 2023 37: "1918 34:611 19:37 7 45 263 53 2 66 N.-U. n'M: n.,r fInV1'j&;i I -03------318 356 161 In Rp ..-- 5 1,706 25 thisviln. .11, . ,it gaining 2 19 5, 694 8 5 958 200 47 21ut davi . es ...... 1 758 1.062 $523 3. 119416 IS 34 86 572 12 Wagering axes: tables, oft.... ------3 464 549 so S 238 224 203 1 2421 3 38 Saul------...... 6,316 295 619 (Washington)------is 74 70210 70 99: ...... 455 1,115 280 . .. 47 ,5,1"",. _"1rgoIf 72 147 0 ...... W .. 1.608 ""Puerto11 . .... 3.16 421 ...... ------..... : ,- : :::::::: ------_ 2 Us. tax an highway motor 13if: 21 16:1 42%7 161: Oth Other "..... ------1. U ,dl,tllbutw...... ------fiG 264 too 2,400 4,334339 13 UnclassiNd exch. txn: DepositaryTransferred -55 21D rullto Gop t-- Wf~_I-G`u------U. trial cathecticin...... 1187 1.186 12, fin Withheld is.. of ""aFederal employees...... ------...... UcdF, Worried depositary receipts I ------1: 46 14,114 36.994 1 Totals for Sister not shown above Sea protective on P. 116.

I 1 111. 1. 98 241D 344 Ifyi111 11 :7275 754 94! r- 11 - 44 496 5D 277 20 03 96 51! ON :W1 1 4 1 432 22 21 960 8.7051 L9Q cl~ 11" 2"70 171 3S7 21 3771 6 010 39 75, f) 91 31420, "136 211209 21 11515 17: 867 374 20.97,- T , ------59 44 192 536 21,421 00 lbatinlitin an P. 116.

112 113 ANNUAL REPORT * STATISTICAL TABLES ANNUAL REPORT 9 STATISTICAL TABLES

Table 3-Internal ratiessuat collandlons by sountes, Racal years 1964 and 1965 Table 3--interracal revenue collections by sources, Racal years 1964 and 1965--Continved [In thousands of dollars) lin thousladj of dollars] fiscal year 1964 Fiscal year So .... f revithou. Snume.finverm. 1964 19155 1965 (1) (1) (2) Grandbital,rill .. . W,...... ------112.260,257 114,434.634 Excise toxin Wt. -Continued --_------___ Stano P buften documents. other Instruments, and playing cards, total. ------...... 171,614 corporation income tests, filtel n___ ~ ...... ------.... 24,300,863 211, 131.334 196,289 ------24,293,959 Issums, and trinsfinim of bonds of Indifiredaters or capital stock, foreign Insurance policies, and deeds of commyrom- 0 Exempt riif;;6ii ------..... 1, JIM 26.128.635 Ft Set. by itntitnicilm.------...... 51 565 54 212 I 2,699 Set. rIll.district directo M.------_------...... 111:115 123:947 Inifividual Income and -pl. "c... tax ---- ...... , 13 cents Par peck ------_---- ...... 8,891 8,128 _------70,764,M SH"Y.Ir"I.,11lion transfer., 50 percent of Profit; reparalml, .1flectiv, June 5, IM ...... 43 2 In... far of ithh,ld Y,m,d"ta.,,.-taxes.plry..rttotal------tax - I to 16,318,069 17 850 506 fincont. to. Ithh.ld . no a ld-age and dissittlIlly I riviramw iiiiiii 17W ------I ...... 53. MO. 068 51:69:249 Manufacturers! excise taxes, total ------_...... ------6,020,543 6,418,145 ReceivedU with returns ------...... ------1------5L.253,082 49 116 910 odistributed depositary receipts I------...... ------Gasoline, 4 cents per riallon.. ------...... 2, 3370 2. W. 135 14 2: 539: 339 Lubricating oil, iftc., 6 cents per gallon; cutting a11, 3 cents per gallon ...... T:76 16 76,095 Railroad rethourrimlbital ...... I ...... I ...... ------Ti mr; (whitlif, 0 r in pait of rublier), inner tubes, and I it nolmr: Rallnedriployinuit compensation tax; tarriploymns' fax 7M percent, employses- tax M liensurt; both Imposed on taxable 593,864 635,734 Ilres, h string 7P., 10 art. or, pound, other. 5 cents per pound, except laminated tires (other than type unit on of W.I. Me highway we Ic at I cent par pound ------__ ------...... 366 391,588 "'RaIrfl with :,,to...... ------...... ------Inner tubes 10 cents per pound ...... 22:219'I1 2 R,,, Undistributed depositary recopla I_ ------580,295 94e, 755 Trend rubb;r, S cent. Par pound".-:::::'::::::::::------:-:":::::::_:":::::::------22.796 24:' 295"s mad arriployess representative tax, 14~j percent an taxable portion of anger 13~ 54 54 954 ter vehicles, clients, bodies. Parts,:nd aW.;iDries: ------' ' ------* ------...... ::- 22 25 U.%to I I islisn'thestatc.: 1,0t,~I.IapnxccL.!_ ------1.1101:35 1,9 1,887 691 thramp insurance, amplogirs of 4 or more persons taxed Truck. g`rrd"b bln6c1,,'bc1 :361 art 3.1 pincenton taxableUpharthincifagges,on tiffective, January I " j~l'it ------1964(WVralundary-1963,3. 5); credit allosivard up to 90 Pentantof tax for contribu toStatennemploymentfuncts ------850.858 622,499 RawlipIrb txi?.1*,nd*,4,r1p1,,f to ------221197:15951 4252 Refrigeration," *"it ""=fr a.," self-contained ------221:S" 7"649 Estate tradutittid rater from 3 moment on first $5,000of net estate In excess of $60,000 exemption to 77 percent on portion over plect go,. and oil appliances, onars, ate., 5 percent; W-rdiltionins units, 10 percent .... . 62,799 75 037 $10,000,001);tax. credit allowed forState death Inn_...... ------. ..- 2,110,992 is. nd 5 percent ------77.576 80:983 Gift nol.red,0 thdral Imm 24 percent an first J5.000of not gifts In excess of $30,000 exemption to 57 percent on P. ftno v0r 2,454,332 937 222 2116 $10,1 013,000"Prunit Illusion for each do -se ------7------305,312950, 291 201 25 6:692 Excise taxes. Wtal_ ...... __...... --_------14,79Z 779 Musital finstrum,it 10 percent an" _------...... : ...... 21,20,748- 13. 232 Sportinif goods (other than fishing mds. cremils, at.). 10 percent 11------_------...... ------2 317' Alcohol tax", total ...... ------...... it ...... --...... 7,34263, 1.7 373 3.577,499 3~ 77Z 638 O.Vness el " 71,867 74:426 Dititillind spirits, tax", total ------_------_------...... ------2.575,320 2.74D.2F6 10 percent; Im selthild type projectors, 5 percent 291:5111 3 surt,bittiflactunst,1050p P.1.u'linlin"I.,garn.Pile or as domestic)...... __ ...... Els,trM.S.".C It IN bulb`,IIndor the."' "It"fatu'i1.es,and10 4 421:1754 Dofinright 1 11 no gotten ban tailiviv proof ...... 504 824 558 576 Firearms (oth ...... 17,455 20.201 occ I, on,30minsporproo go an ...... ------...... 2,5i25j", 570 2,141 515 Mech~rlcxl pencils, pens, 10 percent; lighters III per lighter ($1 or or.); 10 percent (less than $1) It_ 9,299 9,463 u ------4`19 24:626 Marc as. 2 cents perthousand (butnotto exceed l0percentof selling price); tancymodenormlored stems, li;; ------centspel .1 climnarldactilrersof spirits, il $100 par year...... ----- 87 81 thousand "... ------__ ...... 4,355 4.440 Rectifitin": Retailers' anuctse I- the. 20,000 p 2 buirs, hotel u...... ------475,013 513,181 W20,0110preof1, saam 2aller-m...of """ri220imirtmer.... ". .. 27 21' R. .11ti-rinedirinuil5 aphrits,354 panyar ------__ ...... ------...... M 377 13,857 Ligifilig. W. 111p ...rt ...... 178,704 201 386 r...... _ ...... __ ...... 750 676 Jews '10 percent------89,437 04 572 W"'-"hhunubmt...""rofit" a 5 ------...... 5 Furx'76 at.' I ------3D.016 hmms in-fil", tift ...... 11202 5 Taller praplpalre"ons,it ------10 percent. . . --_------_------...... 76,957 195". Mass Ulljor6millosers; manufactursd,$22 each ...... -----_---- 6 995 5 Milixill.namus turcle. taismat...... ------1,546,631 1. 7B6, all Winn, cordials, ft., taxes, total ___ ------110,242 117, am Admissions lastes, total ------...... 98,079 95,591 "printedinshath ~VeljbcI wrintar'!117"Itent"led I It-, itates7 ... a d.r-tIc)__.__ ..... 9.039 9,644 Do cents, SL25 per wine Piton; sparklinul"Wiiiii ------Y.----rb.-tedvifnes,------Theater., conculs, athletic canterarta, at,.: It liqueurs, cordlals, $1.92)...... _ ...... 98,740 100.509 Admissions.T I pentwailes,for lopincrIcaulairrieneach 10 atirirrecithiniscess thlbl.. I r.ffc.h ,limitem,- unt P.I it IIt nc- .1 $1 ...... 45. 11119 50,531 up titimil tax- ket bro ken nt of amou ------_- 526 596 Retaila do.?.. In .1ma, ., In elass and bear, $54 inpull ...... ------Z 280 Z 096 Lic of the amount for which similar accommodation. are old ...... 480 517 Wholessil. dealers In ivireas or In wines and bear, 32 par yeter... .------_- 193 is? A=.''idTry`p "p., ntxc asIt 01 asts, b IIshad p dIt9, 5 0 pa mapI a I sup c h aIcan...... Clu 32 Beer teres, total ------...... _.------_------Root gardens, cattemb, at,., 10 punce"nt o total paid for admissions, services, etc------41,102561 43,623 St 119-90 12=d fixillected by Customs, rates sawn. as domestic)---_-_---- 5,32 5.969 To b clunI.and Initiation tan. 2D percent (if dun or fen are In excess of $10 par year)...... 75 3120 79,671 $9 per barrel of 31 a Ions I...... '98 2,2410 909,4gs lifiliriet.M11%as r. service. telegraph, table. raillo, at, , 10 Part------. -:::: 360: 30 433.632 ME1 rat tax.: Pinintic., 10 percent; wire and awfulpment service, 8 percent------19 273 24 425 "wers. Gingum, bilem no tervitte, 10 part ------5w, 5" 620: M 1",b.-,..r111, 111 bIn:!,jj1j11'p.,rrY,.our 0 Trainux,flartmin of- lifib.500 "r ------...... '20 26 Oll by pipeline, 4Jj piument; linumbird, affect Aug. 1. 1958...... 10 34 Who 11 deal,"deals." b*116924In 8,I.,2;-(l cludeslimited retail dealers in vilres., b.a,$2.?Gpr "bonkprop. 130 brucePa..1rlt;org1.".1rudiun effectivePaid. Ing,fil.w. 16. 1962 except an .1, tranump nation which was reduced to 5 incent 106 062 125,2890 Wait or, or, yevir------___ ...... ------...... month).. . 3.437919 3,628 met whiG is 4 cents per ton; repelfild, inactive Aug. 1, 1958 p ----- 277 15 c 934 Use of were deposit ho-6 10 Perceird-_ ...... _ 7,423 7.480 Tobacco taxes, Met...... ------...... C,,,nuIP,,ndrt1:1or holy1*Ircent1, itlisP. muctichumad, 2 cast, per pound: repealed, effective Aug. 31, 1963_ ..... 14 29 2,052,545 2,148,5% pound 95,411 Claormilln. to III...... ------SuChat and spatial mort,r fuels, 4 cents 12' 079 152:1,9989, 1,976,675 2.009.695 Nampotics and ingrilibirs, What ...... - ...... 1:292 1,366 CIM A (simell), $41,.r thousand ------...... ------_---- ...... 1~976,675 069, 695 ClassI 8 (Writs...... , $8. 0__per IN...... usand ...... lismit ------...... ------1,18795 I'M minalmmurts hiltirilitums-_...... ------..... 71 CIP., total ...... __ ...... _ ...... 6. 309 60.923 Colin-opersted armusement devices, $10 per device, per year------21015 Large cliars, classified by Intended retail prices total ------_ ...... ------Coin-operated gaining devices, $250 per device, per rur...... ------175: 1,5:018 51658 60.547 Bowling allays. pool tables, etc., $20 per alleyor tab ., pan year ...... _ ...... 5,606 4,773 Iticas A ~01,11s"2'qwe gtnt, n1.111.2I .I .no "'Id:------72 521 W.Pring tates: Class B '4 "nu j3SOprentexandit ...... I ...... OccupationalP far. $50 per year ...... ------...... 617 603 Class C I(Dgirr, I6 -tscamb: to11, -r,a I8 an d: ...... 13 221 14 15112 Woman, III arcentof amount wileared_------.... ---- 5,439 6,066 Cl. cents, each)j, 37le "or flimustan ------...... --- 6,921 6.723 Use tax on highway__ ...... mato r vehicles weighingover 26,000 pounds, $3.00 per 1.000 pounds per year (installment privileges ~Dw0':' 15I tents.71can hotover.. cents thousandfinustanK: ------089 343 Ithut. ------_ ...... ;.~; " 100,1939 102,038 Cit.C IF 1IS20 cents"".A)!SI5'I- I' r I ------2:33, 913 2': Al.11. ad butter and filled chasse (Imported and domestic). procenor inmovated Witter and Imported oli 3 Class G (Over 2D cents each), $20 per thousland...... ------004 3, 34 2DOD Flustims transfer and occupsts;at Inn a] ...... 50 Is 71 c!,I, ",it.... --- 6491 330 1964, P.L. $8.563 ...... I .... 1-1...... 14,597 Prepayments 46 Undirtnailla'.still `qact..-- 11"'I"to.":" attractive S "1 2' Tobacco Materials. tobacco products, and cigarette paper, and tubes (Customs) Is 1:43737 605 Unspoiled collialtho ------13,929 23 090 ,M,anuffacturedtabacm. 101tarts intilfcund ...... 16,,716 Undistributed depositary receipts I_ ------_------ToCi%r~ftpagp.at;or,ar.$,Bnd tubn,g"pins il,57311.,ritrim, "; tub. I rint pe, 50------...... 7 4"5 114 92.558 -55:210 _VIolItm Pa. great Revenue Cd.of 1954------See immolation p. 116. See lootbotes on P. 116.

1 4 15 ANNUAL REPORT as STATISTICAL TABLES ANNUAL REPORT as STATISTICAL TABLES

Table 4-4irternal revenue collections by principal sources, f6cal years 1940 through 1965 Footnotes for tables 1-+--Continued [In thotisand, of dollars] 11 Includes oceirpastional taxes on brewens =it wholeattle 018-age and disability insurtarice lasorre and profits taxes taxiss on salaries end and retail beer dealers. ' wages: Employers' and employms' tax each 3% per- Total inter. 9 Includes taxes on cigarcitte, papers and tubcs, court face, cent effective January 1, 1963, both imposed on net corporation Individal Employment Estate and Alwhol Toleacm Manufactur. Ali other penalties, and taxics on Icaf tobacm sold Or minirvorl in taxable portion of was I ...... Fiscal year ended kne 30 sollecthiss Total I d in.m. ie. - gilt taxes is.. - Us. - an, .'as ie. violation of sm. 5731, Internal Revenue Code. ex Collected by profit taxes Us,, 14 Customs inning October 1, 1961, as UX03 3 Includes stamp taxes on issues and transfm of bonds of authorized by Part 275.6275 Title 26, Code of Federal indebtedness or capital stock, foreign insuritrice licies, and Regulations. (1) (2) (3) (4) (5) (6) (7) (11). (9) (10) deeds of conveyance, playing cards, and silver mlion. 0 Issues of stock: 10 cents per $100 or ~Zjrr fraction 15 Incharics taxes on pistols and revolve,ni; phonograph thereof of actuail vidue, ex,cept that such rate be 4 -is 1940 1 5 340 452 2 129 609 1 147,592 982,017 833,521 360 071 624 253 608 518 447 088 337.392 records; musical instruments; sporting goods; fishing od,, per $100 if issued after April 8, 1960, by a corporation which 1941 ------7:370:3 108 3:471: 124 2: 053, 469 1 31 417 655 925 US 407:058 920:056 698: 077 617:373 430,564 excels, etc.; busincss end store machines; cranneress, lcmcs, qualities m a regulated 19421 ------047 869 4 744 048,517 780 992 771503,462902 1 821 682 company or a real 86 ODS Usl 083 :262:800, 932 1, 185:3fi2 432,540 1: film, and projectors; electric light bulbs, and tubcs; firearms, 943 - -:: 22:371:3 6 6,8 29, 498 71 4471:2196 11;1, 42118: 1 923:857 504:746 274:048 estate investment trust. Ismesinvestmentof bonds: 11 cents per $100 shells, and cartridges; mechanical 1944 ...... 40.121,7608 331 :209287.1002 14,766.7969:668:956 261,005 1 :738:372 51 10 6 775 998,483 733, W pencils, pens, and lighters; face value. Transfers ofstock: 4 cents per $100 or major end switches. fraction thercof of actual value: 1945 ------434 e.ON 398 35 061 526 16 027 213 19 034 313 1 779 177 643 055 2 309 966 932 145 11: 782,511 2,29Z 108 transfm of bonds, 5 cents 19461 ------39 672:097 31:259:138 12:553:602 8:704:536 1:700:828 M2 2:526:165 1,165:519 922 671 2 421 944 '- Includes taxes on ticket brokers' sales, an leases of boxam pcr $100 face value. Foreign insurance policies: 1 cent or 947 ------105 396 29 019 756 9 676 459 09 343 297 2 024 365 676:779 291 2:2474,762 1,237,768 425:260 22:1247:194 or scatit, and on admissions gold by proprietors in mcm of 4 cents per 31 of premium. Deeds of conveyance: $100 to Us ------: . ------...... Au:.964:542 31:172:191 10:174:410 1218':997t :71 2:111:3447, lt32 .1:111 2 S1,.7 1,300,280 1. 64 :234 established prim, as well as general admissions tax. S500, 55 cents; each additional $500 or 19491 ------40 463,125 29.6G5,491 11, W, 669 '., 796,538 2,210,607 1,321,875 7791 533 fraction thereof, . 1 2:28060' 892639 17 Transportation of persons; Rate 10 pereent; repealed, 55 -is. 19950 ------_----- 38,957,132445, 28 W? 659 30 854 351 17 153 308 2,644 575 706 227 2 219 202 1,328,4641 21.836,053 2 214 951 effective Nov-bcr 16, 1962, -cept on air transportation 14 Rcpcalcd, effectivc June 22, 1965. : 685 37:384:879 14:387:569 22:997:309 3,627:4794 729:730 2:546: 2:392:719 which was reduccd to 5 percent. 52 So 50 741 017 21 466 910 29 274 107 464 264 $91 147 2 549,120 1:565:IG2UD 396 2 as Rate 10 percent through May 14, 1965; 7 pcmcrit 15: ON 596 8339 808 * 348383'ST7943 2 507 933 buttes,Includci toxxxxi .. interest equalization; adult,ratcd from 353------54:130:732 21:594:515 32:536:217 4:718:403 294 783: 92 1 : 911 2:862:798 2:647:492 May 15, 1965 through 69,686 535 2 i DSocinber 31, 1965. 1954------69,919,991 54,360,014 21,546,322 32,813,691 5,107,623 35,121 2:780 0152 229 , U9, 133 2,464,859 filled clacesse (imported and dorwintic), process as Air conditioners, or renovatedand butter and imported olcomargarinc; nwmtim rcp~lcd, effective May 15, 1965. 1955------_ 66 288 692 49 914 826 18 264 720522 3 650 106 6 719 665 936 267 2,' ,S71,213 2,018,966 Refrigerators and freciers, repeated, effectivejurre 1, 112.840 1 2~ US, 016 end mwihu=a; cominut and othcr vegetable oils processed 22, 1965. 956------...... 75:112:649 56:636:164 21:298: 351 : 337:642 7:295:794 1,171:237 946.920,574913, 1 613,497 3,456,013 2,019 380 17 Sales of light bulbs for incorporation in articles upon I 12571 ------90 171 971 60 560 425 21 530 653 39 029 772 7 Slid 522 3774 999 195 674 050 3,761,925 2,243:856 (mpealed, effective August 31, 1963); transiportation of Which the manufacturers' tax was rcpcalcd, effective 958------...... 79:978:476 59:101:874 20:533: 316 ii,568:55940, 8:644:386 11: 10:925 32 :002, 461 : 8734:021 3,974,135 2,166,6725 pmperty and oil by pipeline (repealed, effective August 1, June 1959...... ___ --- 79,797,973 58,926,254 18,091, 509 734,744 8,853,744 1,352,992 096 1, 06,816 3,958,789 1,997,29 1958& fi-wrins transfer; and occupational taxcs. 22, 1965 (e.g., refrigerators), will be free of tax on and atft~ such date. 1 19 941:47704 8113 17 125 126 22 179 414 44 945 711 11 158 589 1 626 348 33:212113: 711 1 931 5D4 4 735 129 2 004 394 is rporation income tax rates: Effective January 1, 1: 11186 67:917:941 21:764:S40 46:153:001 12:502:451 1:916:392a1 1 901 :991:117 4,8%5,1205,6,' j802 1: 963: 582 1965, first $25,000 of net income, normal tax of 22 p-t; ur In the casse of certain raccuracks, the following rates 1 962---- 99 440 839 715 945 305 21 295 711 50 649 3594581 1215:004708 171 35 97 3 341 282 2 025 736 340 7 2 264 917 net income in me= of $25,000, combined normal and sur. apply: 1963.... :------105:925:395 7 :323:714 22:335:134 52:987: :496 , 87:457303 3: 44 1: W :079:237 610,3D9 2:278: SM Admissiona: I cent for mch 5 cems of 1964----- 12,26D,257 78,891,218 24,30D,663 54,590, 54 .002,504 22, 416, 3,577,499 2,052,545 020,543 2,299,645 tax of 48 percent. Nornial tax and surtax also apply to net mount paid. income derived fiven ceirtain citempt orgartizations, from Ticket bmkcn' gains: 20 percent of excess charga. 1965 ------...... -1114,434,634 79,792.016 26,131,334 17,104,306 2,745,532 3.772,638 2.148,594 6,418,145 t 453,402 53,6611.683 =related trade or business. Calendar year 1964, rates Leases of box" or staits: 20 fic-crit. ser were 22 percent and 50 percent, mspectively. Prior Nwcotics, 1 mrst per ounce; namotics order blanks, See tootoofts below. January 1, 1964, rates were 30 percent and 52 percent,to 31 per hundred. Mariltuarnis, 51 per ounce; marihuana respectively. order blanks, 2 cents each. Amounts shown also include Footnotes for tables 1-4 20 Rates of tax we as follows: occupational taxes levied on reranufacnimrs, dealers, and Individual income triss: Effective, Jamairy 1, 1965, practitioners. For classes and ratext of occupational taoses graduated raf~s from 14 percent on taxable income a- table 14. NoTE.-Calendar yew figures, by regions, districts, States, Amerwican Samoa. Amounts of such taxes collected in not over $500 to 70 percent on amounts of taxable an Adulterated butter: 10 cents per pound. and other areas, for selected types of taxes, may be obtained Guam and Americam, combined Prxicess or Samoa arre with similar income over $200,000. Calcridarryear 1964, rates were renovated butter: ~~ cent per pound. Domestic filled from the Public Information Division, Internal Revenue taxes; reported for Office of International Operations- 6 percent and 77 percent, respectively. Prior to checie: I cent per pound. Imported filled climc: 8 ce,na Service, Washington, D.C., 20224. Floor stocks taxes am Other. January 1, 1964, rates u1nd 1 were 20 percent and 91 per. ~.idust.. prt;dor it muptted butt, end olearruer- repoorted sepwately only during the periods in 'which the 6 Beginning with fiscal ye" 1957, the United States total _'m_r th eent, respectively. in 'und.d.._ collections am of significant amounts. Relatively earall is adjusted individual nor " until truics a- lcvicd to exclude withheld income tersim Old-agc and disability insurance taxes on self-employ- perE- products and are suniountsi collected in subsequent periods we merged with tranifumd to the Government of Guam in accordanum with u'7q ment taxable income, 5.4 pencent for taxable years included in the amounts shown. the amounts shown for the related class of tax. the provisions of Public Law 630, approved August 1, 1950 1964 and 1965. 31 Transfers of moschinegum, short-barmled firearms, I- than $500. (64 Stat. 392). This adjustment mounted to $4,054,704.41 21 Rat" of tax am as follows: Revised. for 1965. ailencens, ctc., 1200 each; ccrtain gum with combination Income tax, withheld: Effcctivc March 4, 1964, 14 per. shotgun and title barrels, and othcr The receipts in the various States do not indicate the 6 Includes railmiad employment compensation tax and tax special types of firearms, cent of wages in excess of exemptions. Prior to the 35 each. Occupational taxes tire levied on manufacturers, Federal tax burden of each, since in many instances, taxes on railroad employee representatives. effective date, taxes wcre withheld at the rate of 18 importers, ars, collected in one State fmm residents of another State. 7 Tax payments or dealers in firearms and we included in the made to banks, under the depositary percent. amounts shown. For example, withholding taxes reported by craployers receipts system, we included in internal mvenue collections located new State lines include substantial amounts for the period in which the depositary receipts are issued. i thheld from salari. of employeesmy who-reside in neighbor. However, such payments am not classified by internal Statm. revenue districts (nor by tax subclasses, to which c:scisc tax Includes taxis on unrelated business income of cirempt payments relate) until the depositary receipts arc received in the internal reveritic offiecal with tax returrins. Accord- 'tions ofindividual income tax not withheld include ingly, the items shown as "Undistributed depository m- old-age and disability imurance taxes on self-craploymen' ccipts" represent the mount of depositary receipts issued, income. Similarly, the collections of income tm withheld less the amount of depositary mceipts rectived with returnis a reported in combined mount with old-age and dis- and distributed by district and tax clan. abilityc insurarace, taxes on galaxies and wages. Estimated 8 Amounts of taxes collected on Pucs-to Rican products exparate national totals for individual income tax and for coming into the United Stritcs am covered into the Treasury old-age and disability insurance taxers are shown in the text of Puerto Rico under Provisions, of sm. 7652(a)(3) of the table on p. 9 and am wed in obtaining national totals for internal Revenue Code ofl954. Such amounts are included individual income taxes and employment taxes in table 4. in overall collections results (tables I through 4), beginning Amounts of old-age and disability insurance tax collections, with 1955, and we shown separately in table 7. classified by States, arc compiled by the Social Security In ludes, occupational tax on manufacturers of stills, Administration as a by-product of its wage and income rc~tifficm, wholesale liquor dealers, retail dealers in liquor m rectord-keeping operations and we published periodically medicinal spirits, and nonbcverage manufacturers of spirits. in the Social ecurity Bulletin. 10 Includes scizures, penalties, cu., and tax, on stills, or i Effective for taxable years beginning after 1960, self- condensers manufactured. employment ms: end taxes imposed by the Federal Insurance Includes occupational tsixes on wholesaili! and retail Contributionas Act am applicable with respect to Gum and dealers" in wines or in wines and beer.

116 117 a ANNUAL REPORT * STATISTICAL TABLES ANNUAL REPORT .* STATISTICAL TABLES Table 5--internal revenue reFunds including Interest Table [In thousands of dollars] 6-Number of returns filed, by Internal revenue legions, districts, States, and Other areas

Individual Incorre Internal revenue nations, districts.Strites, And otier I and .1an Individual corm.. Employ- Estate Gift Excise (Sult.Internal .... nu. .8i.., diltrits, Brain. and other ...A C. Total incoun. bon incorn. Partner- enitax nA*tfd art tax. tax is. Total rponLon ' employment tax" Estate Gift i. ,i. Us I tax taxes .P-.:VI thby,single districts Indicated in panudistals,; touls . (States represented by single districts Indicated in hip hhand A1!1 States shown at bottom Of table) Excessive Isa-thaves; hotels for other States shown at bottom m:,Ulxn ne or.. Other .1 table) ynauit, 1) (2) '(3) (4) (5) (6) 7) a) 9) (1) (2) (3) (4) (5) (6) (7) unload St'- sent ------MAMMA 44.0112.621 2.4111.1WIS 974, M 7, SM M = 203, 107 H. Ou 121. Bay 11 M, Us Unhod statm tow 9;...... 6.06406 ------714.1171 1 4,M,M in. an 30,962 2. M M, U7 A bw~,,A...... An 17. M On ii. nakin 137.08 L M. 711:'348 15,306 31~ 2117 3 a' 747 1,157an "'M768 MAD, 667Ads ~h~~tH .0An...... 1. 05, 1163 AgoI .MaineAs % be 541' M54 974 7 OD3 2'38 7414' l, 210210'892110 AllsIny..._ - - - - . ".1'.'1 '1'1 -1 _. ,~ " 106 '36, '76'1 M47," 9U2 "' *" - - g" - MassachustItts)_ ---- 3.090:907 479 4: . 125 987 346 57 B62 M039:162 58 614 L3,.2,, 182 17:171 589: 117 1oil191 13: 327 99uste.--.- . - - ...... ------_ ----:: 024 3 2 310 ------Sao i l) below) 3 2 al2,3.719 24 : 712'2 Soon...... 1 551 Z2: 1331" S647' 4, 326 695'W 1:3 3~5. 708 2,296 775483 1 514 1'.: 0.6"2 B rook lyn ...... hpItb 5 ------...... 356 2 . 771935 3, 293 .10104: 47 6047 22gd5, 350 24 690 228,50 OR'S13 221 23S 041 eu nto ------:39 378 12 :'705 116, "99 5 '1:1'10If 1'319354 6 059 Radio u B,uufi n n ...... --- 1 27:l313 "' " 117:IS 0223" '7~ '94 31: 13. "59: 11,21065 121: 43"36 71:012,29 l,15,319 3 268 NAw M 71-3 : III Il., .3 2.113 1-2S,., 'SO 04,132 775 M.9! ...... below)... 70809 24 Fortsmout 3. 921 5e.: 999... 47980 630 M262 130 "6 Manhattan- '3: 4331 ,, Pmviden ...... Rhode Island) 82,911 395 154 14,' 29 20 1 46, 2875 52 130,273 14,338 4,17637 ...... 47 '8:37"27 -AtIsentic mlm-. ------501.389 937963 337.22 568 921 134, ~3, 101 ,741 "1 539 14,403Sit othmuth:::::::: MLU;. Iropsbelowits)hi------,.)~-- 17 466 867 715 Pm,ld.n,...... SRhodeS"As~'c~! .land)u 23, 664689 22:997 24: U3 670 101 ------1~ 6220.M185 687 .U"=. lwAn...... 96 31 , 996 764 192, 328 548,347 1,921 2~857 ...... M 41,963 News -Y) ------102,527,e5Mu" m7B4f: I"117432 IM30:31 3'6 21"' 1' 314611: 269312 778:197 0. firno..... 46 933 Philadelp hia.-- 4 3"1 1, 211 14. 133 9" 627 0132 34 1.7. Sea( p-1.0.-~: ------31: 'R94 371 1.7,1117. 728 33 662' 3:3 N ewar k ----- (New d 217 1711 I 17095 to 7 12:7607 Pittsburgh------::-:: Sea ------2, 27I 2e, 723 54 1 12 19:4117 2115 141151 127:451 714 146 1650 Phil a del p hia 204 : M17. an734 M'M it Richnsond....- A A, _ 2 442,681 1,711 1:3 07U65 11720 : 724 5 2 121 '118 Wilmington, --- 116,41 1, 30 1: 111736: 11 21 89 Aft: 315476 1,352904 2,190502 84723: 390 littabulth.-: As b:!*.w 128 a3"57 : 218 1.191 :.1165 34:06,13 2,12to to '2. 474 5, 15 1: 520 26, 1 1806 67 i 3I 935 17 12 Isewthes. Ion ...... I...... 443 , 14: 128a Ati.,t ...... f 1S.- '18: 5297 5 778969 11,495 736 4 1 301 2, V' 105 11: F96' 90'5 1227,13 , 310 1"15: 4.11 M~18,217"n 1"527.727- 1: '087 "Afthavess, nolan...... 1 " 2 133:115 :8 ,ip n, 1, 0 :, 117,911 298 7 : 981 '2~12,5,643, ,. 132 2",311fififif'7 1,'., 112 3 172 '1:405170 37, tIont ...... ------87 1 : 136' 2,8411I, 195 6 "t -B77 C.lurnbl.- 'It'fifth C:.111ne 1:2 3"75:2"47 , '7Afig 154 285 7 270 1 An ------64 7 Greenabom':: I 429 000 614 2, 904 44,111gfi. 1I:M31 57, :12" 3, 706 222 10 BOB N 3 4 923 38. 825 20a 155 449 324 Celurhbi.~ ----- 11 ul CA;ce 1j!hA. )::::: _ .... ---- 47:671' 095 2,061 $59 Jackson. ------Flo'.Miid,.,)Ip!?------07: '746' 4 484 554 409 3161 G-b- ---- 1;110 J.,k..,111.- 117 : 300 943 864 469 523 04 1711. 37to 3: GG1 139 22966 ... 6 6,82 31'790037,94, 1. 843 957 60,643 20..25,0801 1.,431 231 .112 1.41 IID,297 J.ckwn-. 34:7 1: '775 130" :2 59 ------7753 148:946 5.360 ..,,23 87 963 1,5614 74,901 2.27352 rx" SWAM N..hvill...... T..r-.) ...... ":74 `17670 '0: 818743 13'1: 0', 73 B: B55 2.8 ~,47;. 1:: ~d bl.1. 1 115144: 1 1,31,027 T21: 15.509 an". "' in 13 92 3.3 CA."ve! rM=tr ...... cln.l.rdC ...... di 22285,177,810162&21. 421,533 "1,680gas 1: 69,480 _ ...... 1. 221 x6m 3. 594 2: 1 1411 24434,.2. 98215118 2,3:4993 7,3 058,3 62,7: 2:33,3,42 1:4174 155 Ciric nhat IS::~d '977 11,799 All97: '291 D 4 17"q: '73 : 12 4948,4 CIA,. nd ~ n 3,340 534 21 13: " , 76 0. 313 d ~ b':I w ------'044,~3, 713 27 : "Ml 1112fl: 361l10 47: B434G 43 34 MIndia. 2: 725 "764 281 992 86 93 6 31k499, 876553 ,419869 1: 24171 Old=...... 2 763 1L11 Kehtucky~.- 93 , 366 19 1,244'49 11314 9,56, 1,393,996 903 019 5,2799, 759 992 56,848 lodl.rumlia, "1"1",InduIV:...... 1 12 : 676 115,753 3 438 91: P regrow. Wastv"ght'.------$22, 776 540, 412 N'll" , : ------Kidwast ------.... 091 9. 266 43, 81317 178,771. 490 641 39,794 jj-: Want",I'll 66,72521 1 938 57:967 1:574612 34 14 13:97, imm 174. 227 1. M. Barry 3, an Ass 17,An is, am to,""..bu 37 332 1 , 953 34 248 2173 Ab.,d ..n ...... 0: emus Nudeness seatAn...... ____ 2 30, Ch.mJ~D ------3 S7 11 97,8% 42: 477 5, 648 12251.442 ...... M,M us, ggg As, Bay 2.M """b"'below ---- 4 .395: 0..07 2, '914~ SID'G 61:I 1139 654 3 105 $20,741 743 Abludnn.... 17 : 14 , , W` 2646n on. oih". -..- 577 537 66 `12 `14:9.100'23 560342 , 377 63 715 14I'5j 3 130:16 7 14' 21: 725 17178 1771: I""Be. (0)"'b.low)) 3 2 D M388I Z2411 :563 1,21175 908 9 F.Rig.j~j~j_D ----- ,1 1146 1,1 IRS15: 7,11 113 1 4. 3253 930" 1 '13 :75 3 to 74,936 10:95714 12' 175 :504~ 94 Wisconsin) 266: 90 344 1', 4 137 3 1 11528:691931101 21.11 11:,.11 1940:.77 1a 214395 2: 117" 11Al: 112I. 0,: 6008 N 1 847 33 37 Orrish------MI j_.,j)!bratu" ---- 162 2945 to 72' "9M3 St. :1 WN amnsin).__ ------_------12616 2 ~10:O fifir44 41 12: 8419so 24 72 21 379, 13 526,921 R,1754 24,1581 7 312 99 2. 331 676 I- h ------115 '2: 1"16 1211' 17 01 St. ut------Minnesota)- 917 '01:2 131:4 13 23.,65812 208,442' 604 94. ------1491074:14: 77541 24, 371 106,429 Spripslidd 135:' 329,754 1: 8, 1,997 90,309 1 1 2 6,975 553250 201 1,8 462.5 ------IS. (b) belOW):: '57"8, 97 922 625 544 125, 949 36 341523 136&20 2 219 1 783 go 465 42.113 a- was ...... ------1 DO 1 . 764 62.663 Springfield...... (Sea (b) b.I;;v)_ _:------_ 960 3: 49247 60:002 " 372 180 4 8: B71 Alb, ~,I:nv M*b,.i,0*.,_)~------4 876 34 : 92 75l7e2-', M213,,1 nine104 M S-M.1 "'M- - M an savoithewast '"few...... 121 52, 134 . AM8..I M no A ------2,775Abu :630" 1, 'W""721,676118, .79 , '. 173S A..t,.__ Chl.lyfuu,...... (Mlyarning). 32 966 090 679, 785 4715 HO1 37 7,447- 1511a 2 -If,24~174191, 1611 11 ~ ------2016& 191 331 1 986 1,119 15,621 52,047 OR ,61 912 16, 137 635 17 3.W below)...... 2 699 486,738 28.549 38,022 144,717493.12, 620,458226 Dail.Cray- ...... A SCA.olonulIf *) ----_------111 I,MM 2.71G9If 1 '3: 733 24 2 691 Lit 1: 67215:13131 13:a 07 13 1 : 994 1, 9144 4 18: 425 2 '12193 1 2,9336" 96': "1821 -12,4"52' 469 96 3 J ill Lou,Ar. 934192. 191 5 "M0 9:4"2 202 214: ME 426 """)do)As -----....' 69 : 19353 2 2 2'7,, 41 "g:13 gog113 Lf1:817.6 122:3,1,43 796 3,3: ,3,8I 7, 19 4 000 Little Rock_ jgS"RawBe."yon"')LRanse.).,1.....n(I)(1) "0 Ok Off 21: 962 76, 549 ew 35:977 1: 31S 1732 007 1.: '1795 381 476 68 28D 586 tk8. 665 N 76 : 4 45 25: 78" US 1 Wkhit------(K. -a)---- 757 763,331 11,455 13,548 95,175 292,121 Olklahorts Cit ----- 66: 199" '5 37' '53: '54'1 52 230 26 ...... 13, BOX on id'sis M M 592 131 414 Wichhe...... 1 :376 A Agch0M"w1.Be------...... _ M aga gn 1, M, 2n ------62,917 3,025 49,030 4,042 248 56 5,715 (Alaska)h ------...... 108,226 74 003 590 1.71 4,611 8 27' "*5 :"700' Virearsts, .anAn ...... _...... I, M W ,se------(Id. .) 41: Amh*" jAl AM) ------1 : 21 ,.,17124 1, 930 21, 561 91 .1a, S,11SO1 1 337 11, 1. _ ------: 2:047811 2 858 278 AT:1 '67UI ------~!!------T. ill M3 2O 395 327 2 13 : B Id:h.) 22 6 317255 1 : 4617 11, 547 255,67998,, 4 6. 526 1 1 13 1 : 5724 3:755 3,380 3 1:IQ' 3107- 7. 47DO42 . 16,629 "Alan,No j~: :::::::: Hewa ...... _ 19, 6" 885 DDI Los Anplet-, ~ ...... (SeeAt,"",.'.,Or)(a) ~ixelo~j~__:: ...... 6.055.111671" 3, 22:37'7"2521" 1, 931411 67: 7""1 I'll2:74611 1 not 271: 658 267 0`42316, 9 347 753 Pbo.rm~------..... 1, 7416: 943955 41167S:,111 1 ,, 226 , 903 6, 197 172.727 LosPrc Ansells.... ------54 4 2 346 2"63 159 81,17 3 3D. III Be. W below). . ~ ...... 54 136 gin54':9757" 4 3, M 1. 12 71 501 3,892 P. and .... ------06 113: 10164 1115:413703 231,",39:273" ' 1,2' '2 ~Alirvna)Or ------14,161'74 Il2:4420" 50 502 Be"*Be,r"LA- -_ -- ---_---- N... d,) ...... ----- 243, DD3 4 punt.r, 41: 2148 41: 2. IZ,729" fi. "59:529IS' A3:192Go *10,41 1,3,917 348 M --- 1 , DG j I:4 47 . 602 l28:00 72434 7:12'. 1, 3051 2 39 3:1153 5801 Z2, IRS RAran ...... vidVi.~ : :: :: :: :: ::: : :: :: :: ::: - 17,7301 ill 42 ------37017 S.n' I F " C co, 13~8 769 21: 669.094 1 350:' 7173 9'53 Sell 1.11, City::-::::::::: 1~1.11~A) ------_---- 1 Seattle.ran 13 1123 2033:629 '1 :43'58 31,111 44 44 ~_cfews(WIllun!1or)------640, 2DS 050, 654 3271:338593 6: 921 125,724 337,914 260 "267 154 83 San Francis. 199 , 274 125, 627 254 054 10,905 807 12 71:756 se W 1W ------"a, we ..2 in 2.M in 85:1300 a.-SxAtIW ------_ (Wnhirtgun) ... 105,641 0,689 37:646 5,490 260 -51 560 P.In" Ri on ..... __ ...... 2194 ,380 69: 902 170 1 10 ". U33'6 "3357 A. M2 '" L As al ...... _ ..... n oth.,------_ 61 , 630 35. 940 1,953 63 13.192 7:652 1.761 275 P no Rim... ------__ ...... M30 '4 "5 :2-58365 A., .352 ...... ------1' '2014 Of~hor ...... 30,7035 1,078 25, 3 690 151 ,_Aa 0 cearbassaw ...... I'm ...... ---- 1-1 ------I...... 1.40 TOUIA for Star., raft Ishown above

Totals for States not shown above W Callf. 43: 10 Oil ~ 12641: 471 1, 975516,,SO2 2,090.056 16 5 18 327JBIL,25& Illinois--N - 1~,5,' 97 M 3: 1541928 74 264 198 ,, 054 1.161.871 4 1676 31534319, ew York ::: . --- 63: 11~o: 11 27265 ;3197 ot 1'. CaliforrI. MD," III 80,502 711:511284 5 978 175 11,649 J~d A 14027 377.13( 37" 13 "11:657IN ,2,5,:8 1 . '' 401: 53 IS93 11: 044619: 467 4 14 37a1 11:088 13 17:19 TOhio 1~ "7:211 I'S099.7 4:3 141,' 01 6D, .39 35'1: 0889 73 491,063 1, 22 1 F46 151 5 Nn, York ...... 7 267"' 90:349"' 479,107: 13:8 184182 1, 46'967 223 "1939 329 14 230 192380' 09941 d) Oh 311 31: 1 54 61. 415 68,1 7 2 320,043 1,300,337 ''098 7 239,27( A) ------3 :5627' 28 '3'952 2"282 'I'615 127 2,515 I) pru""'I"PlaTexas...... ------271,39532 29,684 212.734 to'20, 589 1 , 104 1113 Includes 110.199 tom 10408, Ng, NBA, PR. and VI which are imiuded in "All other individual and fiduciary" returns in the table on p. 12. Includes drawback ..If Aunt, red.ropties. Fun have fail been reduced to reflect reirnbunvem.nn; from the Fed:rxI Old-Age and Survivors and Fedsixt Disability T tFunds to $191,F .000 In 1965 And 3165.80D,000 in 1964 rom ibe Righway Trust Fund munting to $123.491,DDO in 1965 and $126.637,100 IaInsum"1964; anAd fro.nu` he UnentA;k,"y.."ni TrustA urd 97,609,001) In 1965 Ad 4.291. .. 1964. Net of 58,8117-uftntundeliverableW checks totaling $4,165.000. - Less than MO. 118 119 ANNUAL REPORT ga STATISTICAL TABLES ANNUAL REPORT go STATISTICAL TABLES

Table 7-Intormal revenue tax collected in Puerto Rico on Table 9. Ego blishments qualified to handle tobacco Table 11-P911'silts for operations violating to alcoholic beverages under the Federal Alcohol Administration Act manufactured products coming Into the United States, by materials; or to engage In the production or exportaticrin objects of taxation of tobacco products and cigarette papers and tubes Distilled spirits plants fle thousands of dallars] win. pro. win. A, of faze 30- Status .Ufimz -and ind Class of establishment Grand total Total I istillers ...houttsing lead.. Objects of taxation 1964 1965 .ad lirl 1964 1965 (1) (2) Total ...... ------__ 45.153 45,100 3) 4) ) ) ) ) ) Manufacturers of tobacco products .... 458 - - - rl Is Distilled spirits..,--- ...... ~:__ 38, 310 35,798 Mnaftctut- of is." pop,. and 4 in effect July 1. 1964 ------Distilledn... spirits, rectification tax ...... 872 (' 971 Deal.. In tqb- materials...... 2.062 1,997 ._------.... 13.516 45 89 12 1 7 VA ...... V) Tobacconportworrehouses 147 148 Issued 1, 4 04 0 7 7 0 2 1 , 11, 1 Be., ...... 14 3'0 3 s'56 .0750 Terminated, total-_.. ------1,644 6 0 4 C'"'Cz'.""A ------__ ...... - ..... CClass; 8...... 1 Revoked ------1 , 14 ciazz C_ ...... 593 Otherwise terminated 630 ------jb------34 ------ii-, ------,3 1 Class D ...... _ 110 4 Table I 0-Permits, selating to distilled spirits under chapter 2119g 39 1 06 ...... 31:453 5,960 In affect June 30,1965------1 3.276 153 Cless F ------_...... 671118 1.74 51, Internal Revenue Code, 1954 Amended ...... ------1,370 266 ...... ------_- 66 2 1, sta o . ui Class G ------...... 137 r9 [ 9 =19 97 Cit...... 11------it lots...... Section 'ExcluderfermitsforCustamsmanu urln(S~nded'(4t, wershousto zinc. such astibli,hrint, are not required to qualify as distilled spirit, plants. P : ------...... I. 5171,code Section 5271. IAL Code 2 Column don not represent the fact of and I since on. permit may cover more t an one activity. CM'araltacturred- sm .11tobacco------(chewing. smoking,------and snuff).--- 0 R.

~!`!xz than $500. Users d- Table Not-Amounts of have collected In Puerto Rico an tobacco and liquor mana. Total On, Dealers 112-Perivile m1aifinsquitoare tobacco, undo, chapter 52, Table 1 3-Labol adlylty under Federal Alcohol United Saint or. =#red into the Treasury of Puerto Sttux Internet Code, 1954 Wruwnderrult" lVp tntI iltihas of section 7652(.r ) at the Internal Revenue Code of filled I"delf, . x- Administration Act 1954. Such amounts are included in ov-1 . Ilections reaults (tibia I through %rits, a cle- Ily cially` tree parts stood do, & alcohol As... I.C. mu.:Ex 'ta.. 4), beginning with 1955. alcohol natured natured Total funereal Applications acted upon alcohol rum tobacco ropflotars Table B.-Establishments qualified to engage in the produc- status proof. is Type of label I!on, distribution, storage, or use of alcohol and alcoholic (1) (2) (3) 4) 5) 6) certificates turned liquor, (1) M (3) Di. in July 1, 1964 11,416 10 03 35 ,655 2 52 494 Total Approvals 1,,:.np, approved souidaffect...... 7 1 13 6 In R."t July 1, 1964...... 627 A. of June 30- Imanid...... ------490 47 Close of establishment Terminated, ti 4 04 2 77 78 34 4 Terminated, total --- ...... Grand Wtal~ ...... 47,454 45,662 ET 1965 R.voIud_ 7'-.: - :: ---- 2 ...... 99 1 56 1 3 M 1,509 Otherwise ter. 0R..k.d------Distilled spirits, total...... 19,352 18,678 is 659 initiated...... 60D 15 4 02 2 7 there. Distilled lilts plants: Domestic 7,,302 i-76 Plan (net number)...... 355 352 In effKt June 30, 1. offect June 30,1965. Imported:. 12 MO 16 867 15 183 1,425 09 1 ~ 2S 483 Amended------... 148 production...... 1762 M Am1'Nn k~ 82 0 ------92 ------0 57 3 4 Wines, total ...... 21,133 25,465 268 Warehousing_ 6067 278 gaining: in 61 1,7: '142,9 Is6.,938 JOB D ..tudis ...... 40 150 Imported 527 ...... 149 47 692 Reel""4" be ...... 121 30 Malt boveragg", total...... 1,569 =519 Denatured and tax-free Frclucts (dollars, users, stc.): Dollars In so. .1 y denatured alcohol and d. Domestic "Units M.--, 43 44 Inapavad-..'.'." 1, 4" 469 20 Us.. ad 30 ,am------Is, -;t . ..~- 3,680 3,690 3 PKJ1JIY Us..naturedof alcohol .,U,las...... 1,062 tax-free alcohol...... ::::::::: 7':4"84 7,48 Boor: B.-rias ...... 199 191 Win": Banded win. Wt . no...... - 438 43193 Tnpold wirebottling bay. as ...... 99 V~rqgh,so,IW Ivas 3 3 -1 ------3, 11 '3 1:63 96 W1.1-1. deal.. in be'u 2,77:177,55 14:19791 11 it. :. in Itoma Is...... _ Rate deal n In beer ...... 145,165 21,9,987 Other: Manufacturers of nonbonsrage products (drawbeckt.- Ul 874 Frail-ftevar con-bt. 'ents ------I 47 4 Bottle manulactureire...... D9 107

120 121 ANNUAL REPORT 9 STATISTICAL TABLES ANNUAL REPORT as STATISTICAL TABLES and Table 14-Number of "cuportio-al tax stamps issued, covering Table 114-Number of occupational tax stamps issued, covering fiscal year 1965, or portion thereof, by elm of tax by fiscallecur 1965 or portion thereof, by class of tax and by internal revenue reglons, districts, and States internal revenue regions, districts, an Statesi:Zantinued

Distilled spirit, Wines Bear 7- 7- Who[-I.d.l.. Retail dealers Total Rictift. Rd.! 1 dealers Manut.cluromf Internal .,am.. region. di,tuIcx,.nd States T-Innury nonbeveraze ffoducts Retail d e alers In umber Wholesale Retail deal"$ internal ravanuo resions, districts, an d Stain of ..u . (States ;represented by single districts indicated in parer, Win" liquor Maefac.U. whole. them totals for other State, h.- Win... Win.. RDO b-11 dealer, . deal.. . Not Net Mom It bottom of table) Win... and nd beer or more $123 $24 t 32'41" .(r-b..'in simills districts Indicatedor In bab,is-.- P"mullt.. br- Lee, 20,000 .1. $255 beer, ' (States reprooented of suit$ s then proof dealers, Retail At Medic. I .ad. ..,.ad- than $255 $54 $54 $110 $2.20 than; totals for o or States shown bottom Of 0 " 1255 cl,311.11, far$g, Joel ig 25 ing 50 50 on.urr IssuedT'" 55 ' 20,000 9111- 1 ns, gallons, Saturn , or .... 54 (12) (13) (14) $220 P$12413' m$25110 $50 SIDO (15) (16) (17) (13) (19) (20) $110 union sawase, send ...... (1) (2) (3) (4) (5) (6) (7) (a) (9) (10) (11) us an V7,742 ague 7.497 143.924 1*1 -1 in ldam~ttwwklc, ------47 25 12 &.164 20 us far, 7" 425 1,M Albany I ..... In U X Igo 347,113 413 2. 256 62 763 14 2 84 3,106 101 Coolant Ilourw~ sated- .... 1. 203,W ------48 ------...... 21 604 ------07 17 9_ "so 2 .... i " 27 127 ------I gal ...... 6 is say B rooklyn ---- 1 1623 165 ainotho,A11seetto regriken.. U11 ------12- 1,5 , 10091 4: 827 21 ------0.1 ------4 850 10 A ason 2 5 ...... ------10 6 2158D 6:405 ...... Main.Sea(' 411 ------25 ------552 Ag n.... ni 7,7DO ...... 624 3 2 46 ----- 911 ------3 170 ...... 3 - 2'8~1 '40 i, HankM.,h rd------37" 1a:4127 1 1 3 3 54 9 F 47 lhmolk9 fy~n. Saw ~ Iuslaw -~: 39as:95959I 2 ...... 1 is 34 1 10 74 1 99 '114 IRS 2 1 2 PmVift.ato'ut"h- .h------51 uffal . 5 ------: - :::: ...... 10 ...... ------...... j . 28 1,617 ...... 8: ,58 ...... an dema. ------... RhS"(cM"SHe.Mm..-.r5,-~c a..therbesl PowOwull-)) j Burlingto 4 I1 12 32 ...... Hartford. . : 11 fill...... 1 4, m is 074691 1' 7'1 6 2 13 ------2.M 8. 1" 107 1, am Manhattan. 570 --- ...... 2 561 3 97 1,965 3 Portsmouth:- '74 N .... k------New James) 156 334 5:656 .... 20 1,861 ------(a.. 6 741 649' rovidence ...... fRhods Island) , go. a 11 142 13M0, 21181, ..... 61 8 9 110;h..n ------... ftllcl~tlswud.P owesan...... - 1 as4 '53 5,927 64 R 2 I 9,20 ",56'0 --- M IS71 1 . 413 1479 2 79 ...... (,) ...... 40 505 55 I 1I I2 Wilmington------(D.1-r 4,0110 2 N ewark ( N:.J.". 7.2 T,: '5S93 ------i- 1 4 11 ...... 7 46:909 s 5 h- Minor ..... SO Philadelphia.--. 2- ii an 1272 9,2" a? 30, 794 3 ------1 2 8, 806 Abort------(Gamill.) ------.... : ...... 7 ...... 6 788 a 3 ...... ------i ------a' C I 1 1 "s 9 1,544 2 Richmond...... Argin I)...... 19, 892 . .Mg.__ r~ ...... 3 ...... h :::: 8`19' ------th car; l . 70 2.700 ------I Wil. firsto ~ ...... Do new")------2, 328 ------Ali ...... - 30 j no, SIG ...... ' - G-.,b 's Mi.N.rut q.roli us --- 3 is Ineothown Milan - ... - a 7 ...... 37 98 2 211 '1 5 ~4 Q'433 - ... 14.22 1 ... ------I1 "s35 a1: '403 ::::: ------2 ------Atlant------S37 - ::: 3 2 113 ...... 70 205 ...... SAl.b.ma)...our ------9.96 ...... ------a J. Florida) ------2 IS, :361, ------...... 14 911 ------...... ------4 11 3.922 ...... 3 2 iij------"'al...... 10 4.468 --- ...... 25 NMuarlosinn Copp.l)...... 38 - --- - 12~ 222 :: 2. 1, 25"8 `-C`lncrn7n,1tj------cl-jjf~~ 224 742 7.3011. z an Jackson- 320:275 ------12 4, 3587 2 1 14 2:3 113 1 11 Jacksonvill ...... (Florld.)...... ::::,:: 3 Cl ...land--- ~d~ 4flow, ...... A ...... _ 92 444 19,099 ...... 30 DO ------D etroit Mich,pn), ------8 ':0 19 4 - 249 Al...... ------(Tom-) - ~ ------10 15 3: 1 13 311 230 4 India na II I- I.Iqilu,~) ...... ------. a 2 15'083 2204 89 a3 ...... 2 us129 10'5::036NO as a 5 3 2: Lou., 94 4 60 c"n"M'Il 23.943 ----- 4 1 193 257 46 below 40 635 194 Pnkrsmrg- West virgi;Wi:::: ------3431 2 ..... 6 54 $44 3 ...... f - 468 ...... I , 55,596 2 ------Detroit ...... s. n) t 3 20 1: ------i ------..... 1 11 as zes ~lmf~l,..nc 25,305 Ab I------(-S-iu-t-h- -K.-k-ois)------...... ------*0I ...... "V I-M A "I -.... Ch 2 : ------221,1 1.1 ...... 17 551 ------Do. 4 277 68 Parkersburg...... W ed V1 191 nd ------13,499 1 1 111, 75 1 167 4,055 416 ".an an o is 10 ------5 1 16 930 ------...... ------a.1 41 Mian*11has ~ k ...... 5,962 ...... 18 ------Aba=-'~ : .We no. M I 1 7 i 7~ numb. ------:27 41: 11 717 h 0'.b 50, 120 1 131 15,568 15 l Nebm.ka) ...... sol"eof';jj: Hurt .... '13 21: 419 ... 4 1 ...... I ------...... 2 D ::::::: 18,979 ...... St L..i ----- Missouri) ------1 ------44 1560 a 310 -...... - (b)-D 16: 2428 ---- ...... j- St. Paul. ------Mj rr=;5::::::::::: .... 1 Fargo, ------03 ...... 10 131:92022. 1 92 1 ...... ------1 131086 '7: 10402 7 206 Ifillemukas------fe)be...)n)--...... ---*to- I Springfield ----- So. 1 ------31 123 4 47 260 ...... ------...k 59 a ------1 .1 428 O.-h a 56 6 089 184 4 4 2 A I ;rq ------an sk 215 13 1114 St. Louis------851" a 2 1 (No. Mexico)------...... - 2 ------1 ...... 25,142 ----- 1 17 07 7 1 1 Austin ------0 below) ------17 ------St. Paul ...... 2 10 9 3,782-an in6 437 14, 874 ...... --- 37 Springfitld ----- ...... 19,185 4 ch.y.mr ------51 Snothwart senators ...... 14C IN 23 3 W 17 094 n 0.11 m.------...... 32 I ...... 29 1,398 M2 326 Albuquerque..--. 4: 14 ------. r - I ----- :.... 2620 1466' 31:22101 2 393 9 ------311 2.115715 ...... 20 Anti------Little RocL (Ark.n ------3 25 1 43 1,610 ...... 102 Sn(rib.j.I" nl 3,0069,152 11 ------Vi-n..------...... 22 1 98 3,659 ..... 1 ' 29 1.662 2 - 1 OklahomaHow 0"", ~LOOkhthi=' )------...... ------...... C 17, 2,930 48 185 ...... 113 10 1 05 LittleI-IrR.j,::------Colorado)...... 12,444 ...... ------Wichita ------Kansas)------,, -:: 241, 424 ----- 687 ...... I 92 112 3" Arl,,,n,.",)no):::::::::::: 11 5,111 12 ...... 6 ii------iii ------.....2- 1------S.- i a------to '541 Amemraff...... ------...... New Oll.m. 1 ...... B 9 9 15 It26 ..... Oklahoma Cl Oklahoma)---- 1414:176 ------I ...... sax, 005 ...... 32 as1 :933366 H :;:' ran.). 66 1 . 506 Wichita M ust.) 22 see 17 a$ 17 61 0 ono : i - 77 US A ...... $as is a m H l ulu. ------2 2 30 5 :::::::: ...... _ ...... 14 722 t A 3 1426 5, 3 ...... 5 6.1n. . 2 : 11 :::::::: - ...... - o - 7 4215 ...... ~Al`a`! 377 1 676 :::::::: Ph' (A 192 ld..) ...... I ...... llruna)-_------i6i 2 6211 1, 41 ...... e lena. .... (Montana)...... 64 , 670 - ...... ------53 --- - 11!nclgo. __: ad. ... 23 , H ---- - 3.' '1 ...... --:. 2 038 620 H.nolul ...... IS:'*I i : . :: : 59:,09173 ...... ------16 121 ...... 11 __...... :: ...._2 ...... 2 $55 Soft take cl~-_-:: --- ~ Utrh)------PlummLos A q'r 1es. - ...... '651 ':7212 ------2 47 5 1 7 A, 140:111 ------f a.. a 76 H- 2,853- 122 3 13' 309 59 1,286 ------j IntoSo' ------..... Washington)-') ,low ...... 9 3 Portland.:::: 5,098 ...... 24 5 ...... --- 217 23 R.no ...... Nov.d.)-0 ...... 1'9 ------2 k,..Ielf,...... I7 ------: -----4 4 6 Se.%) 521: 13------...... 240 14,50 Totals 'a :.' F~ 136 5, 3471 ----- 4 1 2 forStates not shown above Seattle...... ---- MahirgtDc) ...... 22,941 ...... ------lab cit 16 2,853 1312 , 324 9,162 85~ Totals for Stores not shown bo,. 2 3 1 16 372 537 w Yo----rk.------2 21 1324a 651156 23,7551 21 ~d) Ohl------...... '7 10 91 6,621 _ .... 61~ 461 :12 1 3 f) PrmnylT ...... is 3 - 760 b) 1111,302 1 11 ------61 - 2 6 1:1 "7914 I li . 5 2. 1201 640 15 7 10 9 .6016 6 593 8,095 1 15146 22915: 790 7 1 21:3 ------HN ow Yuri 130': N '1 22 ' a3 9 4 d ------1 1 323 121 21 6i I Includes 6 bunmrs of on "77: '6 "93 I-1 1 9 3598 2 63 2 4 less thin 5DO barrels at $55, Pa. 'Or. SO 57 11 H ~ T. a...... 61 , 545 20 1

. 122 V- 123 ANNUAL REPORT It STATISTICAL TABLES ' ANNUAL REPORT e STATISTICAL TABLES

Table 14-Number of tax Table 14-Number of occupational tax stamps issued, covering "at 1965 or portion thereof, by clou of tax and by occupational stamps issued, covering Rsc So, 1965 or portion thereof, by close *I tax and by Internal revenue regions, districts,fiscaland Stqsd;;:~Z~ntlnuecl Internal revenue regions, districts, aOXI S;~~antfnuecl

N.-tics; Marihuana National Hnarma Act Colo.p.rated d.vka billiard pool,and bowling alls~premlj7e; Adul- t ..led, internal revenue rollers, diuldicte, and States Man f3c. Populous Dealers in Lbors. Meet- Produe. Manufacturers IRIII.rd or - unlaced factut. Dollars, are and Pr.cU- Lmimns- Internal revenue ragions, districts, and States (Suctes represented by sleff. districts indicated In posem- Importers,lure , Whole. Retail P-ti. bills, or Importers Dealers or pool Accuse. .ted Wageming, .1. dealers tion.", proper.. at, 93 m III Ire, tion$1- , tales, Plane. the, mines; totals for other Shot. boom at t.Itmn of table) and $1 moment! rmmt Gum" bu lta, ofPmm""... dealers. $3 $1 li ons, $I s2i (States represented by single districts Indicated in brokers than Deal.Cie.. .1 tawff,Isyq dark. d -11c.2 and etc.,opium. $12 g:ranth.sss; total, for other States he- at Cl... Class 3 . wn, 310 5* promise,, promise., filled $24 h Donoltable) $500 1, Cie. 2. IXD0 ' bC,pm* kll, promises, ' $25D per choose (30) (31) $25 4, $20 par $10d., 1c. d.,I. (21) (22) (23) (24) (25) (26) (27) (28) (29) $200 table or .they 4" 1 Jus (32) (33) Unlosed Stakes, tated. 127 too gogi no, ns Ldo a 1 (34) (35) (36) (37) (38) (39) (40) (41) I I 21 154 I.W 43, for m or ------1 ...... U 6 ...... 62 6 ------Unflood 1111ante, faced! ...... Planck"Ib.chance mom ?b 1 1 7 575 3 135 22 1 2 1112 $9.= men 27. m ...... _,_... 5 253 1:445 1 1 ------A ugusts.._ . . . . . ISNo.RhoMM-In.S.V.o.as7use . ------ii, 3 913 11.884 1 19 247 ------4 ...... 8 1 ...... Be st--_------AIb =y_'!_* !7!7:: 7 5 4,M IN I . 7 2417 21 , 14 4: .Ibl.~w I ------: ------361 620 ...... 13714 218 11 ':": August----- 21 B.C. 211106 ------3 235 "1:274 15 ------I ...... " 702 ------2 ------Boston ------Me h B. rn.Fcin 961 503 208 1 50 : ...... 1281 1, 11,13 16:5 gor951 14 13 g roo ld : ::::::: : :------:: ------Hlrtt.g!'11~ ------...... C. .... 522 I4,796 ------931 138 30 ------4 Metlo y------Ib Manhattan. Isth a ... ------rllrEwn. ------...... 1,337 9 , 055 ...... ------54 Portsmouth: _::::::------. . 3 -- " 1.617 30 2 ------_ Hartfordo------__ 3 ... ------P.,Id.n,... (cd(~1 belowbelow)cuot..Pand)...'",. 6 ISO312 994 1 1 ..... 731 3,313 127 &.= ".7" 213' as 2 P, half. ~ ------.... 6 1 340 3, 8114 ------see- 2 ...... Man ------2 O.Itl...... ------(-Waritan_ Yind' Vd ----- 2 29 1,093 17, 772 5 9 rts uth showI..I.- .... 155 904 14 ------237 27 2: 4Go 0 931 36 36 In Prolld"------SESo'SCupIth.d(Cin. t------o------rd) ------__ .- N -,k ID --) ----- 222 1,514 ------9 16I 29to :596 57 27 ------2 kd~=71 an ...... ------Philadelphia 'b ,M 4 ii ------1, 11492 56 13 1 ------g:,Yl. j* and D..I-!::::: I ------8 "1 isF6'110 4gI,13107, 02244 '3 '. ------Pithlurgh... . Newark ------IN 119 Richmond ----- I,, Inl I F ------I ...... i. 1:660 529 ------:::: ...... 102 9'712~ '3"701 4 2 ------70 W,,.In&c...... ~D, Isw ..I ...... ------893 132 ...... 70 In 7,1. fle, AlA7 1211 33 ...... Southwark mi.. ------3 1: 7' '19 357 424 ...... ISO ----_-_------...... 6 37 10 4 , 892 11-h-11b ------2 ... ------2 5 999 4 193 369 ...... Atlanta ------3,332 1,1 ------: ------i ------34 -- _ 1~mdbA,.b.-5n Ce ._, .::::------1 2 962 74 466 2 ...... 37 D 647 2,464 1122 29 _ ------scourthowas mi------Col.. . ------AU.mt ..... 4, Age s'M an 15 1,0823 5 139 ------3 563 3,001 635 _------40 Greensboro --- 2:3128 Bir --- : ----- ~ 'l`rill ------I ...... I&ckscmn,,,,,:::: C A .. 1 2 337 Florld.).. 297 C. I=-.: ------S I ------.1 46d 1...... 38 32 1: 174111 4:89200 21 9 Greens boro. No.2 5 1,026 3'j 758 ------56 _ I on--*):::::::::::: ------...... 14 _- 1.0son.------93 : 939 1, 21 110 21 1:1161 57 0 6:'118 26 13 ------1 ------3 ------J.1ksumvUW.:::::::::...... ~t'.pc_Fl. ------...... 1I ------9 N..h,III._ I 98 1,5 795 45 F 04 ... im...... _ ------S..Md Zone 4 3 9,33D 31off 111I ------:::::: ------...... 5 7575 3 963 2,139 ...... Cl t d 12,677 con", mian...... 103 Detroit ...... 8 21: ...... ------3 225 13, 024 47,4U 4,M 2714 297832 53 996 28 11 --- Cmcm1`U ------! ------6.154 Lml.'UIndl..r...... 01 --- WedhucVitill.i.) 9 ----- Cleveland------~d 1,016 657 18 2"41 k ---- 3 ' ------I ------3 75 111 ------119 372 2:013 Detroit------act ------Parkersburg ...... :"------9 2 2 5 6:42 "14: 41'767 18 2 92 ------ago serg 4LM India mi WI .cluckli------1 2 1,190 6,985 956 ...... Mddwaw` 'ashow...... __ ...... 242 749 ------Locievill"' ------527 Aberdeen_ D to).helpMi.)alp .. 3 3 ------700 4.286 1 : 543 ------i 298 34 15 ..:::::: :::::::: :::::::: * ..... ------In Park rsburg.--.----- hh). sin)ri)'b .....w)...... 67 12 ...... ------below)------576 4,406 296 93 5 3726 ""'798 3:823 25 4 ...... 3 . = 4 Do 727 ------Aberd een ------as 32,3114 037 36M I all MiNoIowase - 3 200 ------...... --- 354 '1: oil 342 Is To V 4 , Cl ------(1,%~b) below)...... ------4 2 15 11 11 Mil- 4 ...... 1 ...... 17 1 ~ ...... : 3: 255 3 64 1'10 1.1'217 '2: U 95 1 4 2 1 : 2 IOD so 5 26 1, 261 918 47 3 ...... 10 ------378 f 470 12 ...... 27, 19 5: V'r.Yk;W.-: St. Paul Wl"'an(b) 2 4 1 4 966 14 959 ...... 1 17 ------16 986659 3,1029D 22 6 O_hm_____: Na* -b.Nk.'~-:::------I ...... j. ' 912 2:993 ------Spri.cfi.td.... c St Louis Missouri)mi Ha 44 "achowwa -1ass-_------I in 1I ' M man ------11, 406 S53 ...... ------_ 3 362 1, IOD "6 "4 :::::::: It Paul, rmot.). 2 ------1: ' 67 :475 Albuq0rcl ...... 6- Most.) 17 3 4 162 1 !51 Austil...... belowi .. 243 .599 7,694 sploutil. Is.: (b) belOW) ------...... 2 ------1,44'2M9 397 7 112 ------swathwast reakee, Cheyerm------~wasw mi') ng 129 "S ...... 4 6 2 61 3 ::::::::.... _ ...... A lb -_ ------i Callas------2 31, 1,412 1 172'27 1 a . quo- "2 o"I'll168 1. 325 " ' a's27 ------"s14 A " ') ...... - ~C'r A. "I4"rno - :: :._ V "I"')below)- ---- 1, $47 11: 602 36 12 156 5' 4 ------nfroo.)) Little Rock ------A01kan,."1)): 6 2' 2 1 CIt.y -!) 7131 '17 ...... 217 105 a no ------19 1,011I 4: 311`3 11 ...... ------I ...... 16 142 New Orleans .... ------I ------DoD- V.r ------... . 122 Oklahoma Cl Oklahoma)-----:::::: :: ...... j- 14to 7Df 3:462 10 1 Tto_.d ------... ----- 611 2: 730 117 ...... ty._ 3 ------...... 1.11111 Rock . Kamsa) I 1 2 735 ------374 2 7118 806 2 126 Wichita.-.-.------N "OrleamCinty ::::::: ...... 23 asof I ' M Scale in ::::::------2 62: 799 1.113 W '"ems...... 40 218 ------jC"'I- Anchorage.. ( A ------1 OkI.I.------"'Ok 1 54 59'6311 909 190 Its ' 24 231 952 2 1 Wichita ------1 1,064 3,M lmlse._ --- d':h wastann mi ass ...... 455 ...... 32 Hot.. 260 ------ll-- " G'm 39, ous. l.orr 4 k are ...... 99 11:0"004 21 21 A HmoIuii:::: :::::::::::: __...... 96 631 193 ------156 fours)(a) below) ---- 10 338 2,676 22 392 46 33 Id".he) ------1 262 472 Los An 452 23:423 1 3 ...... 11.11no-__ ------Monte.) A"r ------...... 226 21: 105 ------(Oregon)-- 191 Honolulu ----- : ------...... ------of and ...... 54D Por'Romo_ ------_- (Nav.d.).. :: .. : _: :: _ 1 51, Los Angst...... (So. (a) below)...... 5 ------14 ------2,4232 9 022 "25' ------j ------15 507 ...... 1111I.. Ilk, face ---- 10 236 192 Phumni ------(Art..)-----_------I ------471 2,567 204 ...... It 1 fl, I 1I: 931" , I Portland------F . ------...... I 131 1 11: 40 19 48 I'W816 ...... (Washington)..::...... I 023 5: f 917 3 R -em------138 1 I I IfD S.111 Soft take City..------(Utah) .... I . 1" 231 605 611 San Francisco...... (See 0) be ------I I 172 11: 229 2.0.21n ------1 - Totals for State, not been bell Scott[------(W.1hinglum). ------3 UO 4.702 ...----- " ------

h California. ... 71 4,607 38,255 66 52 Totals for States mi shown above 1 1 3,126 15,400 56 21 :::: ------I7 No. lolk:::::: - 2 ------I Ohl.a 671' 26:686 15,418 577 I) C.Ifforri ...... 5 146 3,101" H. 211 ...... 46 4 17 39 106 118 70 2735 ------j- 2 ) Illbal ..... _ ...... 1 21 684 573 774 I? P am. I'smia. 6 ------...... 2 IA 1) 7: say...... 2 54 1:0113 2'14:566 38 New York ------3 1 ------7 275 71 ~'d) Ohio ------I ------171 4.2 ' 156330 17.261 TexasPennsylvania ------2 ------i, 4,4142, 24,2507 5% ------2195! ------1 563 13, 44 36 1 61

124 125 ANNUAL REPORT 0 STATISTICAL TABLES ANNUAL REPORT 0 STATISTICAL TABLES Table 17.-Appollate Division receipts and dispositions of income, profits, Table 15.-Appolic" Division receipts and dispositions of protested Income, profits, estate, and gift tax cam prior to issuance estate, and gift tax cat" petitioned to the To. of statutory notice of deficiency (imc-9"cri, Casel) ourt (ocketed =an) A. Progress of work A. Progress of work

calm Amonmistaton! in lov.m.r..sent's ralsort(th....4 dollars) - Amount stated In WfAt-I.rY Numberof Numberolcases notice (thousand dotlars) status .11 status D.ficiency in tax penalty 0',ran.ma air D.fit'lency In tax Penalty 0,.r..-m.rt (2) (3) (4) (2) (3) 292 :;dj,nsj, ------Pending July I ------__11... 15,531 1,094 093 37 845 R UIVo ------7 980 944 308 2,105 ------_ ...... 26,301 977:274 38: We 1`95:208 6:852 492: 072 ":17 570 3.034 Retailer! ------Petitions ------21,737 666.774 33,779 63,4041 Dfictr filed In response to- Disposed of. total------Ict direcoma'ststumnz tic.-,... 4,493 3 496,4247 1 :,,1, 1119112 Apo 'lilt' 0i'lliDn'..tt. y..U-as ------_------109 40.558 2,500 By goespert...... ------17,4161 2:94239 2.359 172: 963 7,012 sm Unagread ow.ressessonarts and claim rejection3.-----__- ___- I&D, 103 39 fill, ..d .1, total ...... I ------.9y issuance of statutory nothm-ur...tarred to 90-day status....-- 4,077 24 825 89 5,448 337,790 23,133 1,302 42,902 224,095 By stipulated agreement Pending Jun. 30------20,095 1,394,593 Ty dismit... I by the Tax 6;~it 6"r'j------P. rd.f.ull------: ------: ------4, 4762 7 296,697 20 610 1.187 Fred before the Tax Court on the ------_ 6971 555 2 '502 7 371: 539 021 log Pending June 3D_ ------...... ----_---- 384 998,590 120, 145 3.937 t.1 from table B. Results obtained In dispositions in mit.Differenceetc. 16-Wrisferred to docketed statue-is Caused by excluding districtclirettars'statutDry notices capsidered by Appellate In 90-day status, cases Appellate determination (thousand dollars) B. Results obtained in dispositions Method Number of .1. peer, ...Y,. is. Penalty 0,,memoccummt (1) (2) (3) (4) Appellate determination (thouland dollars) Method Number of c.... 345,463 19,740 55,342 Deficiency 1. is. Disposed of, total.. ------~1,711 penalty D,.r..n,..nt By agreement------...... 17,161 160,243 1:,933 53 051 (1) (2) (3) (4) overessessmen and claim relations. ------...... 499 .5,212 40 1:510 UnargreedBy finponnes of statutory notical_transferred to 90 -day Status ------4,077 Ole so 791 Disposed of, total------_ ...... 5,448 122,497 12,175 5.272 By stipulated agreement T0X, of IsmImaI by the Tax bi~ ------...... ------4.476 81 509 9 652 5,157 ad before the Tax Court on the arait, -~ ..... ------_----- 278 Sol 7 694 37,5393:450 2,021 JOB Table I 6.-Appellathe Division receipts and dispositions *I protested income, profits, estate, and gift fox cases In which statutory notices *I deficiency were outstandins (90-day cases) -prounbls0floold...... she, in table 19. A. Progress of work Table I 8-011c. .1 Chief Counsel--ProCening of income, profits, estate, and glft ta x ca *s i n the Tax Co u rt Amount stated In ttct.,y if. (thousand dollars) Amountin isPuto (t a un dol lam ) state, Number of D.fili.nty 1. tax Penalty (2) (3) (4) Deficiency (1) Status Number of ... 0,.Mym..t ----- ...... 2:044 1,277 Tax Penalty Panding _: 41:378 235 0781 16 896 323 Remixed,JulyoctalI ------(1) C2) (3) (4) Statutory if,. Issued by App.lhnfir Division I ------3 921 195 356 919 745 Statutory motkesis,unal bydlxtdctdirsctrl..d,ac.I,.d cl.11.996-da-virew.4----- '457 4j,722 1,1: 977- 579 Pl~dln' ------4.469 249,651 9.834 1.343 1 47. .1 U1 :1D gge 79 ago Disposed of, totel._ ------Disposedr --nJuly.1 I_I ------_ 6:842 421:168 36:4472 - 2~ 975 935 13 937 122 134 Pending June 30------: 5e, 744 350,111 6:924 73 8Byy agreement------1,184 211 8,980 1,165 ------576 920,373 12 489 5302 By patFt"tax ionof default------* j' ------. 2,450 217,613Is: 731 44 15~ to the Tax Court-ty.ralorral to rocks ad status------I For 56,876 9,906 257 relysisaf disposals, ses table 19. Pending June 30___------1,299 statutory nob,., mses in traplit.-It. Table 19-01fice of Chief I Diffmancefintro table 15-tarafanul to 90-Illy satu"s caused by cases being combined or split for the Purpose of issuing the Courosel-Ransults obtained in income, proffits, estate, and gift tax cases disposed of In the Tax Court

Amount I. dhuxt. Amount approved Percent saved or recovered! B. Results olutaln4 in dispositions Basis of closing Number D.ficlercy over. -717,lncypxma~fly be0YY,81;m Deficiency over- - p and puynmmt mt and y payment Appellate determination (thousand dollars) imalty penalty Denali, Number (1) (2) (3) (4) (5) (6) (7) Method of "m Detci.rcy In tax Penalty Dvamproarment (thousand dollars) (2) (3) (4) Tmal_ ------5,744 376~ 934 50. 573 [~90,204216,.2762576..,,27999477 (.)42 17010 31.0 87.6 4,469 245,977 9,770 1,422 1 Dismissed ----- Disposed Of, total. ------Dewsloo on operri 2"8,5 US14'6 1 14.71 1. 835 to1 163 68 Z12 ACW safflamm ------92 'xis,644~ 1,2J4 23 276 35 92 70, By ...... :211 on 4,.635 303,547 43,359 90:204 4 1`370 29: 90.4 'y ------2~ 450 2.17.613 731 1,144 -f------a i; petition to the T.. C.Ult-tructliwii -I- the. M.

126 127 ANNUAL REPORT & STATISTICAL TABLES ANNUAL REPORT 9 STATISTICAL TABLES

courts of appeals and in Supreme Court Table 22~01ffice of Chief Counsel-Docisiom, of courts of Table 25-0flice Table 20-Office of Chief Counsel-Receipt and dittional of Tax Court came in and Supreme Court of Chief Counsal-Recelpit and disposal appeals In civil tax cases of miscellaneous court cases, lien cases not In court, non. court collection litigation coin, In courts of appeals In Supreme Court and appeal cases

For"rt'and is, Mi mI Amount 1. d4tut. Amount .S ;;rmnvd Amount In disfuls1 Amount pgonnul1. ForGo the Againstthe part[I.inyt nLai. Noncourt (thousand dollars) (thousand do tan) ( thought, lu re ) Total o I'm..a cans collection Appeal (thousand dot an) Court Status asa ,,t I In litigation Stitus Num b., Numberof ment Goven- the of .art Gover. court - casix, - am ficioncy Over- Deficiepey Over- I Cellular, over- Defideariv Over- m.nt . end.....,d Payment-a'- Ceilinrdi" imd pvmfl~ pa yment 8mIPmn.ItY Payment (1) (2) (3) (4) (5) "on (1) (2) (3) (4) penalty(2) (1) _(_"Y 00) Pending 111~y 1 Total1:6 280011918910 3470 1,106 3. 650 Received------6: 119 177 Total---- .... 403 293 95 773 949 201 196158 ------6 138 (1) ...... 35 Pending July 1. total ...... 43.0 43, V22 M Total ...... By courts of appeal,, inul_ ---- 381 267 79 35 1,6.2 1201 2,055 3,151 373 by Canumdemiumv._ ...... 2 ...... 6 138 ------Appealed --- ...... 1-1 ------C~p used of.- i~:_: ------36454 2'9:, M3 2522 ------...... ------.... Originally tried I- 1==7986 =7 627 25 A Pa. :dd bj to ygxx__- Tax ndP .9 ).no 56 I-usaxisa3 Appes!p ...... 12 74 944 9 ------__ ------Court 241 177 4D 24 1635 District courts------...... 140 90 39 368 24 30,7670 ...... -10 209 ...... ------11 Appealed, total...... p I Includes Fults for By S.p... C ..L bral------22 16 6 ------foreclosure by nurtilseems Of other secured creditors, and 79 I5 213_I-2yIt 30.551 8 55 ------.111 to Quiet title to which the United States .. made a party. 263 ' 20 2 154 ...... _ ------OriginallyCo I, Pr!m.,!Iy applications for discharge of Mparty tax Items. be ...... :,: 11:~278st Tax tried I- 1 from 26 2, M2 IS& ------'It------15 Pr,..nyd memorandums on collection Itilitt'r-t ..it. fr.. loglonal counsel Ryon ------Clout, .. ------W dln'lud"I"as11m1t*1..... rFortlch or*I endlot related to cou 14 7 17 1------truce ing or an axis. 335 S 788 _10, 76. 7Z7 210 7 ~152 ------Q) (1) Court of Claim.------State appellate Wult, role ng to insolvency and Disposed cf, total ------debtor proceedings. lien cams in court and collection, 14 ..... a- sumunnint, and Injunction to Commissioner- 174 10 a732 198 10 719 16 1 14 ------Finish 17 1:368 ...12 to team),...... 83 15:741IS 38 I Includes 3 collectin litigation a- Note.-Includes am handled at dational and regional I...IL 13 171 1 735 or.141trUcept.no included for Supreme Court Usix, the cases covered by tables 24 and 25 Modified ...... ---- 1:002 ...... Settled...... 16 ...... Dismissed 49 770 6 ------_. [77606 296 ------...... 9 195 ...... _------Pending Jun. 30, hotel ------_ ----_------Table 26-Office of Chief 7 .....41 Cournsel-Canlood report Appealed by Otmrsionflors-.- So 1,522it,, .1_ 1 ...... Table 23-01fice of Chief Counsel-Receipt and disposal 38409 1071 ; ...... - 2 collection, A P" :itit by takis ------_------of injunction, summons, and disclosure cases Appimal ...... PendinIt Receipts Disposals Pirldin Activity July Jun. 38 Status Number of am - Late than M. (1) (2) (3) (4) Pending July I ...... 704 Total ...... Received ------':3 04B . LI 2" 111) 551 1 Beff Coumel-Racelpt and disposal of suite filed by taxpayers In Federal courts and actions by the Table 21-Office of Chief Administration --- _...... -197 United States for recovery OF erroneous refirrods Total 4,752 110 111 196 Alcohol and Tobacco Tax...,. .., ix. 2,343 ITS ,111 _1M (other than Di'91"n,'J'u'Wid------.....-1... - Refund 1,909 National Office_.... _ '31 alcohol, tobacco and, Field ...... J1:611 31: 717' to..) 13. 79 is .01 p1=111".1 . E;-nocul 142.i-Thf. table include, asum handled at national and regional and do..,.y start. re un or consideration for suit .1 or. levels which Collection Lifigalmn 1------5, OM 12,684 IZ M7 5,MJ Status Tnt.1 inbesuit in Federal and State courts. it do as C. I District it... "Iand IncI"d1=dW111debt., in, ~111toIbD,:12.lml,,1p4).. poo. .,ad firearms taxes. w, to imoubmn.c~ National Offi :f to -ppea and other cases which am includ 306 sit 520 297 in table 25, Field...... 4,748 I~ 173 12,127 4,794 (3) (4) (5) Echmanniml,...... In"' - 2,104d.7, 1 509If.,I 1,277 2,33 a National Office...... 76 79 Pending J Ily 1: Table 24-0flice OF Chief Co.nsel-Rec:Tt Field...... Cases ------...... _rumbor:~ , 3 145 , 1, 24 and disposal 1,201 2,257 1911: 13632 847 of Insolvency and debtor proce Ing, A...... thousand dollars 400: 115 rt.rioret.b. Division ...... 208 708 Received dur ng fair: 163 314 3 - __!t ---E Cas...... ------rnbar- 1 , 493 693 oint Committee Division...... laz 561 Amount 1. 111put------...... ------thousand dollam: 96,602 r- -35, 523 60 381 _ ...... Atorgant- Bankruptcy Misal. 599 75 Total P. calmn DiPoLedC asof on ng year: 7 Status and - Imneou, efund Utogation Division ...... 3.145 I,4S8 -I.293 ------..... number- 1 29 ciedings I catilership proceedingsinsolvency ..... doll.- I32 6733 52,3'476 7"8,559'66 451 1,623 proceedings AmouhN ------t1u.sound : .x Court ...... 9,914 7,211 6-077 11,043 Refunded during Year: ------12 ...... Anm L ------...... ------.-.1bousend Wis._ 37,219 7Jj1%. 11 (1) (2) (3) (4) Worst Office...... 28.05 31 Y3 .92 26.67 ------436 378 5, 342 472 Is...nt of am ... I disposed of... ------Field...... 9,478 6,833 735 10,576 Pending Juno 30: 36 3 335 510013 2 ROD _ ...... 25 Cones.__ ...... _ ------: 163:184 ------841 Pending July I...... 2,070 427 Amount In dispute.... ------d dollar.- 044 200, I Romerviel ------_------3,326 11: 039"8 1,222599 706 Revised. 1 Total.-___ ---- 319 442 821 .133 Includ 191 transferred conses. Revised to give ffftt to here. in reporting mftd.. Nordocket.d- am not included. not agree with the,rumber of can in which decisions were rendered bi divisionsthese consu~inogingclerth..,,yh..rd4 d....to1.sonhl:ment by P. 1,93,4 3 1,457 1 271 675 The number of cases disposed of don the number o , Go... reling.lune . 96930 .out, 13 ,.In I be an for retrial, mamputa ign of tax, etc. In the Court of Claims of 11, Go,- -iiii iii :no 15 dP. rtlyt~r..dp~rtly.l.,~Itth-,Gto,,,erent., P. v In the district courts 405 decisions0, spoutswar. -d-d, of which 215 -1. for an rtly for and partly against I - V.Inm.nt. For decisions by the courts and Supreme Court am is 0 vnnnomt, 145 g.lnlt the Government, 1,PC~cActsidingsS Instituted under the foll.wing section or chapters of Be runthrul, C : W. 77 (railroad morganical the nk. (arran~r)ments as to do,,.,and 1.1.1so)X, (X1,0,1r1:r1,1xmr11nso a- unsectreonl)rn). which involve tax claim ty I,in, rets.rox, and other rights and"is)"'interestsXof IM"ni'MmeSt.a" a ...' din,Banking'w o,7,1.i,1.UjV:bsnc~;::..dhg.1to. .nd Fed-I or State mc.mrship m_ It. Stam. in; I'l-covertings 1-1111"T to CoToratem dtZlujiorn, insolvent banks, maighm. is to, the benefit, I of creditors, or a ministral an o estates of decedents, 11-mr- 0 the United Sut. which mnol,. Note.-Includes, am handled at national and regional Ionia

128 129 ANNUAL REPORT ag STATISTICAL TABLES ANNUAL REPORT ar STATISTICAL TABLES Table 27-0bligations incurred by the Internal Revenue Service linthmutand-fdWI-1 Table 27-0bligationce Inewood by the Internal Revenue Srvice--Contincred [in thousands of dollars] Pa.- I Total Imn Travel Equipment Other Internal revenue office, distrIcL or region and 6.no fit, let-'-[ revenue office, district, Total compensation Tr.YW Equipurnint Other 0 1 (2) (3) (4) (5) , region and boreal. (1) (2) (3) (4) A. National Offics and regional total$ (including district directors' offices and service 'ent..) D. District directura' office, and -"I- swent.1-Cmunmed Total Internal R.,.... Sonic...... 597,337 522. 4a2 17,494 16,724 -40,687 Midwrost: Abend...... Nationno I Offico_...... ------7 211121 11 905 21 376 Ch* 323 85 3 696 1 ...... 035 19:179 37 rVIAllimfil ...... S 7 , 718 3:3312 Do."MtWi_------...... ------...... 241 120 4 96 ...... ------7 4"971 7f,..... :6 3 762 1 521 F...... _ ... (123 746 169 1 DO Mid-All.nfi ...... _ : 925 2 ? 6 386 313 I So"theast_ ------_------_ ...... 6517 611 67 2:902 MiI..7a;;::: '1:190 lag A1 Untral ..... _ ...... I ...... 560 558 946 Oman&------_----_--_-- ...... _ ...... 6 546 90 17 11 7 757 2 3S'.'., 198 1 1'69I Midwest ...... ------_------...... 75 391 901 21:9 5 S t. Lou[------_------_-- 2:994a 96 is 504 117 93 Southwas ...... ------.....": ..... ------54:122 385 2: SL Paul ------6, 406 887 275 23 271 Wast-, __ ...... 76 561 6949 0059625 12, 352 155 3: 59468 Springfield ------_..... 96 171592215 2 1611 14 142 ...... 87: 41 0 35 11 ...... 54 2I ...... 5: '1 '4, 205 Ralifimal counsel ...___ 255 264 834 57 S .. Mid- Seni. Cent...... 5112 5 42 26 R i.milicIP.ItIn ------::: ...... :::::::: ...... th."t: , 420 20 363 6" ...... 4,649 4,327 205 92 111hu uw Oc of International Operations __~ _::: 102: A on 91.901 99 1 14 124 directors' offivis and S.nl. ::: :::: 1030 337 8. Regional commissioners' offices (excluding district Ch. ---_-----_-----_--- ...... 338 22 333 cents.) 0.1r. 1, 119 1:903 60 3 53 D.mr.i::------:: :: 796 9,147 347 22 270 Nurth-Attimlic ...... ------_ ...... 11:489lo a 21730, 13152 671610 Little R.i:'::::::: ------"4:406 074 1142 29 lag is 109j '369 ...... 52,996 2 590 Mid-Atlantic ------74 1,134 New Orl . res 27 So th..t...... _ ...... 10 439 654 577 1 Oklahoma City.,.. ------553 5,251 147" 16 Hi01 10:253 97 325 287 7 570 ------4: 715 4 416 Ce tr.1 ...... ------112 W ., Wichita-, lag 54 157 Midwestn ...... 8 562 7' 651 8 4 482 24:.111 159 68 12' southwest...... 5:700 5:0793 23105 6 451 to. 2: 669 53 87 276 ------...... 8,087 66 3 791 329337 Western...... ------.... - 952 A ---- ...... --- 744 67 15 36 C. R.gkm.I,*saupdi,Wbut.d. H.10 1,539 ,417, 11 Homolulu_ ...... :_ ... 1:7411 5, 598 92 19 48 North-Atlantic...... __ ------5935 219 3 54 ph n ------...... 7 604 40 33 Mid-Afl-tic ...... 97 714 141 22 4 8111 490 131 I'D60 ...... ::: _ ...... 625 28"1 269 715 :::: 3: 051 1I2 949 95 Sm h .ast _ ...... 385 56 Portland --- 11:963 13~ 94 C.nt.i1 -, ...... 64 6 204 Reno-...... ------...... --- 41: 601 115 106 ...... 899 582 270 16 3" 12 Midwest...... '123 Sel l Lk. City 87 66 142 Southwast._ ...... _ ---- 302 242 1 San Franclu...... 1 939 1 789 48 557 Western ...... ------75 2648 348 305 ------71 Seafth,__ 15:0266 14:060 344 58 43 ------_------325 1 5,935 174 75 Wea Train ng Cent ...... --- 16 200 D. District directors' Or-, and nivin mitars ft-f - I,. Untr' ...... -1 ...... _ 166 159 3 2 ------...... 6,496 5, 245 1 17 2762 14~,th-Athmtl,: Albany_ ...... 1:3 U7 11 113 543 108 11 as - Includes 1:735 'Open 12.3 million financed -ipqbmawmm~ Auvost------_ ...... 21471 24339 2823' not include 127,000 socialfromtranf.', to Gn..l Services 6Staten ...... Administration. iS1:7IN 1:41 1 16 134 31 453 rwklyn..-. ---- _ ...... 22 ll"17.1 ...... 9 034 8 5828 249 Burlington ...... ------' 972 92 "1211 136 33 155 Table 28-0blistations Incurred by Hartford ..... Internal liev"ut Service, by appropriation and activity M.nhatt n .- . - ...... 26:1 2'12' 25: 3' 9'3' 173 35 6131 74 196 44 68 [in Pura outh ...... ___ ...... :068 39 th.usandsW doll..] Pr.idPo. '.n...... 12: 2168 12 54 11 9 rho Rica._...... 671 Morth-Atinfic Service Center ... 5,9815,1 5,1 02 225 ------16' Total Pmnn,l compensationR, cU,: Other Mid-At ~ 143 21 121 Appmpriation by Activity and ban. to a.Ill.. 14 07 14 2"26 1.1 108 224 151 342 Newark ..... _...... 070 269 291 262 Philadelphia_P ----- .... 14,629 8 390 IRS I164 1964 1965 1964 19&5 ------8, 750 5 1964 INS ---- 6,499 :977 338 laI (A R!2h..'! ----_------3 T.R.I.Isibisfims------...... wi=-_ ...... 1,697 60 41 597,387 479, OM tic Somica Center ...... ------8,263 1:17'07 37819 IA -!19 - -522,490 70, 63 7 :::74,8-9:71. Appropriated funds. bobil ------South.M, t: 543, 422 595,047 4711. 154 " 714fill, 2:6 39 IY 520,607 f70,32B 74,440 At onto...... 6 Sa int.Totaland...... atpours.: - - 4 : sI's 3 149 28 Btingh...... '17 C.W his._ ...... 2: 3 2,7DI 104 70 15,091 16,511 12,S76 14,t28 6 74, 6, 273 270 59 141 - ge0'2,5151 2. U3 G-J. '.b ...... _ ...... 5! Eximstj di - ,., klo ...... --- 2,572 2:8371 17 6.797 7,507 1 30 12'353 34 2717] Intstreal.milt.0" "W" 67J94 N knmril l------8,304 9. 004 929 134 1:3140375SO 11.' 27113 i .hvlli ...... ---- _ ...... 5:506 5, 0" 189 45 ::: ...... 7,711 7,013 33 71 5V R... mj.Mossup ntint and ismensing: Cannot.Southeast Sorrice Center _ ...... let------_------_-- 134,761 151,339 105.079 117,823 Cincinnati ...... 171 779 7 406 200 4 29,622 33.516 ------2:277 11:605 311 1'24 23! D istricts' normal 9445:, Cl., land------_ ...... 157 448 334 73 X StatisticalService centerreport,imtomatodop.-ti"'-'op. 107~ 61:~M 21WI .71 :'114" 11 : 1,2: 590. 1 29: Detroit--- 14 235 57 AS_ --_------41 2.376 India IHr...... : _ : _ ...... 18:056 7:624 14lj~ ------: --- 4 , 640 5, 728 3.897 ...... 2:5 08D 24 710 2111 495 I-i.." 33 comp iler.: _L14-0 ---Lm Par kers b ur g ------.... 999 :778 & Total...... ------...... Unt. ~.t~?l !,am AS _:...... ------72 66 ...... 398,630 427,197 ! 7 M ...... 5'in ------96 28" 360,499 398,656 38,131 38.541 C. fir. far Audft.c.fax returns.. ------...... 81 922 187,056 2 Sao fixtathis at and of table------* ------CWhic n .1 d.lirqu..t mcumt. and WO;j 15.225 To.A, fraudhot dad Special in, ------570 `0':10 549 93.368 201 045.,. 21 1101:45 NIS 31, 25 057 2j"0"901'.02"' 33:12,39 1. 232 206 Taxpayer amf='. W' '.`bP."1.'y------'it------34,70 2 37 53 27:579 980, 661 1 793 1 462 1 17 387 585 075 1:238 RuNtop7.3teamical planning, and spaial technical Semipro ...... 8,590 20.823 releft ------...... ------9,265 g*3 198 787 067 13. 199 4, 630 11 250 543 949 '087 Re imbursements, total. ------...... 2,340 -911 11113 -3.1 4. -Aralmate Shown do col include appropriation transfer to GSA for real of Nnca, imscrunting to S1.493,00) to 1964: $27,000 in IM.

130 131 ANNUAL REPORT as STATISTICAL TABLES

Table 29-Cluantify and Cost Statistics for Printing

1964 1965 INDEX A Charts, trend, 95 Criminal prosecution: Quantity (thousands) Quantity (thousands) 4 Cost Cost Act,: Chief Counsel, Office of: Analysis of cases, 30 Pkge. thousand Cussof -,k (thousand AnaJysis of cases flowing through, 34 Cases, disposal of, 30 It .. Pa,kagar, d.1turst oIt dollars) Revenut-1964,85 r '.at. I In Excise Tax Reduction Act-1965, Cases involving criminal praxsecu- Results of, 30 45, 46 tion, 30 Supmmc Court decision in, 89, 90 (1) (2) (3) (4) (5) (6) Interest Equalization Ttu,, Act- Disposal of cases by, 44, 127-129 Currcnt research program, 54 Reorganization, 63 9,654 ------9,436 1964, 46 Total ------Civil litigation, 43 1,521 Administrative budget receipts, 10 D packagnof tax raturnsand Instructlormfor ma)or mailint, to ta,py.r,toturl 441,489 72,359 1,258 464,720 76,574 Advisory gmup, 79 Claims. (See specific item) is,' 7.~ 2.1 Data center, 13 ------...... Alcohol and tobacco tax: Collection litigation legal services, 35 S. p,555 410 195,640 23e, 205 546 Delinquent accounts: e2 Form I O ,Sch.du t.a111 , I 1 0 and inst-tion 32 *ges 214191 Authorization Collectionsi Form . and imt I n 167: 442589 144 200 of Industry Opera- Disposals, 32 1 inat bor, as 33 '3IS: NO 3, '26064 Alcohol taxes, 9, 106, 113, 114, 116, as 4 J F*moX III1 1 11 ulasas. B. an ,o an 1729 tions, 40, 41 Statistics on, 33, 34 Fonn 358 : OM 120, 121 ul."Is't D0 For andn'-In ru tig.r.)4-!4 ~ ---- 56,123 1,225 Charts on, 41 Delinquent returns and delinquency .6 For. 112 1h " 54 , 124 19 ,500 A32Ids 41,6105:I M 20, gas3 . 171 1....P.,Pa.C 7 to )I , in m onsan r umOle , Chemical analysis and research 38 Corporation income taxes, 9, 105, " , , mvest,gations: E .?110 .. I Itr.'s P b 393 (For. 018.. 41. 4,531 107 113, 114, 116 ------71,668 4,480 110 67,916 Committee, labeling and advert:.-ng 28 "1 as ------Disability and old-age insurance, 9, Additional tax from, 28, 34 1 010 1, 111:171 4 .12 regulations, 40 Analysis of, 28, 29 Oth.r tax "turns, jrxmr,tjr,,pbIk.u,. forms, 81W Pamphlets- _------3. 586 105, 113, 114 ... ------_------513 6112 2~ 3' Court decisions, 90, 92 Statistics on, 34 Administnativ forms an d p m ets- . ------9 '1148 544 E."'.N inti ng ------: ' :..._ Enforcement activity, 36 Employment taxes, 9, 105, 113, 114, Fi,kd - 976.7980' '07"7 2 52: 03'101 r-7 Determination letters: as stamps------: ------Establishments: 116 Estate and gift taxes, 9, 106, 113, Employee benefit plans, 6 Inspection of, 42 Exempt organizations, 6 , It.kd. Qualified, 42, 120 114, 116 Industry circulaurs, 88 Excise taxes, 9, 106, 113 114 116 Pension trust plans, 6 Individual income taxes, ~, 105: 113, Self-employed persons benefit plans, Label activity, 41, 121 6 Operation Dry-up, 38 116 Regulations, 86 Old-age and disability insurance, 9, Statisticl on, 6 105, 113, 114, 116 Disability insurance tax": Seizures and amsts, 38 Collections, 9, 105, 113, 114 Simplified reporting, 40 Other, 9, 112, 113, 115 116 Railroad retirement, 9: 105, 113, Refunds, 11, 118 Super~ision on-pn,mises, 41 Disciplinary actions, 78 Statistics on, 9, 38, 106-108, 113, 114 Stamp taxes, 107, 108, 113, 114 Dividends and interest, 18, 55 114, 120, 121 Documents, 84 Announcements, 87 Statistics on, 9, 105, 113, 114 Annual technical review institute, 70 Tobacco taxes, 9, 108, 113, 114, 116, Appeals: 121 E Appellate Division, 25 Unemployment insurance, 9, 105, Employee benefit plans, determinations Charts on, 27, 99 113, 114 letters on, 6 Processing of, 27 Withholding taxes, 9, 105, 113, 114 Employment taxes: Statistics on, 27, 28, 126, 127 Commissioner: Additional assessnients -suiting Appendix, 82 Contest of suits, 89, 92 from examination, 22 Assessments, additional. (See Taxtes) Commissioncra; of Internal Revenue, Appellate Division processing of, 27 Assistance: .v. Claims for mfunds, 24 Foreign tax, 48 Compromise, offers in, 35 Collections, 9. 105, 113, 114, 116 Taxpayers, 4 Conference: Refunds of, 11, 118 Overseas, 50 P,x,ceclurt,a, 25 Returns: Legislative, 45 Tax administration, 49 Cooperation, Fcdcral-Statc, 36 Examined, 23 Attitude gamey, 65 Filed, 12, 119 Automatic data processing: Conventions, tax (See Tax c.nven. tions) Enfortement activities: Benefits to taxpayers, 15 Additional tax from, 33 Data center, 13 Coordination and cooperation with Identification of taospayers, 15 bureaus and agencies, 77 Alcohol and tobacco tax crifor-ce. Savings on ADP Corporation income taxes: ment, 36 Equipment, 61 Additional Appeals, 25 Service centers, 13 autsesaments, 34 Claims for refunds, 24 Claims disallowed, 34 Training, 68 Collections, 9, 105, 113, 114, 116 Delinquent accounts, 32 Vital Statistics, 19 Refunds, 11, 118 Delinquent retums, 28 Returns; B Examination program, 21 Examined, 23 Firearms program, 39 Bricis, tax, 69 Filed, 12, 119 Mathematical verification, 20 Budget, administrative receipts, 10 Statistics on, 9, 105, 113, 114, 116 Offers in compromise, 35 Bulletin, Internal Revenue, 6, 87 Court (a) : Tax fraud investigations, 29 Business Master File, 15 Circuit courts of appeals, 92 Estate tax: Of Claims, 4 4, 92 Additional assessments, 33 C Supreme, of the United States, 89 Claims for refunds, 24 Career prograrns, 62 The Tax, of the United States, 4-4 Collections, 9, 106, 113, 114, 116 Chart, organizational, ~iv United States District, 44 Refunds of 11, 118

133 132 IN"DEX 1"EX

Estate tax-Continued Gift taxes: J P-nnel-Continued Returns: Additional assessments, 34 Handicapped, use of, 67 R Claim for refunds, 24 joint Committee on Internal Revenue Incentive awards, 65 Railroad retirement taxes: Tape library, 61 Examined, 23 Taxation, 28 119 Collections, 9, 106, 113, 1114, 116 Investigations, 78 Collections, 9, 105, 113, 114 Tax Filed, 12, program, 78 briefs, 69 Estimated tax, declarations of: Refunds of, It, 118 joint integrity Nondiscrimination program, 66 Refunds of, 11 Tax conventions, 49 filed, 12, 119 Recruitment, 65 Returns filed, 12 Corporation, 12 Returns L Tax Court, The (See also Appeals) individual, 12 Staffing =it redeployment, 63-44 Receipt and processing of returns, 12 Disposals of cases, 28, 128 Laboratories: Receipts Processed by service centers, 19 H 38-39 Statistics on, 66 (See Collections) Tax laws, interpretations and com- Research, Utilization of manpower, Records holdings, 73 Examination, additional assessinents Honors, President Johnson's pmenta- Testing, 39, 42 63 munication of, 2 from, 34 Planning activities, 53-59 Recruitment, 65 Tax (a) ; tions, iii Legal activities, 43-47 Refunds: Examination program: House Rulings, 45 Legislative activities, 43-47 Principal officers of Internal Revenue Additional: Service, xviii-i Claim for, 24 Claims for refund, 24 Litigation, appeals and civil, results From delinquent returns secured, Classification and selection of re- I Programs: Duplicate, 18 34 of, 43-44 Career, 68 Excessive 11 turns, 21 Long-range planning, 53, 54 prepayments, From enforcement, 34 Ovotissessinents of tax, 25 Incentive awards program, 65 Equal employment opportunity, 66 Statistics on, 11, 118 From examination, 34 Income tax(o) : Executive selection Regulations: Returns examined, number of 22 M and develop- From mathematical verification, Tax recommended, additional: 22 .Additional, from enforcement, 33 mcnt, 64 Alcohol and tobacco taxes, 86 34 Excise taxes: All returns, 9, 105, 113, 114, 116 Major management improrvernents, 60 Foreign tax assistance, 48 Amended, 86 From National Identity File, 34 Additional assessments 34 Corporation, 9, 105, 113, 114, 116 Management activities, 60-79 Incentive awtirds, 65 Excise tax, 4-5 Alcohol, 9, 106, 113, 114, 116, 120, Appellate Division pr;cssing of, 28 Individual, 9, 105, 113, 114, 116 Management improwment program, joint integrity, 78 Hearings on, 7 121 Collections, 9, 106, 113, 114, 116 Processing of protesited cuts, 27 60 Legislative advisory, 43 New, 7 Corporation income, 9, 105, 113, Refunds of, 11, 118 Indentity File, National, 18 Maps of Internal Revenue regions Nondiscrimination, 66-67 Releases, News and Technical, 3 114, 116 Indictments, 31 and districts, xii President's cost Returns filed, 12, 119 reduction, 60 Reorganizations: Disability insurance I 9 I 105 I 113, 114 Exempt organizations, detomination Individual income taxes: Mathematical verification: Reports, 63 Employment, 9, 105, assessinents, 33 Chief Counsel, 63 113, 1 14, 116 letters on, 6 Additional Additional tax from, xiii, 20-21 Res~ch, 54 Consolidation of New York it Estate, 9, 106, 113. 114I 116 Appellate Division processing of, 27 Statistics on, 21 Special identification, 50 an North-East Regions 63 Excise, 9, 106, 113, 114, 116 F Claim for refunds, 24 Microfilm reader-printer, ii Tax return forms, 4 Gasoline 113, 114, 116 Technical Divisions, ~3 and motor fuels, 9, log, Collections, 9, 105, Microfilm, me of, 60-61 Taxpayer assistance, 4 113, 115 Facilities management, Mathematical verification of, 20 Reports, General Accounting Office, 78 Communicsitions 73 . Taxpayer compliance measurement, Gift, 9, 106, 113, 114, 116 program, Refunds of, 11, 118 N 55 Reports program, 63 Property and supply management Individual income, 9, 105, 113, 114, Returns: Taxpayer publications, 2 Requests: .116 program, 73 examination National Computer Center, 58, 61 Classification and of, Teaching taxes, 4 Extension for filing, 12 Old-age insurance, 9, Records and paperwork, 73 21 National Identity File, 18 105, 113, 114, Space, 70 Non_ADP Master File processing, 13 Protested cases, statistics on, 27, 28 Technical advice, 5 116 Filed, 12, 119 Public information program: Revenue rulings, analysis of, 5 Statistics on, 73 centers, 13 Noncompliance studio, 54-55 Other, 9, 112, 113, 115, 116 Processed in service program, xiv, 66-67 Films, radio, and television, 3 Research program, 54 Travel Costs, 73 Individual Maswr File, 18 Nondiscrimination Railxohd retirement, 9, 105, 113, 114 News releases, 3 Resoufres utilization, 63 Fedcral-State cooperation, 36 Information returns, number received, Stamp, 107, 108, 113, 114 File: 0 Other, 3 Returns filed: 18 Publications, taxpayer; Tobacco, 9, 108, 113, 114, 116, 121 Business Matter File, 19 Classification =it selection of, 21 Institute, annual technical review, 70 Obligations incumd, Internal Reve- Alcohol and Tobacco, Summary Unemployment, 9, 105, 113, 114 File, 18, 19 Decrease in, 12 Individual Master Inspection activities: nue Sovict, 74, 130-131 Statistics, 82 Withholding,-9, 105, 113, 114 National Identity File, 18 Examination of, Internal audit, 76 Occupational taxes: Farmer's Tax Guide, 82 22 Taxpayer assistance program, 4 Field offices, reduction of, 63 Internal security, 77 Collections, 106, 107, 112, 113, 114, Number examined, 12 Firearmi program, 39, 45 Highlights of 1964 Tax Changes, 83 Taxpayer aisistor positions, 4 Investigations, 78 115 Highway and Motor Fuel Tax Processed in service centers, 15 Taxpayer compliance Fiscal management: Program, Number of stamps issued by class measurement I Joint Integrity 78 Pairiphlets, 83 Projections, 54 program, 55 Cost of operations, 74 of tax, 122-125 Statistics on, 78 Hov; to Apply for Exemption for Statistics on, 12, 119 Statistics on, 74, 130, 131 Intelligence Division: Returns filed, 12 Taxpayer publications. (See Publi. Foreign tax assistance staff, 48 Your Organization, 83 Verification, 20 cations) Statistics on, 29 Offcrs in compromise, 35 Iticome Averaging, 83 Revenue rulings and Foreign tax officials, assistance to, 49 29 Officers, principal, Internal Revenue procedures: Tax mlings: Tax fraud investigations, Income Tax Deductions for Analysis Forms: Interest allowed ori refunds, I I Service, xviii-xxi U.S. of, 6 Request for, 5 Government Civilian Employees Published, 6, Cost of printing, 132 Interest equalization. tax, 46 Old-age insurance taxes: 86 Statistics on, 5 Stationed Abroad, 84 New: Internal technical development and Collections, 9, 105, 113, 114 Teaching taxes program, 4 3903, 85 Information Reporting Require- S guidance, 69 Refunds of, 11, 118 Technical information releases, 3 ments of Sponson of Co,,test, 3920, 85 International Operations: Operation Dry-up, 38 or Self-employed persons benefit plans, Tobacco (tax(es) planning, short-range, 54 3953, 85 Activities of, 48 Operational Sporting Events, 83 determination letters on, 6 Arrests, 38 Miscellaneous publications 3954, 85 Foreign posts of, 50 Organizational planning, 55-56 and doc- Service centers, 13 Collection, 9, 108, 113, 114, 116, 3964, 85 Income growth, statistics on, 51 Other collections, 9, 112, 113 uments, 84 Short-range operational planning, 54 - Overassessments, 25 121 3969,85 Withheld taxes, 52 Retirement Plans for Sdf-cmployed Stamp taxes, statistics of, 122 Overaxsesaments reported to joint Refunds of, I I 3973,85 Interpretation and communication of Individuals, 84 Statistical reporting, 56 Committee, 28 RResolmostfiledrinli2nal action, 31 Revised, 5 tax lam to taxpayers, 2 Sales and Other Dispositions of De. Statistics, comparative highlights, xii Forms =it forms letters, 73 Invutigatiow: preciable Property, P 83 Statistics of income m1caso, 94 Seizures, 38 Tax =turn program, 4 Delinquency, 28--29 Tax Benefits for Older Americans, Summary, xi Statistics on, 9, 11, 31, 38, 108, 113, Fraud investigations, tax, 29 Disciplinary actions, 78 Pension trust plans, 6 83 Supervision of the alcohol and tobacco 114, 116, 121 Personnel, 78 Personnel: Tax Guide for Small Business, 82 industries, 40 Tort claims, 44 Teaching G Prcisecutions retninniended, 30-31 Attitude surveys, 65 Taxes, 82 Supreme Court decisions t Training: 78 Chief Counsel, 47 Tobacco Tax Gasoline taxes: Statistics on, 29, Guide, 83 Civil cases, 89 ADP program, 68 29-30 Employce-managerient relations, 64 U.S. Tax Guide for Aliens, Collections, 109, 113, 115 Tax fraud, 84 Criminal cases, 90 Centers, 68 Wagering and coin-operated gaining Equal employment program, 66 Your Federal Income Tax, Refund., I I 82 Other court actions, 92 Experimental center, 68 Accounting Office Reports, 78 devices, 29 Executive selection program, 64 Puerto Rico, 120 General Systems development, 58 Foreign tax axiistance, 49

134 135 INDEX

Training-Continued Operational, 68 U w Unemployment imurance taxes: State tax assistance, 36 Collections, 9, 105, 113, 114 Wagering tax cases, results of criminal Supervisory and management, 67 Lfuml. of, It, I 18 Treasury Decisions, 85 action, 31 Treasury-Internal Revenue Service Returns filed, 12, 119 Wines, taxes collected, 10,Y, 120, 121 Committee on Withholding taxes, by employer, 9, Statistics, 57 V Trend charts, 96 Verification, mathematical, result of, 105, 113, 114 Trust fund transfers, statistics on, I I 18,20 Work flow in the Service and courts, 34

136 us. .-- --. M.: - -~-