Description of document: Internal (IRS) Historical Study: IRS Historical Fact Book: A Chronology 1646-1992

Requested date: 19-July-2011

Released date: 27-January-2012

Posted date: 13-February-2012

Source of document: IRS FOIA Request HQ FOIA Stop 211 2385 Chamblee Tucker Road Chamblee, GA 30341

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Y- @storica/ qact Book: dchronology

0 1646-1992

. .I IRS CHIEF COUNSEL 1 innray / JAN 61997

IRS HISrORICAL STIJDIES

Published as part of a continuing series of historical studies to preserve and disseminate the history of the and administration in the . Department of the Treasury Internal Revenue Service contents

5 Preface 7 Introduction

11 1646-1799 Reluctance Turns To Reality: The Young Nation Establishes Its Own System of Taxation

21 1800-1859 To Tax or Not To Tax: Meeting the Needs of Expansion

29 1860-1865 Rebellion and War: Creative Financing Creates Lasting Legacies

39 1866-1872 Reconstruction and Reuniting: Congress Reconsiders the

51 1873-1885 Years of Conso1idation:Alcohol and Tobacco Remain Revenue Mainstays

65 1886-1895 Revenue Experimentation: Regulatory , Expanding Duties, and Supreme Court Rulings

73 i896-1909 The Rebirth of the Income Tax: Congress Proposes a Constitutional Amendment

83 1910-1918 Revenue Expansion: A Constitutional Amendment and Provide the Push

95 1919-1925 , Appeals ,and Decentralization: The Bureau Faces an Increasingly Complex System of Taxation

111 1926-1934 Depression and Organized Crime: Tax Rates and Fall

125 1935-1941 Social Security and Firearms Control: New Responsibilities for the

3 135 1942-1949 World War I1 and the Income Tax: A Marriage of Convenience That Survived

147 1950-1953 Investigation and Turmoil: The Depoliticization of Tax Collection

159 1954-1959 Rebuilding a Reputation: “Service” Becomes More Than Just a Name

169 1960-1964 Computerization and International Aid: The IRS Gears up to Support the Global Reach of the United States

181 1965-1969 ADP, IMF, BMF, FTD, DDES, DIF, IDRS Tax Collection Becomes Alphabet Soup

193 1970-1973 Economic Stabilization and Union Negotiations: The IRS Adapts to New Demands

203 1974-1979 Outreach and Automation: The Rise of Service and the Demise of TAS

215 1980-1986 and Processing Nightmares: The 1RS Struggles with the Increasing Pace of Change

221 1987-1 992 Focus on Quality and Taxpayer Service: Putting the “Service” Back Into the IRS

239 Appendix 1: Commissioners of Internal Revenue 242 Appendix 2: Chief Counsels of the Revenue Service 245 Appendix 3 Total Internal Revenue Collections by Year 248 Appendix 4 Personnel 25 1 Appendix 5: Federal Income Tax Rates and Exemptions 255 Subject Index 269 Date Index The approach of April 15 each year research into the fascinating subject brings a flood of questions into the of tax administration as a defining IRS. Questions from about aspect of our history. how to fill out their tax forms. Ques- Also, it must be noted that while tions from citizens on why we pay many topics are covered in this vol- taxes and what the money is used for. ume, many are not This is the first in Questions from the media on various what will be a continuously updated, aspects of our tax system to write expanded and improved “Fact Book.” about during this period of height- With this in mind, users of this work ened interest. And on and on. are asked to call or write the IRS His- This volume is intended to pro- tory and Archival Services Program vide IRS employees and the public with additions and corrections for the with information on the evolution of next edition. our tax system, from the colonial era To make this work as helpful as to the present. Presented in a chrono- possible, two indexes are included. logical format, this book will be a The first is a subject index to direct basic reference source to answer the user to topics of interest. The questions about when things hap- second is a date index, which can be pened. The “why” of most events in used by those wanting to know what the history of tax administration will happened on “this day in history” in be left to future publications of the the IRS. The Introduction provides IRS History and Archival Services a brief historical overview of tax Program. administration in the United States. The historic role of taxation in the formation and growth of the United States is a vast topic that encompasses areas ranging from to tax administration to processing technolo- &amShelley L. Davis gies to personnel practices and a myr- iad of other subjects. This volume IRS Historian does not attempt to be comprehen- sive. Rather, the intent is to provide the user with a handy reference tool to respond to basic questions. Many entries may appear incom- plete or confusing. Rather than omitting such entries, they are included because they provide some insight into the evolution of our tax system. Sources on the history of tax- ation are somewhat scarce, making research in this field quite challeng- ing. It is my hope that this volume will be a first step in expanding T 7 .

The history of tax administration is at the expense of their wealthier closely intertwined with the fellow citizens living in urban areas growth and evolution of the United such as and Philadel- States. Colonial protests against phia. Trouble arose almost imme- British policies, especially tax poli- diately as the government struggled cies, helped spur the revolutionary to enforce chis tax. movement. The Boston Tea Party Six months after passage of this is perhaps the best known event excise tax, reports of a group of men preceding the Revolutionary War disguised in women’s clothing which points to the growing radi- attacking a revenue collector in calism with respect to tax policies. western reached After gaining independence, the Washington. Protests culminated in Continental Congress was wary of mid-1794 with the Whiskey Rebel- the power of taxation. As a result, lion, the first major challenge to the the Articles of Confederation did not legitimacy of the young government. grant the new national government So concerned at this event, Presi- the authority to tax its citizens. dent Washington called out the mili- Money to finance federal govern- tia in what became an historic ment activities was obtained by demonstration of his resolve to sus- requesting donations from the states. tain the authority of the nation and By the time of the Constitutional enforce its revenue laws. Convention ten years later, it was Upon his election to the Presi- obvious that the government simply dency, Thomas Jefferson abolished could not be effective without at least all internal taxes. Once again, the some power to tax. As a result, Article country supported itself through 1, Section 8 of the Constitution gave land sales and revenues. the federal government the power to The generated a need “lay and collect taxes... to pay the for additional revenues, resulting debts...” of the young country. It also in the return of internal excise specified that “duties and imposts taxes for a short period. After the , shall be uniform throughout the end of the war, the nation once United States.” again abolished all internal taxes. During the early years of the It was not until the economic nation, most federal revenues were strains of the Civil War stretched raised through and customs the existing financial structure that duties and land sales. The first resort the nation once again resorted to to internal taxation came in 1791 with internal taxation. In addition to the passage of a revenue act which restoring many of the excise taxes placed an excise tax on distilled spir- from previous years, the Civil War its and tobacco products. brought the creation of the Office Because most distilling activity of the Commissioner of Internal was centered in rural areas, many Revenue in the Treasury Depart- farmers considered this excise tax ment and along with it, the nation’s an unfair burden placed upon them first income tax. The income tax of the Civil War payment of income taxes in the did not affect many citizens, nor years preceding World War I1 was did it raise much revenue. The a sign of affluence. Some citizens most significant and long-term proudly reported that they had impact of this new revenue mea- paid their taxes as evidence of sure was that it created a precedent their financial success. for future income tax measures. World War I1 brought funda- Most of the revenues needed for mental changes to the income tax the Civil War came once again syhem in the United States. from on consumer prod- Although today many taxpayers ucts, primarily alcohol and tobacco. assume that the annual ritual of The income tax expired in 1871. filling out income tax forms has An attempt to revive the income been around since the beginning of tax came in the 1890s with the time, actually it was not until growth of the Populist movement. World War I1 that tax rates reached Although an income tax amend- the average citizen. For example, ment attached to a tariff bill made while just over 350,000 income tax its way through Congress in 1894, returns were filed in 1914, by 194.5 immediate legal challenges the Bureau of Internal Revenue resulted in the Supreme Court was processing 50,000,000 returns declaring the income tax unconsti- annually. tutional in 1895. The court ruled The successful expansion of the that some portions of the income income tax base during the years of tax enacted in 1894 violated the World War 11 was brought about by requirement of Article 1, section 8 several factors. First, national pride of the Constitution requiring all and patriotism were at all time taxes to be apportioned equally high levels and most citizens felt among the states. strongly about helping their gov- It took another 14 years before ernment in whatever manner they another attempt to restore the could. Second, incomes were income tax was made. This effort higher than in prewar years, pro- came in the form of a proposed viding more disposable income and constitutional amendment to a tax bite that did not leave deep resolve the conflicts with the financial scars. Finally, the revenue requirement to apportion internal demands of World War 11 necessi- taxes equally among the states. tated new ways of raising govern- , Four years after it was introduced, ment funds. Wyoming became the 36th state to Before World War 11, income ratify the Sixteenth Amendment to taxes had been payable in quar- the Constitution in 1913, paving terly installments to the local Col- the way for a permanent system of lector’s Office. The expansion of income taxation in the United the tax base during the war years States. found many new taxpayers unpre- Congress quickly enacted an pared to pay a large tax bill- they income , with the first simply had not put aside enough returns (on the new ) money to cover their obligation. due on March 1, 1914. Through This situation led to the first wide- the next 25 years, income tax rates spread use of the “pay-as-you-go” remained at levels that affected system, or withholding, as we only the very wealthy. Essentially, know it today.

8 Following World War 11, the and implementing new techniques American public became accus- and technologies into the tax pro- tomed to the annual ritual of cessing system as well as reempha- income taxes. The filing date was sizing the “service” in the IRS pushed back from March 15 to name. April 15 in the mid-1950s to allow taxpayers more time to fill out the increasingly complicated forms as well as to give the overburdened IRS more time to process the forms. In 1952, after a sefies of politically damaging incidents of and bribery among its own employ- ees, the Bureau of Internal Revenue was reorganized under a plan put forward by President Truman, with the approval of Congress. The reor- ganization decentralized many func- tions to new district offices which replaced the collector’s offices. Civil service directors were appointed to replace the politically appointed col- lectors of the Bureau of Internal Revenue. Not long after, the Bureau was renamed the Internal Revenue Service. By the early 1%Os, the increas- ing demands of processing more and more tax returns led the IRS to develop and implement a series of centralized processing facilities. Within ten years, a total of ten ser- vice centers were scattered around the country, equipped with banks of computer terminals and other data processing equipment to process the growing numbers of tax returns. In the 1980s, the IRS looked to the future to take advantage of the vast technological leaps of the past decade. In 1986, the first electroni- cally filed return was processed, eliminating the need for some tax- payers to mail a paper tax return to a service center. Four years later, electronic filing was available nationwide. The decade of the 1990s will be one of discovering

RELUCTANCETURNS TO REALITY: THEYOUNG NATIONESTABLISHES ITS OWN SYSTEM OF TAXATION

Although born as a nation resisting what were believed to be unfair policies of taxation forced upon the colonies by the British Empire, the United States quickly realized that it needed some centralized way to pay its debts and finance its expanding operations. The years between the birth of the new nation and the dawning of the hinetcenth century saw Congress replace the weak Articles of Confederationwith the more powerful Constitution which provided the authority for the creation of a system of internal taxation. 1646 Some colonists in New Eng- ’ keepers, and other profitably land paid occupation or “faculty” I employed non-real estate owners. taxes as early as this year. This tax is Also in this year, the first excise tax credited as being the ancestor of the 1 on liquor went into effect in Penn- modem income tax Faculty taxes sylvania. were levied on certain occupations by the British empire, requiring 1699 In an attempt to prevent “every laborer, artificer, and handi- colonial competition with the Eng- craftsman” to pay a portion of his lish woolen industry, the Wool Act earnings to the taxing authority. prohibited the exportation of wool Residents of Bay products from the colonies. Colony were subject to taxes on per- sonal and real estates as well as the 1732 The Hat Act required a “returns and gains” of tradesmen, seven-year apprenticeship for all artificers, and handicraftsmen. colonial haunakers and prevented the exportation of hats from one 1649 The principle of taxation coloqy to another. established by the New Plymouth and Massachusetts Bay colonies was 1733 The Molasses Act imposed soon adopted by other colonies. This prohibitive duties on sugar, rum, year, New Haven introduced an act and molasses imported to the taxing the profits of laborers, - colonies from the French, Spanish, people, and others. and Dutch West Indies. This act sought to force the purchase of 1650 passed a faculty British molasses. tax on all ”manual persons and artists” in addition to a general prop- 1736 The British were unable to eny = enforce the Molasses Act as colonial merchants continued to import SEPTEMBER1,1673 The Naviga- sugar, rum, and molasses from other tion Act of 1673 went into effect to islands in the West Indies. collect customs duties in colonial ports. 1750 & 1757 The Iron Acts prohib- i ited the colonial manufacture of 1673 established that finished iron products. taxes were to be assessed according to ”equity in estate and strength,” 1761 Colonial leader James Otis of not only according to the property Massachusetrs argued against the but also in proportion to the “fac- British Writs of Assistance (search ulty” or the “profits and gains” of warrants), claiming that they were a the colonists. violation of the natural righcs of the colonists. In his arguments, Otis 1684 became the only stated that everyone should be “free colony outside to levy from all taxes but what he consents a tax. This year it taxed the profits to in person or by his representa- on traders, merchants, artificers, inn tive,” which later was translated into

12 the rallyhg cry for rebelling colonists on the same day passed the Declara- in the American Revolution. ! tory Act which asserted full authority over the American colonists “in all 1764 The British Parliament areas whatsoever.” enacted the Sugar Act, extending 1 the Molasses Act of 1733, in an JUNE29, 1767 The Townshend attempt to raise money to pay the I Acts, called “England’s most fateful British debt from the French and decision,” established a Board of Indian War. Although the Sugar Act Customs Commissioners in Boston reduced the on molasses from 6 and imposed import duties on glass, pence to 3 pence per gallon, it lead, oil, paints, paper, and tea. increased duties on a wide range of Colonists responded by following a imported goods, including coffee, nonimportation policy which in sugar, and wines. effect served as an embargo against British goods. 1764 The Currency Act required that the sugar tax be paid in specie 1767 An argument against taxation (gold and silver) and prohibited by Parliament appeared in John colonists from issuing money. Dickinson’s “Letters from a Farmer in Pennsylvania.” NOVEMBER1, 1765 The Stamp Act required placing tax stamps 1768 Colonial assemblies urged on virtually every kind of printed opposition to the Townshend Acts. material including newspapers, advertisements, legal documents, JULY19, 1769 The British sloop bills of lading, notes, playing cards, “Liberty” was scuttled while trying and bonds. This was the first direct to enforce royal revenue laws. internal tax imposed on the colonies by the British Parliament. The JANUARY 1770 The new Prime colonists protested this as taxation Minister, Lord Frederick Norton, without representation and an called for repeal of the Townshend infringement on their liberties. Acts, excluding those on tea. Ultimately, the Stamp Act led to the Colonial Stamp Act Congress MARCH5, 1770 Colonists in and a resolution voicing the colo- Boston clashed with British troops nial protest that “taxation without in protests against the Stamp Act representation is tyranny.” The law and its effects, resulting in five affected the most articulate ele- casualties. This event became ments in the colonies, lawyers and known as the “Boston Massacre.” newspapermen, who helped orga- On this same day Parliament nize general protests. repealed the Townshend Acts, but retained the tax on tea. In MARCH18,1766 After vocal response, colonists ended the protests and economic boycotts from embargo against British goods. the colonists left their impact, Parlia- ment repealed the Stamp Act, but 2 JUNE9, 1772 Rhode Island AUGUST25, 1774 A PI - colonists attacked and burned the convention resolved to boycott 2 armed British revenue schooner British goods. 5 “Gaspee” while it attempted to enforce revenue laws in SEPTEMBERS-OCI-OBER 26,1774 Narragansett Bay. The First Continental Congress assembled in Philadelphia with rep- 1773 Parliament passed the Tea resentatives from all colonies except Act which granted the East India . Company a monopoly on the sale of tea to the colonies in an attempt to APRIL1775 Fighting began at Lex- bolster the fin’ances of the ailing ington and Concord. company and to reaffirm its right to tax the colonies. This Act threat- MAY10,1775 The second Conti- ened the economic status of the nental Congress convened in colonial tea merchants and precipi- Philadelphia, appointing George tated the Boston Tea Party. Ship- Washington as Commander-in-Chief ments of tea landed at Charleston, of the Continental Army. but were refused at New York and Philadelphia. NOVEMBER6,1775 The Conti- nental Congress appointed a com- DECEMBER16,1773 A group of mittee to estimate the public debt. about 150 patriots, disguised as Indi- ans and calling themselves the Sons JULY4, 1776 The formal severance of Liberty, protested the Tea Act by of ties with England came when the boarding three British merchant Continental Congress approved the ships and dumping 342 large chests Declaration of Independence. of tea into Boston Harbor. When Britain retaliated with new coercive SEFTEMBER10, 1777 Congress laws, they only widened the split appointed a committee to preparea that eventually led to the American recommendation that the individual Revolution. states commence taxation.

SPRING1774 Parliament passed the SEPTEMBER27,1777 Congress “Intolerable Acts” to punish the resolved that the Treasurer should Massachusetts colonists for the move to York, Pennsylvania. Boston Tea Party. The port of Boston was closed until restitution NOVEMBER15,1777 Congress was made to the East India Com- adopted the Articles of Confedera- pany for the destroyed tea. The tion and submitted them to the quartering of British troops in occu- states for ratification. This first pied dwellings was legalized attempt at self-government by the throughout the colonies and the United States did not give the new colonists were deprived of many Congress the power to levy taxes. chartered rights. Money to finance the government was obtained by making requests for -. -. donations from the states of the held in Philadelphia to revise the Confederation. Articles of Confederation.

1777 Massachusetts authorized a 1787 By the time of the Constitu- faculty tax which was in effect an tional Convention it was apparent ihcome tax. that the new government could not be effective without the power to Q SEPTEMBER19,1778 The Commit- tax. The Constitutional Convention tee on Finance of the Continental included Article 1, Section 8 in the Congress reported the first national new Constitution, stating, “...the budget. Congress shall have the power to lay and collect taxes, duties, imposts, MARCH1,1781 The Articles of and excesses, to pay the debts and Confederation were ratified. provide for the common defense and the general welfare of the United 1782 Citizens at a town meeting in States.” This section also stated that, Worcester, Massachusetts, opposed a “...duties and imposts shall be uni- state liquor tax on the premise that form throughout the United States.” liquor was necessary for the morale The limitations placed on the pow- of farm workers. ers of taxation in the constitution were the result of the colonists’ pre- SEPTEMBER3,1783 The Treaty of vious unpleasant experiences with Paris ended the American Revolu- taxes. tion and Britain recognized Ameri- can independence. MARCH4,1789 The First Congress under the Constitution convened. JANUARY-FEBRUARY1787 Daniel Shay, a destitute Massachusetts APRIL 30, 1789 George Washing- farmer and Revolutionary War vet- ton took the presidential oath at eran, led an uprising of 1,200 men to Federal Hall on Wall Street in New protest the Massachusetts legisla- York City. ture’s failure to enact laws to allow a moratorium from debt collection or JULY4,1789 The first tariff act the use of depreciated paper cur- passed by the new Congress imposed rency as repayment of debts or taxes. duties on “Goods, Wares, and Mer- What became known as Shay’s chandises,” including more than 30 Rebellion failed and confirmed the kinds of commodities.A duty of six judgement of George Washington cents per pound was placed on and other leaden that a stronger imported manufactured tobacco. government than that provided under the Articles of Confederation JULY20,1789 Congress passed the was needed. second revenue measure of the new national government, imposing FEBRUARY21,1787 Congress duties on the tonnage of all shipsor endorsed ’s plan vessels entering the United States. for a constitutional convention to be- - -/ . S JULY 24,1789 The Committee on JANUARY 4,1790 r. The First Federal -* Ways and Means originated as a I Congress met with the major issue -I select committee responsible for i before it being funding the Revolu- 2 economic issues. It was discharged tionary War debt of approximately two months later in favor of the new I $80 million. executive Department of the Trea- I sury under Alexander Hamilton. JANUARY 9,1790 Alexander Hamil- After Hamilton left office, his politi- I ton put forth the first in a series of cal opponents reestablished the I reports on the nation’s economy Committee on Ways and Means. I titled, “Report on Public Credit.“ JULY 31, 1789 The Customs Ser- j MAY5, 1790 A bill came before vice was established, thereby I Congress to place an excise on becoming the oldest agency in the I whiskey and other distilled spirits in federal system. The mission of this the United States. new organization was to raise rev- I enue and protect domestic manufac- I JUNE 21,1790 Congress defeated turers. This date also saw the I the proposed excise bill to levy duties enactment of provisions for collect- on distilled spirits by a vote of 35-23. ing the duties imposed by the rev- I enue acts passed earlier in this I DECEMBER1790 Secretary of the month. Customs districts and posi- Treasury Alexander Hamilton tions for customs collectors were I renewed the request for a whiskey established. I excise in his report on public credit. SEPTEMBER2,1789 The Depart- i 1790 Congress increased tariff ment of the Treasury was estab- rates to raise additional revenue. lished with Alexander Hamilton I Between 1794 and 1816, Congress appointed as the first Secretary of passed some 25 tariff acts. the Treasury. I 1790 The Revenue Marine Service SEPTEMBER11,1789 Tench Coxe was established to aid in the collec- of Pennsylvania assumed the duties tion of revenue. of Assistant to the Secretary of the Treasury. This position was redesig- JANUARY 22,1791 The Pennsylva- nated “Commissioner of the Rev- nia Assembly instructed the state’s enue” in 1792. senaton to oppose a national excise.. The legislature resolved that “any NOVEMBER13,1789 In a letter to proceeding on the part of the United Jean Baptiste LeRoy, Benjamin States tending to the collection of Franklin wrote, “Mais dans ce revenue by means of excise. [is] monde, il n’y a rien d’assure que la established on principles subversive mort et les impou“ (Nothing in life of peace, liberty, and the rights of is certain but death and taxes.) citizens.” 3,1791 MARCH The Revenue Act responsible for collecting the new >E of 1791 became law. This act was excise tax on whiskey. Disguised in : C the first resort to internal taxation in women’s clothes, the attackers cut 3 the United States and it imposed off Johnson’s hair, tarred and feath- excise duties on distilled spirits (the ered him, stole his horse, and left : famed “whiskey tax”) and tobacco him in the forest in a “mortifying products. .The act provided that the and painful situation,” according to a c duties on distilled spirits were to be report by Secretary of the Treasury paid before removing them from Alexander Hamilton. the distillery. The act provided for “supervisors MAY8, 1792 Congress abolished of revenue” whose job was to collect the Office of the Assistant to the levies from both commercial distil- Secretary of the Treasury and leries and-private still owners. The required that “instead thereof there act also Lxlled for the establishment be an officer in the Department of of 14 revenue districts, one in each the Treasury to be... Commissioner state, to be headed by “collectors.” of the Revenue who shall be The collectors could subdivide each charged with superintending the col- district into “surveys of inspection.” lection of other revenues.” The which would function under compensation for the Commissioner “inspectors of revenue.” was set at $1,900 per year. Tench Under this act, the President was Coxe of Pennsylvania assumed these authorized to appoint a supervisor to duties on this day (he had held the each district and as many inspectors position of Assistant to the Secretary to each survey as deemed necessary. of the Treasury). The supervisors worked under the supervision of the Assistant Secre- 1792 Tax receipts totalled $208,943 tary of the Treasury. this fiscal year- less than one-tenth This revenue act was based on a of the amount collected through cus- proposal by Secretary of the Treasury toms duties. The cost of collecting Alexander Hamilton and delegated this money was about 20 percent of the power to “collect” to the Treasury the total revenue collection. Lkpamnent, a power held evcr since. The intent of this act was to provide 1792 The duty on distilled spirits revenues to pay the debts incurred by was reduced and the importation of the federal government’s assumption spirits from foreign ports was prohi- of the states’ debts following the Rev- bited except in casks of 90 or more olutionary’waras well as to avoid the gallons. The intent was to encourage need for a on lands. the manufacture of distilled spirits in the United States and to increase SEPTEMBER .6, 1791 Sixteen men the revenue. assaulted excise collector Robert Johnson in western Pennsylvania. MARCH26,1794 A 15 member Johnson was the tax collector for Ways and Means Committee was Washington and Allegheny counties appointed in the House of Repre- in Pennsylvania and as such, was - sentatives, consisting of one member *I 1:

/ X from each state and chaired by mons. While serving the summons, a h - William Loughton Smith of South group of 30 to 40 men ran towards r Carolina. the federal officers and fired at them 2 from a distance. Neville and Lenox MAY31, 1794 The federal district managed to escape. 6 court in Pennsylvania issued process against 75 distillers in western Penn- JULY 16,1794 At daybreak, about sylvania who had not paid their 50 men armed with and clubs taxes. The processes were not arrest marched to John Neville’s house and warrants, but summonses which demanded his resignation. By the end required the defendants to appear in of the day, Neville had killed five of court to show cause why an arrest the rebels. The Whiskey Rebellion warrant for failure to pay the had begun. In response, Presjdent whiskey tax should not be issued. Washington called out the militia to put down the insurrection in what JUNE5,1794 The Federalists became an historic demonstration of extended the internal revenue sys- the government’s early determination tem through an act taxing carriages, to enforce its revenue laws. sales of certain liquors, the manufac- ture of snuff and refining of sugar, JULY17, 1794 After much debate, and auction sales. This act laid the whiskey tax rebels decided to duties on the issuance of licenses to return to Neville’s home to force retail dealers in wines and in foreign him to resign as inspector of the rev- distilled liquors. enue. About 500 armed men gath- ered at Couch’s Fort under the JUNE9, 1794 Congress passed a leadership of James McFarlane. law requiring auctioneers to rerain After taking five prisoners, the the required duties from the pro- rebels burned Neville’s home and ceeds of sales at auctions, making looted his possessions including his the auctioneer the first withholding wine cellar. agent in the history of our tax sys- tem. The auctioneer was allowed to AUGUST7, 1794 A commission was keep a commission of one percent set up under Attorney General on the duties retained “for his trou- William Bradford to negotiate peace ble in and about the same.” with the whiskey rebels in western Pennsylvania. At the same time, JULY 15,1794 General John President Washington issued a Neville, inspector of the revenue for proclamation calling for an end to the tax survey encompassing west- the insurrection and ordered the ern Pennsylvania, accompanied by governors of Pennsylvania, New Jer- U.S. Marshal David Lenox, sey, , and to attempted to serve summons on muster 13,000 militiamen to be pre- whiskey tax evaders in Allegheny pared to march into Pennsylvania. County. Shortly before noon, the two men arrived at William Miller’s farm to serve Miller with a sum- - - -1 . 18 SEPTEMBER24,1794 Because the revenue. This act provided a 25 n: many of those involved in the penalty of percent of the tax m Whiskey Rebellion refused to sign owed to be paid upon demand of the z m an oath of allegiance to the govern- revenue officer. m ment, Washington ordered the mili- -M U tia to suppress the rebellion. He 1796 The Supreme Court upheld U9 placed the militia under the com- the tax on carriages in the case of mand of the Governor of Virginia Hylton v. United States by deter- and Revolutionary War hero, mining that the tax was not a direct l! Lighthorse Harry Lee. Secretary of tax in the Constitutional sense of the Treasury Alexander Hamilton the term. The taxpayer (Hylton) served as second in command, at his had insisted that the tax was own request. Washington himself unconstitutional because it was a marched with the militia as far as direct tax and not apportioned Bedford, Pennsylvania- the only according to the population as time in American history that a pres- required by the Constitution. ident has taken the field at the head The four Justices agreed with of his army. Alexander Hamilton, counsel for the government, that the direct SEPTEMBER 30,17%-MARCH 3,1795 taxes contemplated by the Consti- A tax on the manufacture of snuff tution included only land and capi- was in effect during this period. tation taxes and possibly a general tax on all personal property. This NOVEMBER13,1794 Known as the was the basis on which all similar Dismal Night, most of the suspects cases were decided by the Supreme in the Whiskey Rebellion were Court until 1895. arrested on this night. Ensuing trials dragged on for a year before all but MARCH3, 1796-JUNE 1,17% two of the defendants were acquit- A tax on snuff mills was in effect ted. Although the two guilty men during this period. were sentenced to hang, President Washington eventually pardoned JULY 6,1797 Stamp taxes as a rev- them. The cost of suppressing the enue measure began this year Whiskey Rebellion to the federal through the passage of the Stamp government was $1.5 million. Act which imposed duties on legal transactions, including a duty on JANUARY 31,1795 Alexander receipts for legacies and probates of Hamilton resigned as Secretary of wills. This was also the first step in the Treasury. the development of a federal inher- itance tax. MAY28,1796 Congress passed an act continuing the tax on carriages DECEMBER15,1797 Implementation and providing that these duties were of the stamp taxes imposed by the to be collected and accounted for by act of July 1797 was postponed for and under the immediate direction six months. of the supervisors and inspectors of - - . c 19 lands, and slaves between the ages of 12 and 50. The tax on houses was pro- gressive. The tax on slaves was 50 cents. The tax on lands was assessed on an evaluation of each lot at a rate high enough to raise the two million dollars.

JULY16, 1798 Collectors of internal revenue were officially authorized by an act this date. The collectprs were appointed by and subordinate to the supervisors. They were fiscal agents and did not have powers associated with collectors in later years.

MARCH1799 An auctioneer named John Fries incited a small rebellion in eastern Pennsylvania against the fed- eral tax on houses. After U.S. Mar- shals arrested several men who had interfered with tax assessors, Fries organized an armed band to rescue the prisoners. President , like his predecessor, could not allow meration of slaves with the tax appor- the challenge to federal authority to tioned to the states in specified go unanswered and the militia marched again on Pennsylvania

1799 The first income tax in the United Kingdom was introduced by Prime Minister William Pitt to provide revenue to finance the , Napoleonic Wars. The rate was two shillings per pound (10 percent) on income above 200 pounds. The income tax was intended to be a temporary war measure. After Napoleon’s defeat at in 1815, the income tax expired and was not reintroduced until 1842. Excise tam on manufamdgoodc wmofimpaid dm& the use of wmuc stomps such as di~one.

TO TAXOR NOT TO TAX: MEETINGTHE NEEDSOF EXPANSION

During these years the nation experimented with various methods of raising revenue, ranging from excise taxes on manufactured goods to land sales and customs duties. For most of these years the United States imposed no internal taxes, resorting to this form of taxation only when the demands of the War of 1812 created a need for greater revenues. During the war years, Secretary of the Treasury Alexander Dallas proposed establishing a permanent system of raising internal revenue. A century would pass before this concept became reality. 8 APRIL 23, 1800 The Treasury 1807 Congress enacted the Embargo m - Department established the Office Act of 1807. In reprisal against E! of Superintendent of Stamps to issue restrictions placed on U.S. ships by 4 revenue stamps. England and during the Napoleonic wars, Jefferson called for 1800 The tax on snuff mills was an embargo that prohibited ship- Q repealed. ment of American raw materials and finished products to the European MARCH3, 1801 The Appropriation belligerents. Because of its drain on Act for this year provided $6,253.06 American shipping profits, Congress for compensation of the Commis- repealed this controversial trade sioner of the Revenue and his staff measure in 1809. The Embargo Act and $900 for administrative was replaced with the Noninter- expenses. course Act, which prohibited trade only with England. 1801 In his annual message to Congress, President Thomas Jeffer- MARCH4, 1812 Congress passed a son proposed the immediate aboli- new tax bill which increased cus- tion of excise taxes. toms duties and reimposed a tax on salt, with the provision that it would APRIL6, 1802 Congress repealed not go into effect until after a decla- the first internal revenue laws effec- ration of war. tive June 30, 1802. This also resulted in the abolishment of the MAY1813 President Madison position of Commissioner of the advised Congress to adopt a well- Revenue and all offices having to do defined system of internal revenue. with the collection of internal taxes. This marked the end of internal tax- JULY22, 1813 Congress passed an ation in the United States until 1813. act to facilitate the collection of the The Commissioner and Supervisors revenue, dealing with organizational of the Revenue were to continue in and procedural matters. This act office until all outstanding taxes had established a system of “collection been collected. districts” for the purpose of assess- ing and collecting direct taxes. Each APRIL30, 1802 The Office of the collection district was to be staffed Superintendent of Stamps was dis- with a collector and a principal asses- continued and its close-out duties sor and subdivided into assessment were transferred to the Commis- districts. sioner of the Revenue. JULY24, 1813 The effects of the FEBRUARY20,1804 The Appropri- War of 1812 prompted Congress to ation Act passed on this date does resort to internal taxation once again. not mention the Commissioner of 1 The revenue act passed on this day the Revenue, confirming the: discon- provided for a direct tax on refined tinuance of this function. sugar, carriages, distillers, and auc- tion sales. Thc Office of the Com-

22 missioner of the Revenue was 1 DECEMBER15, 1814 Graduated revived in the Department of the duties on carriages and harnesses Treasury. The Secretary of the were placed on a valuation basis. Treasury was authorized to transfer With this change, the assessor dis- the collection of customs duties to placed the collector as the principal the Commissioner of the Revenue tax determinator. from the Comptroller. This act also established the collectors as the DECEMBER21, 1814 Additional responsible agents to grant licenses duties were laid on distilled spirits, for distilling. auction sales, licenses to retail sellers of wines and spiritous liquors, and AUGUST2, 18 13 Congress passed foreign merchandise. an act providing for a direct tax of three million dollars to be collected 1814 In a report to Congress, Sec- on ”the value of all lands, lots of retary of the Treasury Alexander ground with their improvements, Dallas advocated establishment of a dwelling-houses, and slaves,” a tax system of permanent annual rev- on licenses of retail liquor dealers enue to be raised by internal taxes, and retailers of foreign merchandise, in addition to external revenue and a stamp tax on bank notes and already derived from customs duties. legal instruments. This marked the beginning of nearly a century of debate between advo- MARCH24, 1814 An appropriation cates of internal taxation and those act passed on this date granted in favor of financing the needs of the $9,410 in Compensation for the country solely through external rev- Commissioner and his clerks. enue. The debate continued until the ratification of the 16th Amend- APRIL18, 1814 An act allowed ment and imposition of a new deputy collectors to assume the income tax in 1913. If the War of duties of the collector in case of ill- 1812 had not ended, Congress might ness, death, removal, or resignation. have enacted such a proposal.

AUGUST24, 1814 The British JANUARY 9, 1815 A direct tax of six, burned the Treasury building in million dollars was “annually laid Washington, D.C. and dined by the upon the United States,” on houses, light of the fire across the street in lands, and slaves. A board of princi- Rhodes ’Tavern. pal assessors was created and given the duty of equalizing and propor- SEPTEMBER1814 Congress recon- tioning valuations among the several vened in a special session to replen- counties or state districts. ish an exhausted treasury and renovate public credit. JANUARY 18, 1815 “Sales taxes” on manufactured articles, tobacco, cig- NOVEMBER22,1814 The Commis- ars, and snuff made for sale in the sioner was authori7~dto designate a United States, household furniture, clerk to assist him in signing licenses. and gold and silver watches were levied. These duties were levied on FEBRUARY2, 1816 With the end of a valuation basis with the assistant the War of 1812, Congress abolishcd and principal assessors responsible taxes on manufactured articles, cig- for determining the amount of tax. ars, cigarettes, snuff, gold, silver- plated ware, and jewelry. JANUARY21, 1815 Secretary of the Treasury Alexander Dallas recom- APRIL27, 1816 The Tariff of 1816 mended the adoption of an inheri- was the first protectionist tariff tance tax and an income tax but the designed to protect domestic indus- Ways and Means Committee try rather than raise revenue. It rejected this idea. placed an average duty of 25 percent on imports that competed with FEBRUARY27, 1815 Congress American-made goods and provided extended thk sales taxes to cover for yearly reductions until a uniform gold, silver-plated ware, and jewelry. 20 percent rate was reached in 1819.

MARCH3, 1815 An administrative DECEMBER1817 President Monroe act strengthened the authority of called for the repeal of all internal collectors to bring suits without taxes in his first message to Congress. delay and to prosecute for breaches of revenue. Collectors were granted DECEhiBER 23, 1817 Congress authority to search and seize for vio- abolished all remaining internal rev- lations of the tax laws. This act also enue taxes effective December 31, duty to make an annual statement, against their retention. From this listing in alphabetical order the point until the outbreak of the Civil names of all persons who paid to him War, the federal government made or his deputies any tax, with an no use of excise, stamp, income, aggregate amount listed next to the inheritance, or direct property taxes. name, to make 100 copies of this list, The federal government was sup- and distribute it to the Commissioner, ported by revenue from import the town clerk, and others. A copy of duties and proceeds from sales of this list was to be posted at the local public lands. The Office of the court house for public inspection. Commissioner of the Revenue was

DECEMBER6, 1815 Secretary of collectors and assessors were to he the Treasury Alexander Dallas eliminated after outstanding taxes stated, “The establishment of a rev- had bccn collected. enue system, which shall not be exclusively dependent upon the JANUARY28, 1818 George Sewell supplies of foreign commerce, Boutwell, destined to become the appears, at this juncture, to claim first Commissioner of Internal Rev- particular attention,” in his annual enue, was born in Brookline, Massa- report on finances. chusetts. APRIL20, 1818 Congress oficially APRIL2,1824 The Appropriation F authorized the President to abolish Act of this year transferred the clerks E all existing offices of collectors of the completing the duties of the Commis- z- direct tax and internal duties. sioner of the Revenue to the Fifth a Auditor’s Office in the Treasury 2 1818 The Tariff of 1816 was Department. amended to extend the duty on cot- ton and woolen goods through 1826. 1824 The increased Duties on iron and certain manufac- duties on wool, cotton, iron products tures were also increased. and hemp.

MARCH3, 1819 The Appropriation 1826 Pennsylvania levied a tax on Act of this year still included a provi- inheritances, the earliest predecessor sion for the Commissioner and the of the modern . clerks in his office. 1828 Thc protectionist Tariff of 1819 The McCulloch v. Maryland 1828 increased tariffs on manufac- Supreme Court decision involved a tured goods under what was called Maryland state tax on the Second the “.” This pro- Bank of the United States. Chief voked a revolt in and Justice John Marshall declared, sparked a as state “The power to tax involves the officials asserted their right to nullify power to destroy” in determining acts of Congress they viewed as that the state could not have that unconstitutional. ’s power over federal government. supporters designed this tariff to embarrass President John Adams by APRIL11,1820 The Appropriation boosting tariff duties to unreasonably Act of this year made no provision for high levels on raw materials and ship the Commissioner of the Revenue, building supplies needed by New but did include $3,700 for three clerks England manufacturers and mer- to “complete the duties of the Com- chants. Northern mercantile interests missioner of the Revenue.” were in conflict with the Southern agricultural economy depcndcnt on MAY15, 1820 As part ofan “Act pro- foreign markets. viding for the better organization of the Treasury Department,’’ the Presi- MAY29,1830 The Office of the Solic- dent was authorized to designate an itor of the Treasury was established officer as “Agent of the Treasury” and charged with responsibilities with part of his duties being the recov- related to the collection of outstand- ery of money or property, including ing direct and indirect duties. taxes, in the name and for the use of the United States. This position was MARCH2,1831 The beginning of the ancestor of the Solicitor or Chief the authority to “compromisc” taxes Counsel of the Treasury Department. is found in an “Act for the relief of certain insolvent debtors of the United States,” passed on this date. F;: JULY14,1832 President Jackson JULY 1836 President Jackson P- signed the which ordered Treasury Secretary Levi 5 reduced tariff levels to about the lev- Woodbury to issue a circular that 2 els of 1824. John C. Calhoun and allowed only gold and silver to be other southern spokesmen took an accepted in payment for federal increasingly intransigent position lands after August 15. against protective tariffs, viewing them as undermining the Southern 1 1836 Construction began on the economy. Calhoun eventually Treasury Building. sparked the nullificationcrisis when South Carolina declared the tariffs of MAY1837 In the Panic of 1837 1828 and 1832 to be null and void in New York banks suspended specie that state. payments as the second worst depression in United States’ history JUNE10, 1833 The office of Solicitor began (1837-1843). Secretary of the of the Treasury as established in 1830 Treasury Roger Taney announced was abolished by executive order and that federal funds would no longer replaced by a new office of Solicitor of be deposited in the Second Bank of the Treasury with revised responsibil- the United States in an effort to ides for only “the legal work of the carry out Jackson’s opposition to the Treasury Department now performed Bank. The destruction of the Sec- by [the Justice] Department.” ond Bank gave a free hand to various paper money schemes, fueling the 1833 of inflation preceding the Panic of helped produce the compromise tar- 1837. This depression stimulated a iff of 1833 by proposing that tariffs new wave of as Ameri- be gradually reduced until 1842 can manufacturers blamed high

same level as the tariffs of 1816. goods.

1834 The national debt was OCTOBER2,1837 Congress sus- retired. pended payment of surplus rev- enues to the states. 1836 Land sales accounted for nearly half of all federal revenues. MARCH3,1839 The common law right to sue a tax collector for

sentation in Congress. Under this collected under protest. Congress law the Treasury paid out over $28 enacted legislation on this date

26

\ - -_ - or not they were collected under judicial remedy was recognized for 30 protest. The Secretary of the Trea- reviewing of the legitimacy of tax 8 sury was required to refund taxes collections. paid under protest when such taxes were shown to be excessive. FEBRUARY26, 1845 Congress in effect overruled the Supreme Court 1840 Pennsylvania became the decision of Cary v. Curtis by provid- first state to enact a state income ing that nothing in the legislation tax. Tax rates were so low that the should be construed to eliminate revenue raised from this tax was the right to sue collectors for duties insignificant. paid under protest. The legislation also provided that to preserve the 1841 Maryland adopted an income action, the taxpayer’s written tax, exempting incomes under $500 protest setting forth his objections and those derived from taxed prop- had to accompany or precede the erty. Collection of the tax was so lax disputed tax payment. that by 1850 the law was virtually repealed. 1845 Florida enacted an income tax, but had such little success that AUGUST26, 1842 The Treasury ten years later it abolished the Department established a fiscal year entire system. running from July 1 to June 30. 1845 Maryland instituted an 1842 The invoked inheritance tax. substantially higher duties. 1846 The Tariff of 1846, known as 1842 The first segment of the the , significantly low- Treasury Building was completed. ered duties. This marked the closest the United States came to 1843 Virginia passed an income in the period before the Civil War. tax, taxing one percent of salaries and professional income over $400 1847 North Carolina levied an per year. The tax also included a inheritance tax. 2% percent tax on all interest or profit from money, bonds, notes, or 1848 Representative David certificates of debt. also Wilmot of Pennsylvania proposed instituted taxes on professional and that five million dollars be raised business income this year. annually through a tax on personal and other property, stocks, and JANUARY21, 1845 The Supreme money. This tax would finance the Court held in the case of Cary v. Mexican War and pay off the public Curtis that if a collector was not free debt. Since this would have taxed to retain protested taxes he could the slave property in the South and not be held personally accountable financial investments in the North, for the amount. This resulted in , the measure was defeated 139-47. serious questions as to whether any

27 $ 1848 Alabama levied an inheri- 1855 ‘The Court of Claims was cre- 50- tance tax. ated, allowing for refund suits to be brought directly against the IJnited 1849 North Carolina enacted an States for the first time. Decisions of Q income tax on salaries and fees and the Court of Claims were considered on interest and profits. to be only advisory and required approval by Congress. 1851 enacted a prohibition law which forbid the manufacture 1856 The Democrats endorsed and sale of alcoholic liquors in the free trade in their party platform and state. pressed for reduced tariffs.

1851 Massachusetts passed the 1857 The economy was shaken by a first state law which allowed towns sharp but short-lived financial panic. to tax inhabitants to support free libraries.

28 T~xpayenline up in a CoIlcCtor’s ohduring& CiOil War to pqrheir incomc tax. 1860 -1865 REBELLIONAND WAR: CREATIVE FINANCING CREATESLASTING LEGACIES

The financial demands of the civil war required that Congress seek new ways to raise revenue. As a result, the first income tax imposed on the citizens of the linited States was enacted in 1861. Because Congress neglected to simultaneously establish a mechanism to collect this revenue, another year passed before the Bureau of Internal Revenue was created to administer the Civil War income tax and other revenues. This first income tax, intended to be a temporary revenue raising measure, featured progressive rates ranging from three to five percent on incomes above $600 per year. JUNE1850 The Ways and Means JULY9,1861 The Ways and Means Committee eliminated one million Committee reported a bill authoriz- dollars from a naval appropriations ing the Secretary of the Treasury to bill for repair and equipping of ves- borrow $250 million over the next sels. Congressman Lovejoy of 12 months. stated, "I am tired of appropriating i money for the army and navy when, JULY16,1861 Congress introduced absolutely, they are of no use 1 the first bill of the Civil War provid- whatsoever." 1 ing for an increase in revenues, but it provided only for changes in tariff DECEMBER1860 The Secretary of duties and not for any form of inter- the Treasury reported that receipts nal taxes. The bill called for an from customs duties were already increase in duties on sugar, tea, and falling below what would ordinarily coffee. be expected.

FEBRUARY8,1861 Congress autho- rized the President to borrow $25 million before July 1 by issuing stocks with interest not to exceed six peicent. Before Congress adjourned, the President was authorized to bor- row an additional $10 million at the same rates. This was the last financial measure passed during the Buchanan administration.

MARCH2,1861 Congress passed Income or ." the h4orrill Tariff Act which became the existing tariff at the onset of the Civil War. This tariff was amended in 1862 and 1864, with duty levels reaching 47 percent by the end tea, and sugar. of the war. JULY 23, 1861 The House Ways JUNE6,1861 The New York Timw and Means Committee approved a praised the English revenue system bill providing for a direct tax of $30 and proposed a very slight tax upon incomes.

JULY4,1861 The 37th Congress convened in a special session which lasted through August. The nation had been in a virtual state of war since April 15. providing for a direct tax and various ’ This bill also imposed new excise internal duties. Borrowing from an taxes and an income tax set at three earlier measure in 1813, the omnibus percent of annual income over $800. bill provided $30 million in revenues The rate was raised to five percent derived principally from real estate on income derived from property taxes apportioned on a state requisi- owned by American citizens resid- tion system. ing abroad, except for income derived from IJ.S. securities which JULY25, 1861 Senator James F. was taxed at a rate of 1.5 percent. Simmons of Rhode Island attached a The tax was to be paid by June 30, proposal for an income tax to a tariff 1862. Each state was allowed to bill he introduced. assess, collect, and pay its quota of the direct tax. JULY29,1861 The Ways and This act established the position Means Committee reported Morrill’s of “Commissioner of Taxes” with bill again, diminishing the direct tax powers and responsibilities similar by one-third (to $20 million) and to those of the Commissioner of the including a tax of three percent on Revenue of earlier periods (this all incomes over $600 per year. The position was never filled), allowed a House passed this bill by a vote of principal assessor and collector in 77-60 on this day. each state and territory and a collec- tor and an assessor in each of the JULY29,1861 The Senate adopted collection districts. Because all loyal Senator Simmon’s amendment for a states (except ) had paid tax on incomes over $I,OOO for per- their taxes by February 1862, no col- sons residing in the United States lectors or assessors were appointed and a tax of 7.5 percent on incomes under this law. derived from property owned in the United States by any citizen of the AUGU~5, 1861 In response to the United States residing abroad. new tax law, the New York Hemid Income derived from interest. on stated, “Millionaires like Mr. W.B. securities of the United States was Astor, Commodore Vanderbilt ... and to be taxed at only 2.5 percent. others, will henceforth contribute a fair proportion of their wealth to the AUGUST5,1861 The Conference support of the national govern- Committee of both houses reported ment.” back a bill which included the changes in tariff rates, the direct tax, DECEMBER2,1861 When Con- and the income tax which was passed gress reconvened in regular session, in an emergency session of Congress. the Secretary of the Treasury President Lincoln signed the bill reported that nothing had been which would be known as the Rev- done in his office toward getting the enue Act of 1861, imposing a direct tax machinery in order for the collection of $20 million per year apportioned of direct taxes. among the existing states and territo- ries and the District of Columbia. 7k ; 1861 The Secretary of the Trea- direct tax. The Senate voted to -00 sury recommended to Congress that strike out the direct tax, raised a national banking system be estab- income tax rates, and made them lished to strengthen the Union’s progressive. 6 finances and provide a uniform cur- The Committee of Conference rency. ironed out the differences between House and Senate versions- keep- JANUARY 8,1862 The Nm Yo& ing the direct tax, but suspending its Times asserted that the income tax I operation for two years. The pro- was “one of the most equitable and gressive rates for the income tax bearable taxes that can be proposed.” I wcre kept with tax rates of three percent on income from $600 to JANUARY 21,1862 Congress passed $10,000 and five percent on incomes a resolution “that, in order to pay the over $10,000. ordinary expenses of the Government, the interest on national loans, and JUNE 7, 1862 An act provided for have an ample sinking fund for the the appointment of a board of tax ultimate liquidation of all public commissioners in each of the states debts, a tax shall, with the tariff on in rebellion to collect the direct tax. imports, secure an annual revenue Cornmissioners were not to enter on of not less than $150 million.” duty until thc military authority of the United States was established in FEBRUARY1862 Congress autho- each state. Commissioners were rized the printing of treasury notes, authorized to lease lands until the dubbed “greenbacks” because of rebellion was put down and the the green ink used for printing. authority of the United States estab- lished. MARCH3,1862 The House Ways The U.S. Direct Tax Commis- and Means Committee presented sion for the District of South Car- a revenue measure to the House olina was authorizcd on this date, providing for taxes expected to yield as part of the bill providing “for the about $164 million annually. The collection of direct taxes in insur- bill included an income tax, but it rectionary districts within the was not an important item, as its United States.” During this month’ yield was estimated at only $5 mil- a board of three commissioners was lion. Approximately one million dol- sent to Beaufort, South Carolina to lars in revenue was expected from collect the direct tax levied by the a tax on inheritances of personal act of August 5, 1861. property exceeding $1,000. ]LINE 30,1862 The first income APRIL10, 1862 The internal rev- taxes were due under the law of enue bill was sent to the Senate after August 5, 1861. These taxes were easy passage in the House. The never collected because there was House version of the bill placed a no administrative system established tax of three percent on all incomes for this purpose. over $600 and also provided for a

32 were an authorization for a rail and > telegraph line between the 5 into law by President Lincoln on River and the Pacific Ocean and a ? this date and featured progressive bill to prevent and punish polygamy. ; taxation, levies on incomes, and N01 withholding. Congress suspended JCLY 14,1862 Congress passed a tariff acc to increase duties to offset the impact of the previously enacted internal taxes.

JULY17,1862 The First Commis- sioner of Internal Revenue took office. George S. Boutwell, a Massa- chusetts lawyer who had served in the state legislature and also as governor, was confirmed by President Lincoln for this position on April 24, 1862.

JULY29, 1862 Six collection dis- tricts were established in Iowa.

JULY30, 1862 Five collection dis- tricts were established in California.

AuGUsr 1,1862 The Revenue Act of July 1 specified 33 trades or pro- fessions which could not be per- formed until a license was obtained. The penalty for carrying on a trade or business without such a license after this date was three times the cost of the license.

AUGUST6, 1862 Three collection districts were established in and three in .

AUGUST8, 1862 Four collection districts were established in Con- necticut and two in Rhode Island.

AUGU~~11, 1862 Five collection districts were established in New Jersey. Twenty-four collection districts were established in Penn- sylvania. N \o AUGUST12,1862 Five collection responsibility for issuing all stamps. m districts were established in Maine. Adhesive backed revenue stamps were first issued this year. 3t; c) AUGUST15, 1862 Eleven collection 3 a districts were established iri . DECEMBER25,1862 An amenda- tory act to the Act of July 1, 1862 AUGUST 19,1862 Nineteen collec- provided that all official documents 6 tion districts were established in of the United States were exempt . from stamp taxes. This act also held that no instrument could be consid- AUGUST22,1862 Thirty-two col- ered invalid for lack of a particular lection districts were established in kind of stamp with the exception New York. that stamps for use on proprietary articles could not be used on legal AUGUST25,1862 Thirteen collec- instruments. tion districts were established in Illi- nois. 1863 In its first year of operation, the Office of the Commissioner of AUGUST26,1862 Ten collection Internal Revenue collected $39.1 districts were established in Massa- million. chusetts. Six collection districts were established in Wisconsin. JANUARY1, 1863 By this date, the work force of the Bureau of Internal AUGUST 27, 1862 Five collection Revenue totalled 3,882 employees. districts were established in Mary- This included 3,822 in the field ser- land. vice (366 collectors and assessors, 898 deputy collectors, 2,558 assistant AUGUST 1862 The Commissioner assessors)and 60 in administrative advertised for bids for printing rev- offices in Washington (1 Commis- enue stamps. A contract was sioner, 51 male clerks, and 8 female awarded to Butler and Carpenter of clerks). Philadelphia. Assessors were paid $3 per day while giving instructions; $5 per day, SEPTEMBER1,1862 The new inter- while hearing appeals, considering nal revenue laws on alcohol and valuations and preparing assessment other items went into operation. The lists; and $1 for every 100 names in tax on fermented liquors was $1 per the tax lists submitted to the collec- barrel of not more than 31 gallons. tor. Assistant assessors received $3 per day and an allowance of $1 for SEPTEMBER17, 1862 Six collection every 100 names delivered to the districts were formed in Michigan. assessor. Collectors received a com- mission of four percent on all money OCTOBER1, 1862 The portions of collected up to $lOO,OOO and 2 per- the Revenue Acts of July 1,1862 cent on money above that amount. imposing stamp taxes went into Deputy collectors were paid by the effect. The Commissioner was given collector. - -- I 34

\ L FEBRUARY2,1863 Commissioner cent every six months. The Secre- Bounvell issued a decision that, tary of the Treasury was authorized however slaves may have been to compromise claims. regarded by the laws of a state previ- ous to their emancipation, if they MARCH4,1863 George Bounvell were liberated by the last will and resigned after less than one year as testament of their masters, they Commissioner to become a Massa- were not to be treated as personal chusetts Congressman. Boutwell later property and were not subject to the became Secretary of the Treasury. inheritance tax. MARCH18, 1863 Joseph J. Lewis of FEBRUARY25,1863 Congress Pennsylvania became the second passed the National Banking Associ- Commissioner of Internal Revenue. anon Act which established a system of national banks. The banks were APRIL1863 The Bureau of Internal required to have one-third of their Revenue issued rules to guide asses- capital invested in U.S. securities, sors and collectors in collecting the deposited in the United States Trea- inheritance tax. sury. The banks could then issue paper currency up to the value of 90 JUNE 4,1863 A group of western percent of their U.S. bond holdings. and eastern manufacturers met in By the end of 1865, more than Chicago and adopted resolutions 11,500 banks had joined the national demanding that the income tax be banking system. -suspended,so far as it affected income from stocks, until Congress MARCH3,1863 Congress passed an assembled again. The Treasury act which included a provision allow- Department refused to bow to this ing the President to appoint a pressure. Deputy Commissioner of Internal Revenue as well as a Cashier of Inter- SEPTEMBER16, 1863 The Presi- nal Revenues. dent instructed the South Carolina The Cashier would be in charge Direct Tax Commission to reserve of all monies received in the Office 81 plantations on the sea islands of of the Commissioner. The first that state for military, naval, charita- Deputy Commissioner was C.F. ble, educational, or police purposes. Estee of New York. Authority was These instructions also provided for also given to the Secretary of the the sale of homesteads of 10 and 20 Treasury to hire not more than three acres to heads of families of African revenue agents to help detect, pre- descent. vent, and punish fraud. I -+*D distilled spirits from 20 to 60 cents The Commissioner was autho- m” per gallon, as recommended by Sec- rized to compromise all suits “relat- s retary Chase, Whiskey speculators ing to internal revenue,” to abate a began hoarding the commodity. outstanding assessments, and to 3 refund taxes, subject to prescribed MARCH7,1864 The tax on dis- regulations. This act provided for tilled spirits was raised from 20 to 60 the seizure of property “found in the Q cents per gallon. possession of any person for the pur- pose of being sold or removed in AFWL 1,1864 The tax on fer- fraud of the revenue or with design mented liquors was raised from 60 to avoid the payment of tax.” cents to $1 per barrel. The tax on smoking tobacco was increased from 5 to 25 cents per APRIL 14,1864 The Ways and pound, Fine-cut chewing and plug Means Committee reported a bill to tobacco taxes were increased from provide additional internal revenue, 15 to 35 cents per pound. with an income of 5 percent The Commissioner was autho- on incomes above $600. rized to refund taxes erroneously or

The bill also provided for with- increased from three to five. holding of 3 percent of income up to $5,000 and on interest and dividends JULY 4, 1864 Congress imposed an paid by banks, railroads, insurance income tax in addition to that of companies, etc. The tax on distilled June 30, of 5 percent on all incomes spirits was raised from 60 cenm to over $600 for the year ending $1.50 per gallon. December 31, 1863. This tax was to This law exempted savings-banks be collected on or before October 1, from all taxation where they had no 1864. This emergency levy was capital stock and confined their busi- inspired by the fear that despite the ness to receiving and loaning anticipated revenues from the June deposits for the benefit of depositors 30 bill, the Treasury would lack the

36

-.- ?- SEPTEMBER1,1864 Revenue Wells was appointed “Special 51 stamps were required on matches. Commissioner of the Revenue,” E r with his four-year term beginning L m DECEMBER22,1864 The tax on June 30, 1866. During his tenure, 01m distilled spirits was raised from $1.50 Wells submitted four annual reports to $2.00 per gallon. which had significant impact on the of the United States. 1864 Mark Twain paid an income Also under this bill, the assistant tax of $36.82, plus a $3.12 late filing assessor was empowered to increase fine and remarked that he felt any taxpayer’s estimate of his “important” because the govern- income, even if made under oath, ment was finally paying attention when it seemed to be an understate- to him. ment. Existing tax rates were

FEBRUARY9, 1865 Justin S. Morrill introduced a bill to amend the Inter- nal Revenue Act of June 30,1864 to increase the revenue and reinforce the Treasury. He recommended increasing taxes to a rate of 10 per- cent on all incomes over $3,000. Robert Mallory of Kentucky main- tained that this was an excessive amount and suggested a tax of 5 percent on incomes between $500- $5,000 and 10 percent on incomes over $S,OOO. This was the version adopted by the House on February 16 by a vote of 65-56.

MARCH1, 1865 One collection dis- trict was established in Arkansas.

MARCH3, 1865 Morrill’s internal revenue measure became law. This act imposed the highest tax rates of the Civil War. As part of this mea- sure, Congress created the US. Revenue Commission to study ris- ing tax revenues and the efficiency of tax administration. The members Department building served as the were to be appointed for four-year temporary White House for Presi- terms and included David Wells of dent Johnson for two months. New York, Stephen Colwell of Pennsylvania, and Samuel Hayes of Illinois.

37 2 APRIL27, 1865 Six collection dis- JULY1, 1865 Prior to this date, Col- oc- tricts were established in Missouri. lectors of Internal Revenue served - as their own disbursing agents and w 2 MAY17, 1865 The Commissioner were allowed to keep that part of issued instructions to the Direct Tax their collections necessary to pay the Commissioners to suspend all sales expenses of assessing and collecting. 6 of lands for taxes until otherwise ordered. OCTOBER31, 1865 William Onon resigned after only four months as May 30, 1865 Four collection dis- Commissioner to become President tricts were established in Georgia. of American Telegraph Company Three collection districts were and later, Western Union. established in South Carolina. NOVEMBER1, 1865 Edward A. JUNE2, 1865 Three collection Rollins, a Republican from New districts were established in hlissis- Hampshire, became the fourth Com- sippi. missioner. Rollins had served as Deputy Commissioner under Joseph JUUE5, 1865 Four collection Lewis. districts were established in Texas. 1865 The imposition of a 10 per- JUNE 22, 1865 Three collection cent tax on state bank notes drove districts were established in the 7,000 different types of these . notes out of circulation.

JUSE 1865 The US. Revenue I Commission was organized.

JULY1,1865 Joseph Lewis resigned as Commissioner and was replaced by William Onon, who had served as Collector of the Sixth Dis- trict of New York.

'. '.

38 ,. - z866 -z872 RECONSTRUCTIONAND REUNITING: CONGRESS RECONSIDERSTHE INCOME TAX

The income tax enacted as an emergency measure during the Civil War expired and the nation once again relied on raising revenue through other means. The Bureau of Internal Revenue began to consolidate its organizational structure as fewer field offices were needed and the first of many Congressionally-sponsored investigations into the operations of the Bureau was undertaken by the “Special Commissioner of the Revenue” during these years. JANUARY25, 1866 Nine collection increase in tax rates was removed; districts were established in Ken- the income tax was declared payable tucky. every year “until and including the year 1870 and no longer.” FEBRUARY27, 1866 Sevcn collec- 1 This act established a definite cion districts were established in number of personnel for the Bureau North Carolina. of Internal Revenue. The Commis- sioner was authorized a total of 256 FEBRUARY1866 The U.S. Revenue employees, including 3 depury com- Commission made a special report to missioners, a solicitor, 7 heads of Congress on “Distilled Spirits as a divisions, 221 clerks, 8 messengers, Source of National Revenue.” and 15 laborers. The law also created the Office of Solicitor of Internal MARCH14, 1866 Three collection Revenue. Walter H. Smith, a lawyer districts were established in West from Ohio, became the first Solicitor Virginia. of the Revenue. All deposits in savings banks and APRIL23, 1866 Eight collection institutions where the deposits made districts were established in Virginia. by any one person amounted to $500 were subject to taxation. This MAY9,1866 A joint resolution act changed the payment of taxes deleted paraffine oil and crude peuo- on dividends and interest on bonds leum from the list of taxable items. from direct payment to the Commis- sioner to collectors and assessors in MAY19,1866 Eight collection dis- local districts. The amount of annual tricts were established in . taxes paid by brewers and distillers was doubled. Manufacturers of JULY13,1866 Congress reduced or tobacco, snuff, and cigars were eliminated many taxes. The bill classed as tobacconists instead of passed on this date allowed the manufacturers. income tax to stand with minor This act provided a process by amendments due to the lack of time which collectors could sell goods to deal with the many changes seized for violation of the revenue needed. The intent was to reduce laws where the value did not exceed the revenue collected by about $65 $300. This act provided that any per- million per year. son who executed or attempted to These changes included having execute a fraudulent bond for the the tax apply to citizens residing purpose of withdrawing spirits from outside the United States; applying bonded warehouses should forfeit all a tax rate of 10 percent on salaries property in such spirits. This act pro- above $5,OOO to officers of the fed- vided for “special taxes” in lieu of eral government, who had previously the license taxes of earlier laws. been exempt from tax; carriages val- ued under $300, yachts, pianofortes, and other musical instruments were exempted from tax; the 20 percent - - -1 \ . JULY 13,1866 Three collection dis- I removed from a brewery. This tricts were established in Arkansas. method of collection remained unchanged until Prohibition. JULY 16, 1866 Congress autho- rized the unsold and unleased lands SEPTEMBER30,1866 The commis- in South Carolina acquired in pay- sion to collect the direct tax in ment of the direct tax to pass into Alabama was dissolved. the custody of the Freedmen's Bureau. NOVEMBER1866 Commissioner t Edward Rollins reported to Con- ACGUST 1, 1866 The tax on cot- gress on the administration of the ton increased from two to three income tax and for the first time pro- cents per pound. Affidavits, vided information on the number of receipts for the delivery of prop- taxpayers and the amount of rev- erty, appeals, confessions of judg- enue in each class of the progressive ments, writs, and other original tax rates. He also recommended that processes were made exempt from the amount of exemption be raised while a tax on bankers' from 5600 to $l,oOO. and brokers' sales of stocks and bonds was added to the stamp DECEMBER1,1866 The commis- schedule. sion to collect the direct tax in North Carolina was dissolved. AUGUST3, 1866 The Secretary of the Treasury issued an order to the DECEMBER15,1866 The commis- Commissioner to suspend collec- sions to collect the direct tax in tion of the direct tax in the states Georgia and Louisiana were dis- which had been in secession. The solved. commissions for the tax collectors in these states were dissolved, DECEMBER31,1866 The commis- except in South Carolina where the sion to collect the direct tax in Mis- collection of deferred payments on sissippi was dissolved. lands which had been bid in by the United States and afterwards sold DECEMBER1866 Congress charged on three years time to persons in a select committee with investigating the Army and the Navy continued. "any frauds or evasions in the pay- ment of internal duties" as well as AUGUST1866 The tax on bankers the role of revenue officers in com- and brokers sales was reduced from promises, settlements, and under- K to Xm of one percent and was payments. The committee issued a made payable by stamps. report the following year stating that "they doubted that the laws would SEPTEMBER1, 1866 Prior to this ever be efficiently executed until date, the tax on fermented liquors there has been a reorganization of was paid in currency. After this the revenue force." date, the tax was paid by stamps affixed to the spigot of every barrel -i - . '/ \ 41 $ 1866 Representative James than three days, with its proposal oc- Garfield of Ohio (later President) for abandoning the progressive spear-headed an effort to make tax income tax rates. This new bill &, information private. remained in force until 1870 and included a tax of 5 percent on all 1866 The national debt stood at income over $1,000. This act also $2.86 billion, a level that would not moved back the date for the last be reached again until World War I. collection of income taxes to April 30, 1870 (from June 30, 1870). FEBRUARY13, 1867 Justin Morrill Receipts for the delivery of prop- presented a bill to the House Ways erty, affidavits, appeals, confessions and Means Committee on internal of judgement, writs, and other orig- revenue, stressing the need to lower inal processes, canned and pre- taxes. The bill proposed a flat 5 per- served meats and shellfish, cent tax rate on incomes above vegetables, and fruits, were $l,OOO. exempted from stamp duty by this act. The use of packages known as FEBRUARY25,1867 Congress “thirds” by brewers was authorized approved refunding illegal collec- to accommodate brewers west of tions of the direct tax by the Secre- the Rocky Mountains. Taxes on tary of the Treasury. cigars were reduced from $10 to $5 per thousand. FEBRUARY28.1867 The commis- Under this act, district attorneys sion to collect the direct tax in Texas were required to report to the was dissolved. Bureau of Internal Revenue at the close of each court term the num- FEBRUARY1867 The Secretary of ber of suits brought and the status

designed by a Mr. Tagliabue of New rized the Secretary of the Treasury York. A committee of the National to adopt, procure, and prescribe for Academy of Sciences had approved use such hydrometers and weighing the design of this hydrometer in an and gauging instruments for the effort to establish a uniform and cor- prevention and detection of frauds rect system to inspect and gauge spir- by distillers of spirits as he deemed its subject to tax. AI1 gaugers were necessary. required to use this hydrometer. This act also provided that if the amount of the tax on distilled spir- MARCH1, 1867 Clothing or articles its could not be obtained the spirits of dress not specifically enumerated should be destroyed. This act were exempt from taxation while tax amended the procedure for appeal MARCH5, 1867 The commission FEBRUARY3, 1868 A joint resolu- to collect the direct tax in Arkansas 1 tion provided for the appointment of was dissolved. a commission to examine and test spirit meters. MARCH26,1867 Congress passed an act allowing the Secretary of the MARCH31, 1868 Heavy._ penalties Treasury to discontinue the employ- were laid upon revenue officers and ment of any person involved in the agents for gross neglect of duty or for collection of the direct tax in insur- defrauding the United States. The rectionary districts where, in his same penalties applied if the rev- judgment, these services were no enue officer or agent had knowledge longer needed. of fraud committed by any person and failed to report it in writing. MARCH1867 The time for making the annual assessment of articles in MARCH1868 A new congressional Schedule A (income and special committee investigated revenue taxes) was changed from May to frauds. The committee report March. accused President Andrew Johnson and his supporters of direct involve- APRIL 3, 1867 A Committee of the ment in the fraud. National Academy of Sciences com- pleted a report promoting the use of JUNE 8, 1868 Commissioner spirit meters designed by Mr. Isaac Rollins submitted his resignation to P. Tice of New York to measure the President Johnson, contingent on production capacity of distilleries for the appointment of a successor. taxation purposes. JULY 20,1868 Congress passed a APRIL 26,1867 The Secretary of revenue act strengthening the the Treasury announced the adop- administrative control of the Com- tion of spirit meters made by Mr. missioner over his field officers. The Tice and required distillers to apply Commissioner was authorized to for the devices by May 15, 1867. appoint 25 “supervisors of internal revenue” who would have the power, APRIL, 30, 1867 The commissions to transfer or suspend any officer or to collect the direct taxes in Virginia field employee of the Internal Kev- and Tennessee were dissolved. enue Bureau for neglect of duty, abuse of power, or fraud. The Com- SEPTEMBER 1,1867 The tax on missioner was also given authority to cotton was reduced from three cents hire 25 “detectives” to prevent fraud to two and one-half cents per pound. upon the government and assist in the collection of taxes. 1867 Congress prohibited legal The revenue provisions of this act challenges to tax assessments prior were devoted almost exclusively to to their collection. the taxation of distilled spirits and tobacco. Manufacturers were - -required to pack their product in c . December 1867. The government later dismissed the case when the star prosecution witness was arrested Z provisions for leakage on spirits for perjury. manufactured after its enactment. This act imposed two rates of NOVEMBER2,1868 The Secretary taxation on tobacco products- 16 and of the Treasury set this date for ’ 32 cents per pound. Taxes on distilled putting into operation the provisions of the revenue act of July 20, 1868 pertaining to the use of stamps on distilled spirits.

NOVEMBER23,1868 The Secretary of the Treasury set this date for putting into operation the provisions of the revenue act of July 20, 1868 pertaining to the use of stamps on tobacco products.

ation of the direct tax law until Janu- 1868 The constitutionality of the ary 1, 1869. After this, no further gross receipts (corporation) tax was action was taken by Congress or the tested in the case of Pacific Insur- President to put these laws into effect. ance Co. v. Soule. Soule was the Collector for the First District of JULY 30,1868 A revenue law California. The Supreme Court ren- passed this date required that a rec- dered an opinion that the tax on pre- tifying establishment could not be miums received by insurance within 600 feet of a distillery and companies was not a direct tax, but gave authority to revenue officers an excise duty and was therefore to break up any ground in order to constitutional. look for pipes connecting two such places. This law was passed to pre- 1868 Beginning this year, taxation vent evasion of the tax. of distilled beverages and tobacco became a major source of internal AUGUST5,1868 President Johnson revenue. From 1868 to 1913, nearly accepted Commissioner Rollins’ 90 percent of all internal revenue resignation. collections came from these taxes.

AUGUST 31, 1868 A warrant was FEBRCARY5,1869 A Ncae York brought against Commissioner Tribune editorial stated, “The income Rollins, Deputy Commissioner tax is the most odious, vexatious, Thomas Harland, several local dis- inquisitorial, and unequal of all our tillers and others for tax evasion, taxes... a tax on honesty, and just the bribery, and blackmail during reverse of protective. It tends to tax the quality out of existence.”

44 MARCH4,1869 Congress amended SEPTEMBER6,1869 An attempt was the act of July 20, 1868 to provide made to assassinate revenue detective that the compensation of storekeep- James 1. Brooks in Philadelphia for ers was to be repaid to the govern- which two men were convicted and ment by the manufacturers of sentenced to prison for seven years. distilled spirits and owners of ware- houses. NOVEMBER10,1869 The Nm York Times reported that it hoped efforts MARCH10,1869 Edward A. Rollins to repeal the income tax would not resigned as Commissioner as Ulysses succeed. Grant assumed the Presidency. DECEMBER10,1869 ThNene, York MARCH11,1869 Columbus Tribune continued to oppose the Delano, an Ohio Congressman, income tax, writing, “We do not became Commissioner. believe there is a tax levied by the Government so onerous upon so large MARCH12,1869 Former Commis- a class of people as the Income Tax.” sioner George S. Boutwell became the 28th Secretary of the Treasury. DECEMBER20,1869 David A. Wells presented his report as Special APRIL14, 1869 The Commissioner Commissioner of the Revenue to the issued an order disallowing deduc- Secretary of the Treasury. Shortly tions for leakage of spirits when thereafter, President Grant dis- removed from bond. missed Wells because he objected to his advocacy of tariff reform. APRIL1869 The Commissioner established a policy requiring rev- 1869 Customs revenue again enue stamps to be placed on the exceeded internal revenue. item being taxed so as to display the entire face of the stamp. This 1869 The Treasury Building was was to prevent frauds perpetrated completed. by placing one stamp over another, which allowed taxpayers to deceive 1869 The Supreme Court again the tax collector by cutting the ruled that the income tax was not a stamps in half. direct tax in the case of Veazie Bank v. Fenno. Chief Justice Chase, in ALGUST3,1869 The Commis- delivering the opinion in this case, sioner issued Circular 79 which pro- stated, “the words ‘direct taxes,’ as vided that no claim or application for used in the Constitution, compre- refunding of taxes would be consid- hended only capitation taxes, and ered by the Commissioner unless it taxes on land, and perhaps taxes on was filed within two years from the personal property by general valua- date of payment of tax. tion and assessment of the various descriptions possessed within the several States.” $ 1869 The Prohibition Party, which to the income tax law. During the W - supported legislative prohibition of Civil War there had been little objec- the manufacture, transportation, and tion to this practice, but following the sale of alcoholic beverages, was war strong objection arose from the formed in Chicago. conservative press, resulting in the prohibition of publication of income APRIL 5,1870 Commissioner tax returns. The law stated “that no Columbus Delano forbade tax asses- collector... shall permit to be pub- sors from furnishing lists of taxpayers lished in any manner such income for publication. returns or any part thereof, except such general statistics, not specifying APRIL 26,1870 The Nm Yo4 Thcs the names of individuals or firms...” argued that “a moderate and a prop- Also, no penalties for refusal or erly collected income tax will be the neglect to make a return or an most satisfactory and just of any that increase of assessment could be made can be devised, and we hope the or imposed without due notice to the House of Representatives will firmly person charged. This act also repealed resist the effort of the Senate to keep the tax on legacies and successions. it at the present figure...” OCTOBER1, 1870 Sugar inspectors MAY1870 Ways and Means Com- employed by the Bureau were mittee Chairman Robert Schenck of required to determine the bounty on Ohio introduced a bill to reduce some beet sugar. This provision was internal taxes and to repeal the repealed in 1894. wartime inheritance tax. OCTOBER1,1870 The tax on gross JUNE 22,1870 Both the Solicitor of receipts, sales (other than sales paid Internal Revenue and the Solicitor of by stamps and sales of tobacco, spirits, the Treasury were transferred to the and wines), legacies, successions, arti- newly organized Department of Jus- cles in Schedule A, passports, and the tice. special tax on boats, barges, and flats was repealed. JUNE 30,1870 The Office of the Special Commissioner of the Rev- OCTOBER31,1870 The commis- enue expired. sion to collect the direct tax in South Carolina was dissolved. JULY 14,1870 Congress passed a revenue act which preserved the 1870 In Day v. Buffington, the income tax but lowered the rates to U.S. Circuit Court of the District of 2%percent on incomes over $Z,OOO. Massachusetts held that the salary of The tax was limited to the years 1870 a judge of a state court was not tax- and 187 1, “and no longer.” able by the United States. An appeal Administrative changes brought to the Supreme Court sustained the about by this law affected the publi- decision of the lower court. cation of income tax returns in the first official confidentiality provisions- - * . \ a- 1870 During this year, federal JAKU-Y 20,1871 Commissioner P officers seized the tobacco manufac- Pleasanton sent a communication to E

turing establishment of EIias C. of the Ways and c m Boudinot, a Cherokee Indian, oper- Means Committee in which he said .I- ating inside the boundary of the that the income tax was “most obnox- Cherokee Nation for nonpayment of 1 ious to the genius of our people,” was taxes. The District Court of the 1 inquisitorial, exposed “the most pri- United States for the Western Dis- vate pecuniary affairs of our citizens,” trict of Arkansas upheld this action. was not productive of great revenue, Boudinot later won his case in the and should be unconditionally Court of Claims, recovering the sum repealed. Pleasanton was soon contra- of $3,272.25, the value of his prop- dicted by Secretary of the Treasury erty seized and sold. Boutwell.

JANUARY 2,1871 Columbus Delano 1 FEBRUARY7,1871 Samuel Hooper resigned as Commissioner to become moved that the House rules be sus- Secretary of the Interior. pended so that a bill to repeal the income tax might be passed. This JANUARY 3,1871 Alfred Pleasanton became Commissioner. Pleasanton had been Collector of Internal Rev- enue in New York and his appoint- ment as Commissioner was made against the advice of Secretary of the Treasury George Boutwell. Pleasanton was seen as compliant to the wishes of various big business MARCH 1,1871 The First, Second, groups, especially those whose claims and Third Districts of New York were furthered by Samuel Ward of were consolidated into the First Dis- New York, the ablest lobbyist of the trict. The Fourth and Sixth Districts day. In the end, Boutwell removed of New York were consolidated into Pleasanton after he had served only the Second District. The Fifth and seven months. Seventh Districts of New York were consolidated into the Third District JANUARY 19,1871 The iVm York Thcs reversed its earlier opinion by APRIL1, 1871 The First and Sec- stating that “the income tax has been ond California Districts were consoli- unpopular from the moment of its dated into the First District. The enactment.. let Congress redeem the First and Second Districts of Ohio session from utter barrenness by were consolidated into the First Dis- averting the vexation and unpopular- trict The First and Third Districts of ity which will inevitably arise from Pennsylvania were consolidated into the continued infliction of the impost the First District i.e., income tax” ; MAY1,1871 The repeal of special J~JNE6, 1872 An act authorized the -m taxes, except those relating to spirits, Secretary of the Treasury to employ 2 tobacco, fermented liquors, and the not more than three persons to assist ' special tax on boats, barges, and flats, in discovering and collecting any went into effect. money belonging to the United States under such terms and conditions as he JULY1,1871 The Second and Third deemed best for the interests of the Districts of Wisconsin were consoli- United States. dated into the Second District. This allowed the Secretary of the Treasury to enter into contracts with AUGUST8,1871 Alfred Pleasanton individuals outside the Bureau of resigned as Commissioner. Internal Revenue to collect taxes. These individuals were to be paid AUGUST9,1871 John W. Douglass from the monies and property they of Pennsylvania became Commis- collected rather than from govern- sioner. ment funds. Authority was also given to pay rewards of 10 percent of DECEMBER1,1871 The First and monies collected to informants. Second Districts of Maryland were This act also required a reduction consolidated into the First District. of the number of internal revenue dis- tricts to not more than 80. This act 1871 Justice Strong, member of the also reduced the price of stamps for U.S. Circuit Court for the Elastern rectified spirits and wholesale liquor District of Pennsylvania, upheld the dealers' packages from 25 cents to 10 constitutionality of the income tax cents, effective August 1, 1872. Alco- imposed by the June 30,1864 act. hol taxes were raised from 50 to 70 cena per gallon. This act also JAWJARY2,1872 The Second and imposed a uniform rate of taxation of Fourth Districts of Pennsylvania were 20 cents per pound on all tobacco consolidated into the Second District. products except snuff which was taxed at the rate of 32 cents per MARCH1,1872 The Fourth and pound. The bonded warehouse sys- Fifth Districts of Wisconsin were con- tem for the storage of tobacco . solidated into the Third District. intended for was repealed. Taxes on banks and bankers Mmcfi 6,1872 The number of became assessable on the first of June internal revenue agents was increased and December, respectively. Special to 25 and the number of supervisors taxes were payable on May 1 of each reduced to 10. year. A statute of limitations for claim- ing refunds of taxes alleged to have JUNE 1,1872 The Twenty-Seventh been paid in error was set at two and Thirty-First Districts of New years. Documentary stamp duties York were consolidated into the under Schedule B were repealed with Twenty-Seventh District. the exception of two cent stamps on bank checks, drafts, or orders.

48 JUNE 8, 1872 The Secretary of the DECEMBER24,1872 In response to 5 Treasury signed an agreement grant- the report from the Special Revenue N ing 50 percent of the gross amount of Commission, Congress enacted legis- taxes collected by contract employees lation which abolished the offices of of the Bureau of Internal Revenue to assessors and assistant assessors and the employee. This action ultimately transferred their duties to collectors. led to much dissatisfaction among This action was to be completed regular employees of the Bureau of beforc Junc 30, 1873. Most assessor’s Internal Revenue, whose salaries offices were closed by May 20, 1873. were set at a specific level, in no case to exceed $3,500. Thus, no matter DECEMBER27,1872 Alaska became how much a collector part of the Oregon District. brought in, he could not hope to match the potential profits reaped by 1872 All incomc taxes cnactcd dur- a contract tax collector. ing the Civil War years expired. The tariff of 1872 reduced tariff rates by AUGUST13,1872 Secretary of the 10 percent. The total amount collec- Treasury Boutwell contracted with tion in income taxes for the ycars John D. Sanborn of Massachusetts to 1863-1874 was approximately $274 collect taxes from 39 “distillers, million. An additional $67 million was rectifiers, and purchasers of whiskey.” collected from taxes on corporate Sanborn received 50 percent of what incomes and dividends and interest he collected. on United States securities. Together, Additional contracts with Sanborn these tax rcccipts accounted for just were made in October 1872, March under 20 percent of total tax revenues 1873, and July 1873. During his for this period. Over $617 million was tenure Sanborn collected $213,500. collected from alcohol and tobacco The Commissioner objected to this taxes while another $641 million manner of collecting taxes to no avail. came from various other excise and These contracts became the subject occupational taxes, accounting for of a congressional investigation in over 70 percent of total internal rev- February 1874, in which it was enue collections for this period. The decided that although the Contracts number of individual income tax were improper, the Secretary of the returns received during this period Treasury had not acted corruptly. fluctuated widely, ranging from a high The investigation report also stated of 276,661 in 1870 to only 72,949 by that the Bureau of Internal Revenue 1872. Changing tax rates and exemp- could have collected the money more tion levels accounted for the differ- ably itself. ence.

OCTOBER1,1872 All stamp taxes 1872 The job title of “dctcctivc” except those on bank checks were was changcd to “agent” and the Com- repealed. missioner was given hiring authority for fraud agents.

49 E 1872 An act was passed to permit 1872 A legal opinion in the case of 2 former owners or their heirs of lands ! Erskine v. Van Arsdale permitted the seized as a result of the direct tax accrual of interest on a disputed laws of the Civil War in the states in refund from a collector from the 6 secession to reclaim their former time of payment to the time of judg- property, then held by the United ment. States, if within two years they pre- sented satisfactory proof of their for- mer ownership and paid the taxes, penalty, costs, and interest at 10 per- cent per year from the date of assess- ment of the tax.

50 \

Rnvnue Sramps wmused middy dmughout thir pniod.

YEARS OF CONSOLIDATION: ALCOHOLAND TOBACCOREMAIN REVEN u E MAINSTAY s

The consolidation of internal revenue offices around the country continued as the country retreated from the use of internal taxes to raise revenue. By the mid-l870s, the only remaining internal taxes were those on alcohol and tobacco. Enforcement of regulations for the operation of distilleries and other brewing facilities required that the Bureau of Internal Revenue establish laboratories to measure the alcoholic content of various liquors. JANUARY 1, 1873 The First and 1873-1885 The Bureau of Inter- Third Connecticut Districts were nal Revenue issued special tax consolidated into the First District. stamps for taxes levied on various categories or classes of dealers and MAY20, 1873 The First and manufacturers of tobacco. Third California Districts were consolidated into the First District. JANUARY 29,1874 The number of deputy collectors was decreased JULY 1, 1873 All offices of assessor from three to two. and assistant assessor were abol- ished by this date. FEBRUARY1,1874 The First, Sec- ond, and Third Districts of Ver- NOVEMBER1,1873 The Second mont were consolidated into the and Fourth Districts in Connecti- Second and Third Districts. cut were consolidated into the Second District. FEBRUARY13,1874 The House of Representatives passed a resolu- NOVEMBER15, 1873 The First tion asking the Secretary of the and Second Districts in Rhode Treasury to transmit “copies of all Island were consolidated into the contracts made ...” for the collection First District. of taxes out of concern that such contracts provided for abuses in the 1873 Financial panic during this collection of the revenue. year caused a period of uncon- trolled credit, inflation, wild spccu- APRIL1, 1874 The Eighth and lation, and over-expansion. The Ninth Districts of New York were country found itself entangled in consolidated into the Fourth District. unemployment, scandals, and cor- rupt practices. This and recurrent JUNE 1, 1874 The First and Sec- depressions which plagued the ond Districts of Kentucky were country through the 1890s fostered consolidated into the Second the rise of the Populist or People’s District. Party. Made up of farmers and city labor groups, the Populists advo- JUNE 18, 1874 Congress cated an income tax not only as a exempted institutions doing busi- source of revenue, but also as a ness solely as savings banks from symbol of reform and a means of taxation on deposits. regulating the economy. JUNE 22, 1874 After an investiga- 1873-1879 Fourteen different tion, Congress repealed the use of income tax bills were introduced in contracts with private individuals to Congress by Congressmen from the assist Bureau employees in discov- Midwest and the South. None were ering and collecting delinquent passed. taxes. The Secretary of the Trea- sury was directed to revoke and *annul all contracts for the collection 52

\ -. . of taxes made under the original pro- FEBRUARY8, 1875 Congress P visions. passed an act which provided for -5 While the investigation developed allowances to be paid to collectors X.J no specific evidence of corruption, of internal revenue for their salaries the investigating committee deter- and the salaries of their deputies. mined that a large percentage of the As a result, the Treasury Depart- taxes collected by the the contract ment ceased payment of commis- employee Sanbom were not a proper I sions to collectors. subject of a contract under the law. This practice had also caused much MARCH1, 1875 The three collec- dissatisfaction on the part of the tion districts of were Bureau’s salaried personnel who consolidated into the First and Sec- often ended up assisting contract ond Districts. employees in obtaining the overdue revenue but not sharing in the 50 MARCH3, 1875 The President percent profit. signed a new tariff bill which repealed the IO percent reductions DECEMBER1, 1874 The First and and increased rates on several Second Districts of Texas were items. Taxes on tobacco products consolidated into the First District. increased from 20 to 24 cents per pound and taxes on distilled spirits DECEMBER19, 1874 ’The First increased from 70 to 90 cents per and Second Districts of Virginia gallon. (This rate was actually more were consolidated into the Second than four times the cost of produc- District. tion.)

1874 The Supreme Court upheld APRIL 1, 1875 The ten collection the constitutionality of Civil War districts of Massachusetts were federal inheritance taxes in Scholey reduced to five, numbered the v. Rew on the ground that the inher- First, Third, Fifth, Eighth, and itance tax was an excise tax or duty Tenth. The Fifth District of Vir- but not a direct tax as prohibited by ginia was reorganized. the constitution. MAY 14, 1875 John W. Douglass 1874 The National Women’s resigned as Commissioner. Christian Temperance Union (W.C.T.U.) was formed in Cleve- MAY15, 1875 Daniel D. Pratt of land to promote prohibition. Indiana became Commissioner.

JANUARY1, 1875 The Seventh MAY18, 1875 The Commissioner and Ninth Districts of Pennsylva- established a Division of Revenue nia were consolidated into the Agents, relieving Supervisors of the Ninth District. Revenue of all responsibility in relation to directing Revenue Agents. AUGUST1,1875 The First and JANUARY 1,1876 The Third Dis- Second Districts of Pennsylvania trict of Arkansas was formed with were consolidated into the First the consolidation of the previous District. First, Second, and Third Districts of Arkansas into one collection dis- AUGUST31, 1875 The Commis- trict. sioner abolished the services of The Second and Sixth Districts special clerks, having determined of Illinois were consolidated into that there was no authority for their the Second District. The Tenth employment. and Twelfth Districts of Illinois were consolidated into the Tenth OCTOBER1,1875 The Fifth Dis- District. trict of Indiana was abolished. The Second and Third Districts of Indiana were consolidated into NOVEMBER1, 1875 The’Twenty- the Second District. The Sixth and Fifth and Twenty-Eighth Districts Eighth Districts of Indiana were of New York were consolidated consolidated into the Sixth District. into the Twenty-Eighth District. The Ninth and Tenth Districts of Indiana were consolidated into the DECEMBER1, 1875 The Fourth Tenth District. The Fifth and and Fifth California Districts were Eleventh Districts of Indiana were consolidated into the Fourth Dis- consolidated into the Eleventh trict. District. The Second and Third Districts DECEMBER10,1875 The First, of Maine were consolidated into Second, and Third Districts of i the Second District. The Fourth New Hampshire were consolidated and Fifth Districts of Maine were into the First District. consolidated into the Fourth Districr The Third and Fifth Districts of DECEMBER15,1875 The Seiond Maryland were Consolidated into and Third Districts of Vermont the Third District. were consolidated into the Second The Fourth and Fifth Districts District. of New Jersey were consolidated into the Fifth District. 1875 Secretary of the Treasury The Eleventh and Thirteenth Bristow investigated and broke up Districts of New York were consoli- the conspiracy of distillers and dated into the Eleventh District. internal revenue officials known The Tenth and Twelfth Districts as the “Whiskey Ring.” Orville of New York were consolidated Babcock, the President’s private into the Twelfth District. The secretary was indicted while Presi- Fourteenth and Eighteenth Dis- dent Grant was implicated in this tricts of New York were consoli- scandal. In the end, more than $3 dated into the Fourteenth District. million in taxes was recovered and The Fifteenth and Sixteenth Dis- 238 persons were indicted and 110 tricts of New York were consoli- convicted. dated into the Fifteenth District. Second Districts of New York were and Eighth Districts of Tennessee consolidated into the Twenty-First were consolidated into the Eighth District. The Twenty-Third and District. & Twenty-Fourth Districts were con- solidated into the Twenty-Fourth JANUARY5, 1876 The Seventh

Pennsylvania were consolidated into consolidated into the Third District. the Fifth District. The Eighth and ALJGLJSI-2,1876 Green B. Raum District was reestablished with new of Illinois became Commissioner. 1 boundaries. 1 The Second, Sixth, and Seventh AUGUST15,1876 An appropria- ' Districts of Indiana were abolished. tions act provided for the transmittal 1 The First, Second, and Fourth of revenue stamps to collectors by 1 Districts of Iowa were abolished registered mail and dispensed with 1 and reconstituted as the Second the "gauging of packages of distilled ' and Fourth Districts. The First and spirits filled on the premises of I Second Districts of Maine were wholesale liquor-dealers" and pro- 1 consolidated into the First District. vided that such packages "shall The First and Third Districts of thereafter be stamped under such Maryland were abolished. The regulations as the Commissioner of Twentieth and Twenty-First Dis- Internal Revenue may prescribe." tricts of New York were consoli- Under the provisions of this act, the dated into the Twenty-First duties of the gauger and storekeeper District. The Seventh, Thirteenth, could be combined into one position and Eighteenth Districts of Ohio for the first time. This act also called were abolished. for a reduction of the number of col- The Fourteenth and Eighteenth lection districts to 131. Districts of Pennsylvania were con- solidated into the Fourteenth Dis- SEPTEMBER8,1876 The First and trict. The Twenty-Second and Third Districts of Massachusetts Twenty-Third Districts of Pennsyl- were consolidated into the Third vania were abolished. District. The Third, Fourth, and Fifth Districts of Tennessee were con- SEPTEMBER16,1876 The Si- solidated into the Fifth District. teenth and Seventeenth Dismcts of The Fifth and Sixth Districts of Pennsylvania were consolidated Virginia were consolidated into the into the Sixteenth District. Sixth District. The First and Third Districts of SEFTEMBER20,1876 The Second West Virginia were consolidated and Third Districts of Michigan into the First District. were consolidated into the Third District. OCTOBER 11,1876 The Third and The Third and Fourth Districts Sixth Districts of Iowa were consoli- of Missouri were consolidated into dated into the Third District. the Fourth District. The First and Second Districts 1 of Tennessee were consolidated i OCTOBER2,1876 Nine Maryland 1 into the Second District. counties became part of the Delaware I Collection District. The District of Columbia became part of the Third District of Maryland. The Thirteenth District of Illi- nois was abolished and the Fourth NOVEMBER1,1876 The Sccond First and Second Districts of and Fourth Districts of Georgia were Alabama. consolidated into the Second District. The First and Fifth Districts of The Second and Third Districts Michigan were consolidated into of Kentucky were consolidated into the First District. the Second District. The Second and Third Districts MARCH3, 1877 An appropriations of South Carolina were abolished act authorized the establishment of and the state was constituted as the special bonded warehouses for the South Carolina District. storage of brandy made from grapes for a period of three years before DECEMBER1,1876 The First and payment of tax was due. The act Third Districts of Georgia were con- also reduced the number of collec- solidated into the Third District. tion districts to 126 and transferred The Fifth and Eighth Districts of responsibility for the printing of all Virginia were consolidated into the internal revenue stamps, except Fifth District. adhesive and proprietary stamps, stamps on checks, and stamps on 1876 The number of deputy com- tin-foil tobacco wrappers, to the missioners was decreased from two Bureau of Engraving and Printing. to one and supervisors of internal revenue were abolished. The Com- MARCH1877 Commissioner missioner divided the country into Raum established a system of 18 revenue agents’ districts, assign- inspection of collector’s offices ing one revenue agent to each. which ranked each office against a uniform standard of a “First Class 1876 A prohibition amendment to Office.” the constitution was introduced in the House of Representatives. JUNE1,1877 The First, Second, and Third Districts of Louisiana JANUARY1,1877 The Eighth and were consolidated into the District Tenth Districts of Massachusetts of Louisiana. were consolidated into the Tenth District. JUNE 18, 1877 Two Virginia coun- The Sixth and Seventh Districts ties were added to the territory of of North Carolina were consoli- the Delaware Collection District. dated into the Sixth District. JUNE19,1877 The Second Dis- FEBRUARY9,1877 Lieutenant trict of Virginia was reorganized. McIntire was killed in Georgia while enforcing laws against illicit JULY1, 1877 The First and distilling. Fourth Districts of Maine were consolidated into the First District. MARCH1, 1877 The Third Dis- The First and Second Districts trict of Alabama was abolished and of Mississippi were consolidated consolidated with the realigned -into the First District. 5 \ h The Second District of New MARCH28, 1878 A joint resolution m York was reorganized and the extended the bonded period for dis- k Thirty-Second District of New tilled spirits to three years. In 3 0 York was abolished. response, distillers founded the 3 4 National Distillers and Liquor Deal- AuGusT 17, 1877 The number of ers Association to seck changes in relatives who could be employed in Internal Revenue regulations. ’6 each Internal Revenue district was I im i ted. APRIL1878 Deputy Marshal Rufus H. Springs was killed in an OCTOBER4,1877 The stock of ambush while accompanied by a revenue stamps was transferrcd posse of deputy collectors in a from the New York Bank Note search for an illicit still in South Company as the Bureau of Engrav- Carolina. ing and Printing took over the 1 printing of internal revenue stamps JUNE19, 1878 An appropriation for tobacco, spirits, and beer for the act included $75,000 for “detecting Bureau of Internal Revenue. and bringing to trial and punish- Stamps were delivered directly to ment, persons guilty of violating the Bureau of Internal Revenue for the internal revenue laws, or acces- storage and shipment to the various sory to the same, included pay- cdection districts. Prior to this, the ments for information and printing and shipment of revenue detection ...” stamps except for those on bank checks and tin foil tobacco wrap- AUGUST9, 1878 Deputy Collector pers was handled by the American, Cooper of Knoxville, Tennessee, Continental, and National Bank was killed. Note Companies of New York. AUGLST1878 In Ovcrton County, 1877 In response to growing Tennessee, a posse of 11 internal problems with states arresting rev- revenue officers had stopped at a enue agents and the US. Marshals farmer’s house for the night and assisting them and concerned about were atcacked by a band of armed , its revenues, Congress passed a law illicit distillers who kept up the to protect revenue agents from attack through the night. By the arrest for acts taken in the dis- next morning the force of attackers charge of their responsibility to col- numbered nearly 200. The officers lect taxes. took shelter in a log house where they were besieged for 42 hours. 1877 Six internal revenue officers ’I‘hree internal rcvcnue officers were killed in the line of duty, were wounded during this period. including Lt McIntire, 3 guides, Although Commissioner Raum and 2 others, in Georgia, len- ordered a force to assist the officers, nessee and Virginia. Six others thc officers were released before were wounded, in New Jersey, the rescue force arrived. North Carolina, and Virginia. - - c c I 58 1878 Tofacilitate the export of sels and pipes or which required -Ca -4 distilled liquors, the government , the cisterns to be connected with 0 removed the tax on all export the outlet of the worm. liquor, replacing it with a ten cents a barrel export stamp. JULY21, 1879 The largest dis- tillery in the United States was put MARCHI, 1879 The Secretary into operation in the fifth district of of the Treasury was authorized to Illinois. set the salaries of collectors and deputy collectors and to pay them OCTOBER15, 1879 The work of from United States funds. One of printing documentary and propri- the purposes of this change was to etary stamps was transferred from halt the payment of commissions the American Bank Note Company based on the amount of taxes col- of New York to the Bureau of lected to collectors and their Engraving and Printing. Printing of deputies. The minimum salary was , check stamps remained with the set at $2,OOO, if annual collections Graphic Company of New York were $2,500 or less, and a maxi- City and printing of stamps on tin mum salary of $4,500 if annual col- foil wrappers for tobacco with the lections amounted to $l,OOO,OOO or John J. Crooke and Company of more. Scw York. The total number of authorizcd revenue agents was increased from 1879 ‘I’he Supreme Court upheld 25 to 35. The tax rate on snuff was the 1877 legislation protecting rev- lowered from 32 to 16 cents per enue agents from arrest by state pound while the tax rate on tobacco authorities in Tennessee v. Davis, was lowered from 24 cents to 16 after US. Marshal and Deputy Col- cents per pound. The tax on ciga- lector of Internal Revenue James rettes and cigars was not reduced. Davis was indicted for murder after A redemption period of three years killing J.B. Haynes after Haynes was allowed for check stamps or shot at him while Davis was imprinted stamps. An act of this 1 destroying an illegal still. date authorizcd the use of a process of vaporizing alcohol in the manu- 1879 The Commissioner pub- facture of vinegar. lished a compilation of all internal revenue laws and statutes to be MARCH3, 1879 Congress autho- used by judges, district attorneys, rized the Commissioner, with the marshals, and officers of internal approval of the Secretary of the revenue. He also directed the revi- Treasury, to exempt distillers sion and enlargement of the Rev- whose distilleries had a daily pro- enue Agents’ Manual. ducing capacity of less than 30 gal- lons of proof spirits from thc provisions of existing law which required the process to be carried on through continuous closed ves-

5 9 p MAY28, 1880 Congress passed an AUGUST8, 1881 The Indian Ter- -00 act repealing all charges on stamps ritory became part of the Kansas * for rectified spirits and wholesale Collection District. ' liquor dealers' packages. 'The rate had been 10 cents per stamp since NOVEhlBER 2, 1881 Taylor Love 1872. Allowances for loss of dis- was killed in Habersham County, tilled spirits while in the warehouse Georgia, for giving information to were authorized. internal revenue officers about illicit distilling operations. JULY1, 1880 Responsibility for the appointment of storekeepers, 1881 In Springer v. United States, gaugers, and tobacco inspectors was the Supreme Court upheld the shifted from the Commissioner of constitutionality of the 1862 income Internal Revenue to the Secretary tax. The Court stated that Congress of the Treasury. never intended it as the direct tax prohibited by the Constitution. JANUARY1881 Beginning this month, distilleries producing 100 MARCH13,1882 Deputy Collec- bushels or less each day were tor James M. Davis was killed in placed under the control of a single McMinnville, Warren County, storekeeper-gauger. Before this, Tennessee in an ambush after leav- the cutoff had been distilleries pro- ing court. ducing 60 bushels or less each day. MARCH1882 Lee Turner was JULY16, 1881 For the first time, killed in Swinnett County, Georgia the Bureau of Internal Revenue for informing internal revenue required applicants for positions of officers about illicit stills. storekeeper, gauger, inspector, or other subordinate positions to sub- MAY5, 1882 Through legislation mit applications in writing, includ- enacted on this date, all Chinese ing age, legal residence, place of laborers were required to apply to birth, service in the Army or Navy, the Commissioner of Internal Rev- names of relatives employed in the enue for certificates of residence . government, experience, and previ- and the Bureau was expected to ous work, accompanied by recom- enforce this legislation. mendations. AUGUST7, 1882 An act of Con- JULY 20, 1881 Deputy Collector gress required the Commissioner to Thomas L. Brayton was killed in make a detailed statement of all Pickens County, South Carolina by miscellaneous expenditures in the John McDow, an illicit distiller Bureau of Internal Revenue. whose still he had seized and he was attempting to arrest. FEBRUARY10,1883 Deputy Col- lector Henry F. Walker was shot and killed by David Fraley in Stan- -ley County, North Carolina while c L attempting to seize an illegal dis- JULY1,1883 All stamp taxes not tillery. previously abolished were repealed. This included adhesive stamp taxes MARCH3, 1883 All internal taxes, on proprietary medicines, bank except those on tobacco products, checks, and friction matches. distilled spirits, fermented liquors, ' and on the dealers of these prod- JULY 21, 1883 The Second District ucts were repealed through legisla- of North Carolina was consolidated tion enacted this date. Stamp taxes with the Fourth District of North were also repealed by this act, Carolina. effective July 1, 1883. Taxes on tobacco products were cut in half to JULY 25, 1883 The Twenty-Fourth a rate of 8 cents per pound. The and Twcnty-Sixth Districts of New Secretary of the Treasury was York were consolidated with the authorized to audit and pay the Twenty-First District of New York. claims of the original owners of The Seventh District of Ohio was lands which were sold for non-pay- consolidated with the Eleventh Dis- ment of direct taxes. trict of Ohio.

APRIL30, 1883 Green B. Raum AUGU.ST 1, 1883 TheThird District resigned as Commissioner. of Illinois was consolidated with the Second District of Illinois. MAY1, 1883 Reduced tobacco tax The First District of Indiana was rates took effect. consolidated with the Seventh Dis- trict of Indiana. The Fourth District MAY21, 1883 Walter Evans of of Indiana was consolidated with the Kentucky became Commissioner. Sixth District of Indiana. The Third and Fourth Districts of JUNE 15,1883 The repeal of the Maryland were consolidated into the tax on bank checks resulted in the Maryland District cancellation of the contract with The Fifth Massachusetts District the Graphic Company of New York was consolidated with the Third Dis- City which had supplied stamps trict of Massachusetts. imprinted on bank checks. The Second Missouri District was consolidated with the First Missouri JUNE 25,1883 An Executive District. Order of the President outlined a The Eleventh District of New consolidation plan for collection York was consolidated with the Four- districts, reducing the total number teenth District of New York. The of districts from 126 to 85. The Twelfth District of New York was Bureau estimated an annual savings consolidated with the Fifteenth Dis- of $125,000 as a result of thcse trict of Ncw York. reductions. The Third District of Ohio was consolidated with the Sixth District of Ohio. The Fourth District of Ohio was consolidated with the Tenth Dis- uict of Ohio. The Fifteenth District The Eighth District of Pennsylva- of Ohio was consolidated with the nia was consolidated with the First Eighteenth District of Ohio. and Ninth Districts of Pennsylvania. The Twentieth District of Penn- The Fourteenth District of Pennsyl- sylvania was consolidated with the vania was consolidated with the Nineteenth District of Pennsylvania. Twelfth District of Pennsylvania. The First and Second Districts of The Sixteenth District of Pennsyl- West Virginia were consolidated into vania was consolidated with the the West Virginia District. Twenty-Second and Twenty-Third Districts of Pennsylvania. AUGUST7,1883 The Second and The Third District of Virginia was Third Districts of Georgia were con- consolidated with the Second and solidated into the Georgia District. Sixth Districts of Virginia. The Fifth The Tenth District of Indiana was District of Virginia was consolidated consolidated with the Eleventh with the Fourth District of Virginia. District of Indiana. The Ninth Kentucky was consoli- AuGusr 20,1883 Idaho and dated with the Seventh and Eighth became part of the Montana Collec- Districts of Kentucky. tion District. The Third and Sixth Districts of Dakota (became North and South Michigan were consolidated with Dakota in 1891) became part of the the First and Fourth Districts of Nebraska Collection District. Michigan. The Fifth District of Iowa was The First and Second Districts of consolidated with the Second and Minnesota were consolidated into Fourth Iowa Districts. the Minnesota District. The Fifth District of Missouri was SEPTEMBER 1,1883 The Territory consolidated with the Sixth District of Washington became part of the of Missouri. Oregon Collection District. The Thirtieth District of New The First and Second Connecti- York was consolidated with the cut Districts were consolidated into Twenty-Eighth District of New the Connecticut District. . York. The Seventh District of Illinois. I was consolidated with the Eighth AUGUST10,1883 The Eighth Dis- District of Illinois. trict of Tennessee was consolidated I with the Fifth District of Ten- SEPTEMBER 5, 1883 Arizona nessee. / became part of the New Mexico Collection District. I AuGi:.sT 15,1883 Wyoming became part of the Colorado Collec- 1 OCTOBER1,1883 was con- tion District. solidated with the Fourth California The First and Second Alabama I District. Districts were consolidated into the Alabama District. I I OCTOBER13,1883 The First and could export to avoid payment of the ; a Third Districts of Wisconsin were tax. VI consolidated into the First District. 1884 The need for control of prac- NOVEMBER 1883 The work of can- titioners was recognized as early as celing and redeeming stamps this year when Congress authorized imprinted upon checks and return- the Secretary of the Treasury to pre- ing them to claimants was sus- i scribe rules for recognition of attor- pended because the appropriation of 1 neys and agents and to disbar or the Bureau of Engraving and Print- ' suspend any incompetent or disrep- ing was not sufficient to continue I utable person. chis work. The work began again in February 1884 after Congress made 1 1884 One employee of the Bureau an additional appropriation. I.was killed during seizure of an illicit Stlll. JANUARY1,1884 The tax on bank I deposits and capital ceased. 1884 The hti-Monopoly Party I. joined with the Greenback-Labor MAY17, 1884 Congress passed an 1 Par,ty to form the People's Party, act authorizing the governor of the which supported many liberal mea- territory of Alaska to issue permits sures, including a graduated income for the sale of liquor for medicinal, I tax. mechanical, or scientific purposes. ' MARCH 19, 1885 Walter Evans JULY7, 1884 Congress approved an I resigned as Commissioner. act providing appropriations for fiscal I year 1885 which reduced the num- MARCH20, 1885 Joseph S. hliller ber of authorized revenue agents of West Virginia became Commis- from 35 to 20 and limited their com- 1 sioner. pensation to $7 per day. Instead of I allowing them actual and necessary MARCH 30, 1885 The Oklahoma travel expenses, a per diem Territory was attached to the Kansas allowance of $3 per day was estab Collection District. lished. I APRIL 1885 Attorney General A. H. JULY31. 1884 Nevada was sepa- Garland concluded that the law pro- I rated from the California Collection tecting revenue agents from arrest District while Utah was separated 1 by state authorities did not apply to from the Montana District. I [J.S. Marshals. 1884 The Attorney General put I 1885 One employee of the Bureau forth an opinion allowing owners of was killed in a raid on an illicit still. distilled spirits in bond, upon which the excise tax was due or would soon be due, an extension of seven months during which the owner 1885 The consolidation of collec- m - tors’ offices that took place over the last ten years resulted in the elimi- nation of 98 separate offices. From a &) high of 225 collectors’ offices in 1873, the Bureau of Internal Rev- enue ended this era with only 127 collectors’ offices. As a dramatic example of these reductions, the State of New York began this period with 32 offices and ended with only 7 collectors’ offices. The Svpmne cOUt2jUShm in I895 mho rnicd thc incomt fax pmvisions ofthe Wilson tanff bill unronstimhonai.

REv E N u E Ex P E RIM E NTAT I o N : REGULATORYTAXES, EXP.4NDING DUTIES, AND SUPREME COURT RIJLINGS

Even without an income tax to collect and enforce, the Bureau of Internal Revenue remained busy with other duties during these years. Congress passed the first regulatory tax aimed more at regulating the production of margarine than raising revenue while an attempt to revive the income tax in the 1890s was knocked down as unconstitutional by the Supreme Court in 1895. JUNE 30,1886 All check and propri- 1886 One employee of the Bureau P - etary revenue stamps had to be was wounded in a raid on an illicit redeemed by this date. still. 2 AUGUSI-2, 1886 The Oleomargarine 1886-1972 Special tax stamps wcrc Tax was passed, representing the first issued by Internal Revenue. After ,& regulatory tax, aimed primarily at 1972, occupational taxes were con- keeping margarine from competing trolled by IRS Forms 4732 and 4733 with butter. Instead, oleo production (Special Tax Stamp). doubled in five years and almost $1 million was collected in taxes during FEBRUARY23,1887 Congress passed the first year. an act prohibiting the importation of An offshoot of this legislation was opium into the United States by Chi- the establishment of an Analytical and nese. This act also made it a misde- Chemical Division in the Bureau and meanor for United States citizcns to the authorization to hire a chemist traffic in opium in China. and a microscopist The tax defined butter and MARCH3,1887 Congress passed an imposed a tax on manufacture, sale, act providing for thc redemption and importation, and exportation of oleo- sale of school-farm lands held by the margarine. The tax was set at a rate of United States acquired under the 2 cents per pound or fraction thereof, direct tax laws in Beaufort County, and special license taxes of $600 were South Carolina. There were 18 of placed on manufacturers, $480 upon these school farms owned by the wholesale dealers, and $48 upon retail linited States which had been rcntcd dealers. from year to year by the Collector of A tax of 15 cents per pound, in Internal Revenue. addition to the duty, was placed on imported oleomargarine. ‘The act MARCH3,1887 The Tucker Act legalized the adulteration of butter provided that actions against the with “additional coloring matter.” IJnited States for payment of This act went into effect October 31, refunds of taxes paid in dispute 1886. could only be brought if the amount in controversy did not exceed OCTOBER1,1886 The Office of $10,000. Such cases could be Inspector of Tobacco was abolished brought either in district courts or in the Bureau of Internal Revenue. the Court of Claims. In a Court of These duties were transferred to coi- Claims decision, no jury trial was lectors in the district offices. available and no monetary limitation was imposed as a condition of juris- NOVEMBER1886 The Burcau estab- diction. lished a laboratory in response to pas- sage of the oleomargarine tax to test MARCH24, 1887 The Bureau margarine samples. issued regulations for the redemp- tion and sale of school-farm lands describing the manner in which the

66 original owners, heirs-at-law, or 1888 Deputy Marshal Russell grantees could obtain redemption. ' Wireman was killed in a raid on 1 an illicit still while Deputy Collec- MAY21,1887 By Executive order 1 tor B. B. Bouldin and Deputy Mar- President Cleveland reduced the , shal 0. F. Hightower were number of internal revenue districts from 84 to 62. Various changes between 1887 and 1914 brought the total number of districts up to 67.

JUNE 30,1887 Nine Maryland and two Virginia counties were separared from the Delaware Collection District

JULY1, 1887 Nevada became part of the California Collection District once again. Rhode Island became part of the West Virginia became Cornmissioner. Connecticut Collection District. Delaware and the District of AL~;U= 14, 1889 Deputy Collector Columbia became part of the Mary- Frank Weller was killed in a raid on land Collection District. an illicit still. Maine and Vermont became part of the New Hampshire Collection District.

facture or sale of adulterated food or SEPTEMBER 25, 1890 The time for drugs in the District of Columbia." redemption of school-farm lands in This act gave the Bureau of Internal South Carolina was again extended 0 1,1890 1894. W01 OCTOBER The McKinley This was the first tariff to Tariff Act increased protectionist tar- include a complete schedule of pro- a w iff rates. The act imposed a tax of $10 tective duties on agricultural products. cc 0 per pound on opium manufactured in This tariff act also brought many E the United States for smoking pur- changes in the laws relating to inter- 0 poses and provided that no person nal revenue procedures, although it could engage in such manufacture did not affect the organization of the Q who was not a citizen of the United Bureau. Popular indignation over the States and who had not paid the bond increased tariff rates was reflected at required by the Bureau. the polls as McKinley was defeated Payment of the tax was indicated for rcelection and less than 90 of 332 by affixing a special tax stamp to the Congressmen elected to the SZnd package of opium. The act ]required Congress were Republicans. that all manufacturers engaged in preparing opium for smoking do so OCTOBER1,1890 Thc dates of the under the surveillance of the Com- special tax year were changed from missioner of Internal Revenue. This May 1-April 30 to July 1-June 30, to act also imposed a duty of $12 per I conform to the fiscal year. pound on imported opium, but I admitted the importation of crude or DECEMBER19,1890 Deputy Collec- unmanufactured opium free: of duty. ' tor C. D. Alexander and Deputy Mar- Tobacco taxes were reduced from 8 shal J:O.Thompson were wounded in to 6 cents per pound and all special a raid on an illicit still. taxes imposed upon dealers, manufac- turers, and sellers of tobacco were MARCH2, 1891 Monies collected repealed effective May 1, 18'21. from the direct tax act of June 6, Wholesale dealers of oleomargarine 1862 were returned to the states by were required to keep books and sub- an act of this date. mit returns. A bounty on producers of sugar MARCH3, 1891 Congress author- from beets, sorghum, or sugaicane ized the Commissioner of Internal grown in the United States was Revenue to employ not more than included as part of this act. The 12 inspectors to inspect sugar upon , bounty was to be determined by the which a bounty was required to be Bureau of Internal Revenue. Despite paid. These inspectors were paid protests from the Commissioner chat $5 a day. this duty was not connected with the This act also authorized the use duties with which the Bureau was of alcohol tax free in the manufac- ordinarily charged, and his recommen- ture of sugar from sorghum and dation that it be transferred tci the Sec- included a provision for the with- retary of Agriculture, the provision was drawal of distilled spirits from dis- retained and administered by the tillery warehouses, free of tax, to be Bureau until its repeal on Augost 26, used solely in the manufacture of sugar from sorghum. MARCH20, 1891 Special employee seven temporary laboratories in R.I. Barnwell was killed and Deputy Lehi, Utah; Norfolk, Nebraska; Fort ,Marshal T. L. Brim was wounded in Scott, Kansas; Sugarlands, Texas; St. a raid on an illicit still. Cloud, Florida; Syracuse, New York; and Montpelier, Vermont. The gen- APRIL 28, 1891 A train wreck on eral laboratory in Washington, D.C. the Baltimore and Ohio Railroad was also enlarged. destroyed a shipment of internal rev- , enue stamps valued at over $29,000. FEBRUARY13, 1892 The large Because there was no provision in increase of chemical analysis work the law authorizing the Treasury i' resulting from the provisions of the Department to credit che accounts of McKinley Tariff Act of October 1, the Bureau with stamps destroyed 1890, led to the establishment of the under such circumstances, this event Division of Chemistry on this date. prompted the Bureau to request that Congress enact such a law. MAY1,1892 A new method of gauging distilled spirits was insti- JULY 1,1891 The bounty on sugar tuted, changing from rod or caliper enacted as part of the October 1890 measurement to weight. tariff act became available to sugar producers. MAY 5, 1892 An act required that all Chinese laborers in the United States JULY 1891 The Populist or Peo- apply to collectors of Internal Rev- ples' Party put forward an economic enue for a certificate of residence. platform calling for the free and unlimited coinage of silver, a gradu- hlARCH 1, 1893 Congress passed ated income tax, postal savings the California Debris Control Act, banks, government ownership of imposing a tax on hydraulic mining, railroads, and telephone and tele- the debris from which flowed into or graph operations, prohibition of alien was in whole or in part restrained by land ownership, immigration restric- dams or other works erected for the tion, and an 8 hour work day at their detention of debris by the California first national convention in Omaha. Debris Commission.

DECEMBER28, 1891 An official APRIL18, 1893 John W. h4ason audit of the revenue stamps main- resigned as Commissioner. tained in the vaults of the Bureau was initiated. APRIL 19, 1893 Joseph S. Miller of West Virginia became Commissioner DECEMBER29,1891 Deputy Mar- for a second time. shal D. c. c. Jackson was wounded by illicit distillers in Dekalb County. OCTOBER1893-J.Wu.4R~ 1894 The House Ways and Means Committee 1891-1892 The Bureau established explored the possibilities and desir- two new permanent laboratories in ability of an income tax in a series of San Francisco and New Orleans and hearings and discussions. -.+ NOVEMBER3,1893 Congress cure of adulterated food or drugs in passed an amendatory act to the Chi- the District of Columbia for which nese Exclusion Act of May 5,1892 the Bureau’s laboratorieswere not prohibiting the entrance of Chinese equipped to handle. persons into the United States. The responsibilityfor registering Chinese 1894-1913 Income from customs laborers remained with the Bureau of and internal revenue were roughly Internal Revenue. A supporting act equal during these years. required Chinese laborers to apply for certificates of residence through their JANUARY2,1894 The House Ways local internal revenue office. and Means Committee agreed with a 7-4 vote to impose a tax of 2 percent DECEMBER9,1893 The Treasury ! on all net incomes of corporationsand Department appointed a committee individual incomes over $4,OOO. This to conduct an inventory of internal marked the beginning of debate over revenue stamps in the vaults of the the new tariff bill. Stamp Division. The inventory was conducted from December 27,1893 JANUARY 8,1894 Ways and Means through January 3,1894. Committee Chairman William L. Wilson of West Virginia opened the DECEMBER19,1893 Representative debate on the Wilson tariff bill. John L. Bretz of Indiana introduced a bill which called for an income tax. JANUARY29,1894 A proposal to amend the Wilson tariff bill to include DECEMBER1893 President Grover I an income tax provision levying a Cleveland bowed to party sentiment 2 percent tax on all income above and in his annual message to Con- 1 $4,OOO for both individuals and corpo- gress gave a surprise endorsement to a rations was put forth in the House of “small tax” on corporate income. 1 Representatives. Only one in every 100 Americans was wealthy enough to 1893 Deputy Collector S. 1). pay the tax at this rate. Mather and General Deputy Collec- I tors J. L. Spurrier and S. C. Cardwell JANUARY 30,1894 The House voted~ were killed in Tennessee during raids , 175-56 in favor of adding the income on illicit stills. tax provision to the Wilson tariff bill.

1893 The Bureau issued revised I FEBRUARY1,1894 The Internal regulationsproviding for the analysis Revenue amendment was formally of milk samples in the District of passed by the House with a vote of Columbia to be conducted by the 182-48. All but 10 Republicans health office of the Districb under the refrained from voting. The Wilson supervision and control of the Bureau. tariff bill as a whole passed the House This action was taken in response to with a vote of 204-140, with 8 not vot- an increasing number of samples ing, after a rousing speech by Ways requiring analysis under the 1888 law and Means Chairman Wilson saying, which prevented the sale or rnanufac- I “This is not a battle over percentages,

70 over this or that tariff schedule; it is a income tax, the act reduced the duty 5 2 battle for human freedom.” on imported opium from $12 to $6 C per pound and provided that manu- APRIL2,1894 The Wilson Cariff bill facturers using alcohol in the arts or was introduced into the Senate medicinal compounds could receive Finance Committee by Senator a rebate or repayment of the tax paid Daniel W. Voorhees of Indiana. on this alcohol. This act allowed storekeepers and G MAY3,1894 The Bureau com- gaugers to perform the separate duties pleted its work associated with the of a storekeeper at any distillery or to registration of Chinese laborers. perform any of the duties of a gauger. Over 106,000 registration certificates The sugar bounty was repealed. The were applied for between the enact- tax rate on distilled liquors increased ment of the Chinese Exclusion Act from 90 cents to $1.10 per gallon and in November 1893 and this date. the tax on playing cards was set at two cents per pack. JULY3,1894 The Senate passed the Wilson Tariff Act. This act OCTOBER6,1894 The Secretary of revived the income tax, with a flat the Treasury advised the Commis- rate of 2 percent on corporate and sioner to take no action to enforce the individual incomes over $4,OOO. provisions of the Wilson Tariff Act Withholding was used for certain because Congress had appropriated corporation dividends and the no funds for its enforcement. salaries of government employees. The final vote for approval was DECEMBER22,1894 The constitu- 204-140 in the House and 39-34 in tional challenge to the income tax the Senate. The income tax provi- began with a bill filed in the Superior sions of this bill included confiden- Court of the District of Columbia to tiality protections, stating that “it restrain the Commissioner of Internal shall be unlawful for any collector... Revenue from collecting the tax to divulge or to make known in any imposed by the law on John G. manner whatever not provided by Moore. law to any person ... the amount or source of income, profits, losses, 1894 The Bureau of Internal Rev- expenditures, set forth or disclosed enue abolished the office of the in any income return by any person Microscopist, leaving the entire work or corporation.” of the laboratory upon the Chemist.

AUGUST 8, 1894 Deputy Collector J.WU.4RI’ 11,1895 The second chal- Wiley C. Lewis was wounded in lenge to the consitutionality of the Stokes County, North Carolina. income tax began with the filing of Hyde v. Continental Trust. AUGL-ST28, 1894 President Cleveland allowed the Wilson Tariff JANUARY 19, 1895 The case of Act to become law without his signa- Pollock v. Farmers’ Loan and Trust ture. In addition to reinstating the Company was brought in challenge to the income tax. Three constitutional MARCH7,8,11,12, 13,1895 The grounds were cited for the challenge, first hearings on the income tax cases 1) that it constituted a direct tax were held before the Supreme Court. which did not meet the requirement that such measures be apportioned MARCH15,1895 Deputy Marshal among the states on the basis of pop- W. N. Somers and Guide S. H. Coffey ulation, 2) that the exemption of were wounded. incomes below $4,OOO violated the requirement that taxes be uniform, APRIL 8, 1895 With a 5-4 vote, the and 3) that it impinged on the right9 Supreme Court ruled that the of state and local governments by tax- income tax was unconstitutional on ing the interest on obligations issued the grounds that it was a direct tax by these bodies. and had not been apportioned equally according to population as JANUARY 25,1895 Congress appro- the Constitution prescribed. priated $245,095 to defray the expenses of enacting and collecting APRIL15, 1895 A rehearing of the the income tax in the Urgent income tax case was requested by Deficiency Bill. Shortly thereafter, an Joseph H. Choate and his associates. Income Tax Division was established in the Bureau of Internal Revenue. APRIL2.5, 1895 Deputy Marshal S. H. Stalcup was killed. JANUARY 28,1895 The supreme Court agreed to accept all three cases MAY6-8, 1895 The Supreme Court filed against the income tax (Moore, reheard the income tax case. Hyde, Pollock). MAY20,1895 The Supreme Court FEBRUARY21,1895 AJoinc Resolu- upheld its original decision striking tion extended the deadline for pay- down the constitutionality of the ment of income taxes enacted in income tax. In a surprise move, one the 1894 tariff bill from March 1 judge reversed his position in favor to April 15. of the tax, which in effect rendered every section of the 1894 income tax. MARCH1, 1895 Congress prohibited law unconstitutional. the sale of “spirituous, vinous, or malt liquors” and other intoxicating bever- NOVEMBER 6, 1895 Deputy Collec- ages in the Indian Territory. tor J. R. Ware was wounded in Har- ris County, Georgia. MARCH2,1895 Congress passed an act to “regulate the sale of milk in the 1895 Before the end of the year, a District of Columbia” which relieved constitutional amendment to legiti- the Division of Chemistry laboratory mize an income tax and overturn the in Washington, D.C. of its duties recent Supreme Court decision was related to the sale of milk. Congress introduced in Congress. This effort also renewed the bounty paid to was not successful. sugar producers. THEREBIRTH OF THE INCOME TAX: CONGRESSPROPOSES A CONSTITUTIONAL AMENDMENT

The economic demands of the Spanish-American War prompted Congress to raise excise taxes on alcohol, tobacco, and other manufactured goods but did not prompt an immediate return to the income tax. Under the leadership of President , popular support for an income tax was revived in the first years of the twentieth century and by 1909 Congress had passed an amendment to the Constitution which would allow for an income tax without apportionment among the states. Only one state ratified the proposed amendment that year. MARCH9, 18% Deputy Collectors Walter F. Davis and James S. Smith were wounded at Kernersville, ' Florence, South Carolina, were North Carolina. wounded by B. L. Jones, an illicit distiller resisting arrest. APRIL 6,18% Congress passed a joint resolution providing for the NOVEMBER26,18% Joseph S. destruction of income tax returns, Miller resigned as Commissioner. copies, statements, and all related records from the Civil War income SOVEMBER27, 18% William St. tax. John Forman of Illinois became Commissioner. MAY5,1896 The Commissioner delivered all income tax returns and DECEMBER4,18% Deputy Collec- related documents to a committee tor Moffitt was killed by illicit dis- appointed by the Secretary of the tiller Lee Turner in Montgomery Treasury which promptly destroyed County, North Carolina. the records by burning them. 18% The Supreme Court upheld MAY6, 1896 The position of inter- the constitutionality of state inheri- nal revenue agent was brought into tance taxes in United Scates v. the classified Civil Service through a revision of the civil service rules. 18% The income tax was a major JUNE3.18% The act authorizing a issue in this year's presidential elec- rebate on alcohol used in the arts or I tion with William J. Bryan running for medicinal purposes was repealed. against William h4cKinley.

JUNE 6,18% A act defined cheese JANUARY 30, 1897 Congress and imposed a tax of one cent per enacted a law prohibiting the sale of pound on the manufacture, sale, intoxicating beverages to Indians in importation, and exportation of filled the Indian Territory. cheese. Imported filled cheese was taxed at the race of eight cents per MARCH4,1897 In his inaugural pound. address, President McKinley stressed the immediate need to maintain gov- JULY 13,18% Deputy Collector E. ernment credit by securing an ade- T. McAfee was wounded in an quate income through a system of ambush while on raid near Buford, taxation, external or internal, or both. Guinnett County.

AUGUST7,18% The Division of Sugar Bounty was discontinued. L ars. This was the first act that distin- checks, stocks, bonds, insurance C 2 guished between cigarettes and cig- policies, legal documents, chewing b

ars, defining a cigar as a cigarette gum, and wine. ae wrapped in tobacco. Previous acts U referred to “tobacco cigarettes.” APRIL 29,1898 Congressmen Joseph W. Bailey and Benton McMillan led JULY27, 1897 President McKinley an effort to add an income tax amend- c issued an Executive Order except- ment to Dingley’s revenue bill, but it ing 438 deputy collectors in the was rejected 134-171. Bureau of Internal Revenue, the Bureau of Customs, and other offices JUNE13, 1898 Congress passed the of the Treasury Department from War Revenue Act to provide revenue civil service laws. to support the Spanish-American War. The act doubled taxes on beer JULY27,1897 Posseman F. T. and tobacco products. Tobacco taxes Harper was wounded near Kingston, were increased from 6 to 12 cents per North Carolina. pound; taxes on large cigars and ciga- rettes were increased from $3 to NOVEMBER30,1897 Deputy Col- $3.60 per thousand and from $1 to lector A. A. Phillips and Posseman $1.50 on small cigarettes. D. B. Stewart were wounded near Special taxes on tobacco manufac- Greenville, North Carolina. turers, dealers, and sellers were reim- posed. This act imposed a tax upon DECEMBER31, 1897 William St. documents, instruments, and special John Forman resigned as Commis- taxes on bankers, proprietors of the- sioner. aters, museums, conccrt halls, cir- cuses, bowling alleys and billiard JANUARY 1,1898 Nathan B. Scott rooms. User fees were imposed on of West Virginia became Commis- federal recreational facilities. This sioner. act also imposed a tax on chewing gum at a rate of 4 cents per $1 of APRIL25,1898 Chairman of the value, defined mixed flour and Ways and Means Committee Nelson imposed a tax upon its manufacture, Dingley of Maine introduced a war sale, importation and exportation. ’ revenue measure that he estimated Despite this act, the major portion would produce an additional $100 of war expenses were paid through million. It included excise taxes, the loans rather than taxes. The Secrc- sale of war bonds, but no income tax. tary of the Treasury was authorized Special taxes were imposed on to issue up to $100 million in bankers and brokers, but also on the- certificates of indebtedness and up aters, circuses, bowling alleys, bil- to $400 million in 3 percent 10 to 20 liard parlors. Rates were doubled on year bonds. tobacco, beer, and liquor, while stamp taxes were instituted on bank JUNE27,1898 The Bureau issued regulations relating to the tax on -chcwing gum, requiring that a pro-

71 a.W prietary stamp be affixed to each JUNE7, 1899 A shortage in the 2 package of gum. stamp account of the Bureau was $ caused by the theft of beer stamps 3 0 AUGUST27,1898 Deputy Marshals amounting to $10,000. 3 4 B. F. Taylor and Joe Dobson were killed while Possemen Clay Renfrow JULY5, 1899 The United States and Sie Lawrence were wounded in District Court in the District of Q Pope County, Arkansas. Kentucky upheld the position of the government and the Bureau of SEPTEMBER9,1898 Possemen J. A. Internal Revenue to not release tax Robertson and J.F. Miller were documents, furnish copies of wounded in Polk County, NC. returns, or testify.

1898 The Supreme Court upheld AUGUST1899 The United States the constitutionality of state inheri- District Court, Eastern District of tance taxes in Magoon v. Illinois Pennsylvania, ruled in the case of Trust and Savings Bank. U.S. v. Dougherty that the oleomar- garine tax was constitutional and FEBRUARY28,1899 Nathan B. that the primary object of the oleo- Scott resigned as Commissioner. margarine law was to raise revenue. Dougherty had contended that MARCH1,1899 George W. Wilson rather than being a revenue mea- of Ohio became Commissioner. sure, the oleomargarine law was a police regulation which Congress APRIL 17,1899 Deputy Marshall had no power co enact. Taylor Harris was wounded in Hay- wood County, NC. 1899 The United States District Judge in Connecticut ruled that a APRIL 21, 1899 Sheriff J.S. Dawson collector of the revenue could not was killed in Haywood County, NC. compel a taxpayer to appear and testify before him as to the correct- APRIL24, 1899 Associated Press ness of returns made under the dispatches announced the seizure of oleomargarine law, judging that the hundreds of thousands of cigars provisions granting the collector manufactured at Lancaster, Pennsyl- the authority to summon persons vania, by the Jacobs and Kendig before him for examination applied firm, bearing counterfeit revenue to objects of taxation upon which stamps. The discovery of counterfeit the tax was collected by the stamps was made by an internal rev- method of return and assessment enue employee in Washingcon, and not to those upon which the D.C., and not in the districts in tax paid by a stamp. which these cigars were located. William M. Jacobs and W. L. Kendig 1899 A tax was levied on all opium were arrested. This was the first case manufactured in the United States of counterfeiting cigar stamps in the for smoking purposes. history of the Bureau. -. 76 k April 9,1900 The Supreme Court 1900 An additional deputy com- t z ruled that Collector's records were missioner was authorized. c ' t executive documents of the United 9 .c States and not releasable outside the JA~IJARY1901 An inventory of all - \c Department of the Treasury. I revenue stamps in the l'reasury NC Department vault was made for APRIL 16, 1900 The Supreme 1 accounting purposes. Court decided that express compa- nies were not forbidden to shift the MARCH2,1901 Congrcss passed the burden of the stamp tax by a reason- War Revenue Reduction Act which able increase in rates. The question reduced or repealed most taxes arose under the provisions of the imposed during the Spanish-Ameri- War Revenue Act of 1898 as to can War, but retained legacy taxes, whether the shipper or the carrier 1 excise taxes on oil and sugar refining had to pay for the stamp required on companies, and special annual duties transported goods. on bankers and brokers. This act reduced taxes on cigars and cigarettes APRIL30, 1900 The Collection and provided for a 20 percent dis- Distrct of was established in count on revenue scamps to manufac- Honolulu. turers of tobacco and snuff. Most of the tax reductions of this act took MAY14,1900 The Supreme Court 1 effect July 1, 1902. ruled that legacy taxes were consti- tutional. The tax was held not to be MARCH21,1901 Deputy Marshal a direct tax within the meaning of W. A. Hoss was wounded and Deputy AS. the Constitution, but rather, a duty Marshal..: Whiteley was killed dur- or excise. I.ing a raid in Lincoln County, Georgia.

NOVEMBER27,1900 George W. JIKY1, 1901 North and South Wilson resigned as Commissioner. Dakota were detached from the Nebraska Collection District and con- NOVEMBER29,1900 Deputy Col- I stituted as the North and South lectors John H. Chapman and Dakota Collection District, Charles Gee were wounded in a raid I in Northampton County, North I JULY23,1901 Posseman Cord Carolina. Mackie and Deputy hfarshal Price I were wounded in a raid in Purnam DECEMBER 12,1900 Deputy Col- County, Tennessee. lector John F. Lanier was wounded during a raid in Alabama and died JANUARY 11,1902 Deputy Marshall from his wounds on December 24. Holsonback was killed in a raid in I ,Ciarshall County, Alabama. DECEMBER20,1900 John W. Yerkes of Kentucky became Com- ' JAWCARY31,1902 Representative missioner. Sereno E. Payne of New York, Chair- man of the House Ways and Means Committee, introduced a bill to and established two new tax rates. repeal all Spanish-American War rcv- Thc act placed a tax of 10 cents per enue taxes. I pound on oleomargarine that was artificially colored;The act also pro- MARCH8,1902 Congress passed “an 1 vided for a tax of one-fourth of one act temporarily to provide revenuc for cent per pound on oleomargarine pro- the Philippine Islands, and for other duced free from artificial coloration purposes.” The act stated, in part, that caused it to look likc butter of “that all the duties and taxes collected any shade of yellow. in the United States upon articles coming from the Philippine Archipel- JUNE 27,1902 Congress passed an ago... shallpot be covered into the act authorizing the refund of taxes general fund of the Treasury of the collected upon bequests for legacies United States but shall be held as a for uses of a religious, literary, charita- separate fund and paid into the trea- ble, educational character, or for the sury of the Philippine Islands to be encouragement of art, etc., under the used and expended for the govern- act of June 13,1898. ment and benefit of said islands.” JULY 1,1902 Special taxes on the APRIL 12, 1902 The bill to repeal all occupations of manufacturers and war revenue taxes became law. All dealers in tobacco were abolished. legacy taxes were repealed as part of this measure. This bill reduced the I SEPTEMBER 1,1902 Thc state of tax on tobacco and snuff to 6 cents per Washington and the territory of pound and provided for a rebate of tax Alaska wcre detached from the Ore- to manufacturers or dealers on all orig- gon Collection District and consti- inal and unbroken factory packages of tuted as the Washington Collection smoking and manufactured tobacco District. and snuff held by them on the effec- tive date of this act, July 1,1902. 1902 Legal opinion in the case of Parton v. Brady held that if a collector APRIL12,1902 An act of this date, dicd while suit was pending an action to take effect on July 1,1902 set the could be revived against his estate. rate of tax on tobacco, snuff, cigars, and cigarettes as follows: 6 cents per FEBRUARY14,1903 Congress pound on smoking and chewing approved an act creating the Depart- tobacco and snuff; $3 per thousand on ment of Commerce and Labor, to large cigars; 54 cents per thousand on include the Commissioner-General of small cigars; $1.08 per thousand on Immigration. This new organization small cigarettes; and $3 per thousand assumed responsibility for the regis- on large cigarettes. tration of Chinese persons, which had been conducted by the Bureau of MAY9,1902 The amendatov Ole* Internal Revenue. margarine Act, effective July 1,1902, abolished the previous tax rate of two cents per pound on oleomargarine I JULY 1,1903 A11 records, duplicate JULY4,1906 President Theodore certificates of Chinese residency etc., Koosevelt announced his support for from the Bureau of Internal Revenue graduated income and inheritance were transferred to the Commis- taxes in a speech celebrating the lay- sioner-General of Immigration. I ing of the cornerstone for the new House of Representatives building. NOVEMBER22,1903 Deputy Col- lector George ‘r.Rives was seriously JUNE 7, 1906 Congress passed an wounded while on a raid for the act providing that alcohol could be seizure of illicit stills near I denatured, free of rax, only in dena- Marysville, Virginia. turing bonded warehouses located I on the distillery premises where the FEBRUARY10,1904 At the request 1 alcohol was produced. Under this of the Commissioner, the Treasury law, only large distillers who pro- Department appointed three expert 1 duced alcohol from grain or molasses accountants to make a count of the 1 were able to cake advantage of this revenue stamps retained in the privilege. The act took effect Janu- Treasury Department vault and to 1 ary 1,1907 and was commonly verify all books and accounts. I referred to as the “free alcohol bill.” MAY31,1904 The Supreme Court 1 SEPTEMBER26,1906 The Bureau of upheld the constitutionality of the Internal Revenue issued the first of a oleomargarine act of May 2, 1902 in series of explanatory circulars regard- the case of Leo W. McCray v. The ing the denatured alcohol act of June United States. 7, 1906. This circular explained that small distilleries which had been ren- OCTOBER1904 The Supreme dered useless for producing alcohol Court held that “when any sub- for beverage purposes by reason of stance, although named as a possible local prohibitory laws might be ingredient of oleomargarine, sub- profitably employed in the distillation stantially serves only the function of of spirits for denaturation. coloring the mass.. . is an artificial coloration,” in upholding che consti- 1906 The Analytical and Chemical tutionality of the oleomargarine tax Division was transferred to the statutes. Bureau of Chemistry in the Agricul- ture Department. 1904 The United States initiated an international movement to sup- 1906 President Theodore Roosevelt press the growing opium traffic. brought the deputy collectors of the Bureau of Internal Revenue into the 1905 Posseman John Carver was classified civil service system. shot and killed while on a raid with Deputy Collector Spears for seizure of MARCH2,1907 Congress approved an illicit distillery near the Tennessee- an act allowing the establishment of North Carolina scate line. I small farm distilleries, with a daily capacity of not more than 100 proof

79 gallons. Distilleries of this class were paid. This led to the Opium Exclu- exempt from many of the require- sion Act the following year. ments relating to grain and fruit dis- tilleries. This act also authorized the JUNE 1, 1908 The state of Missis- use of denatured alcohol in the manu- sippi was added to the Alabama Col- facture of ether or chloroform and lection District. Prior to this, other chemical substances where Mississippi had been attached to the the alcohol used was changed Louisiana Collection District. into some other chemical sub- stance. This act amended the act JULY SEPTEMBER 8,1908 Com- of June 7, 1906 and went into effect missioner John Capers and Chief on September 1, 1907. Chemist Crampton travelled to Europe to gather information on &RIL 30. 1907 John W. Yerkes laws concerning the tax-free use of resigned as Commissioner. alcohol for industrial purposes in other countries. JLJNE5,1907 John G. Capers of South Carolina became Commis- 1906 By this year, Democratic and sioner. Socialist party members called for an income tax while the Roosevelt-Taft JUNE 1907 President Theodore wing of the Republican party Roosevelt declared that “most great expressed sympathy for the idea. civilized countries have an income tax and an inheritance tax In my judg- FEBRUARY4, 1909 An act this date ment both should be part of our sys- provided that any amcle containing tem of federal taxation.” alcohol brought from into the United States for consumption or NOVEMBER25,1907 The Second sale would be taxed at the rate of and Fifth Dismcts of Tennessee $1.10 per proof gallon to be collected were consolidated. at the port of entry by the collector of internal revenue. 1907 Alabama and Georgia adopted state prohibition laws. FEBRUARY9,1909 Congress . approved the Opium Exclusion Act JANUARY 31,1908 President Rm which prohibited the importation and sevelt recommended passage of a use of opium for other than medicinal direct income and inheritance tax in purposes after April 1,1909. his presidential address. MARCH17, 1909 Ways and Means MAY27,1908 The American Opium Committee Chairman Payne reported Commission was established. A prob- a bill that reinstated the federal inher- lem arose when it was realized that itance tax. This bill passed the House despite its efforts to curtail opium by a vote of 217-161 on April 9. traffic, the United States still allowed the importation of smoking opium as long as the appropriate taxes were - // k24RCH 25,1909 SenatorThomasP. JUNE16, 1909 President Taft sent - Gore of Oklahoma introduced a reso- a message to Congress stressing the 2 lution for an income tax amendment dangers to popular confidence in the ;; 0 into the Senate. Supreme Court which would arise if 9 Congress were to enact a general MARCH 29,1909 Tennessee Rep- income tax in the hope that the resentative Cordell Hull appealed Court would reverse itself. He sug- for immediate adoption of an income gested the adoption of a joint resolu- tax as “the fairest, the most equi- tion proposing to the states a federal table system of taxation that has yet income tax amendment to the Con- been devised.” stitution. He also proposed a 2 percent excise tax on the net APRIL 15, 1909 Democratic Sena- incomes of all corporations except tor Joseph W.Bailey of North Car- national banks, savings banks, and olina introduced an amendment to building and loan associations. the tariff bill that copied the 1894 revenue act except for stipulating a JUNE 17,1909 In response to 3 percent tax on incomes over $.$OW Taft’s message, Norris Brown intro- and exempting state, county, and duced a third resolution for a consti- municipal bonds. This was followed tutional amendment which read, soon by a Republican proposal for a “the Congress shall have the power graduated tax ranging from 2 percent to lay and collect direct taxes on on incomes over $5,000 to 6 percent incomes without apportionment on those over $lOO,OOO. among the several states according to population.” The Senate Finance APRIL 28, 1909 Senator Noms Committee amended this by striking Brown of Nebraska introduced a res- out the word “direct” and adding olution for an income tax amend- “from whatever source derived” ment into the Senate. He introduced after “incomes.” These changes a second resolution on June 11, were introduced by Senator Nelson 1909, but the Senate Finance Com- Aldrich of Rhode Island. mittee buried these and Senator Gore’s resolutions. JUNE 28, 1909 Senator Aldrich reported the Finance Committee’s MAY7,1909 Ex-Deputy Marshal resolution of the income tax amend- A. W. Holden was killed on a raid on ment to the Senate. an illicit distillery near Port Towson, Oklahoma. JULY 1, 1909 The Sixth District of California was formed. MAY1909 Republican insurgents and Democrats agreed to unite JULY 5,1909 The Senate approved behind a comprehensive plan that the constitutional amendment pro- was close to Bailey’s original pro- posal with a vote of 77-0. posal for an income tax. This group included all Democrats and 19 Republicans. JULY8,1909 The Senate passed AUGUST10,1909 Alabama became the Payne-Aldrich tariff bill which the first and only state this year to included a corporation excise tax by ratify the 16th Amendment. It a vote of 45-34. This bill included a would take until 1913 to achieve specific provision that such returns sufficient state votes to add the be made public...“ the return ... shall amendment to the Constitution. constitute public records and be open to inspection as such.” The AUGUST31, 1909 John G. Capers public nature of the returns was resigned as Commissioner. short-lived- it was changed in 1910. The Senate version of this bill con- SEYrEMBER 1,1909 Royal E. Cabell tained 847 amendments to the of Virginia became Commissioner. Payne bill with the inheritance tax feature deleted. SEPTEMBER2, 1909 Special employee D. A. Kanipe was shot and JULY12, 1909 After only four hours wounded on a raid near Tryon, of debate, thc House approved the North Carolina. proposed constitutional amendment by a vote of 318-14 DECEMBER22,1909 Deputy Col- lector L. C. Hill was shot and JULY31,1909 The President wounded on a raid on Laurel Creek, signed the Payne-Aldrich Act. Kcntucky by an accidentally dis- charged . AUGUS~5,1909 The Corporation Excise Tax became law, marking the DECEMBER24,1909 President Taft beginning of our modem system of issued his decision in a prolonged corporate income taxation. It was controvcrsy as to what composed called an “excise on the privilege of whiskey, to be effective July 1, 1910. doing business,” and imposed a tax of 1 percent on net corporation incomes 1909 Virginia enacted a state above $5,000. A Corporation Tax income tax, but huge numbers of its Division was organized to handle col- citizens refused to pay it. Tax agents lections for the new levy. travcllcd into rural counties to col- Outgoing President Roosevelt had lect it and some were never heard persuaded Congress to enact this from again. The tax was repealed in excise tax on corporate income. The 1910 after less than $100,000 was tax brought in $1 1 million the first collected. year and remained in effect until 1912. This new law also authorizcd 1909 Chairman of the House Ways state tax officials to inspect federal and Means Committee Payne returns and provided warned that the imposition of a fed- for the collection of internal revenue eral income tax would turn America taxes on the tobacco, cigars, and cig- into a “nation of liars.” arettes imported into the IJnited States from the Philippine Islands. 1909 Tennessee passed a prohibi- tion law. -. \ 82

- -__. (910 -1918 REVENUEEXPANSION: A CONSTITUTIONALAMENDMENT AND WORLD WAR 1 PROVIDE THE PUSH

Four years after its proposal, enough states ratified the 16th amendment to make it part of the Constitution. Within a few months Congress enacted a new income tax featuring progressive rates of one to seven percent on incomes above $3,OOO. The average annual income that year was $800. As a result, very few Americans faced paying the income tax. In addition to reinstating the income tax, the year 1913 saw the birth of the 1~040form. MARCH1, 1910 The first corporate 1910 Representative David Foster income tax returns were due on or of Vermont introduced three mea- before this date. The tax was to be sures to eliminate the non-medical assessed on or before June 1 and the use of narcotics. Together, the bills amount of tax collectible on or amended previous legislation pro- before June 30,1910. hibiting the importation of opium and other narcotics for nonmedical MARCH17-18, 1910 Fifteen cases uses by imposing taxes and new reg- filed by corporations challenging the ulations on their manufacture and 1909 corporation tax’s constitutional- distribution. The measure died in ity were consolidated as Flint v. the Ways and Means Committee. Stone Tracy Company and sched- uled for argument before the Supreme 1910 The tax on the manufacture Chnthis month. They were rear- of filled cheese under the act of gued in January 1911 since the June 6, 1896, was discontinued. Court could not arrive at a decision. FEBRUARY6,191 1 Oklahoma was APRIL 13,1910 Deputy Collector detached from the District of W. A. Anderson was killed on a raid Kansas and established as a separate in Walker County, Alabama. Posse- district. man Putnam was shot and wounded in the hip during the same raid. MARCH2,191 1 An act authorized acceptance of certified checks JUNE 25, 1910 The Deficiency drawn on national and state banks Appropriation Act authorized the for payment of internal revenue Commissioner to appoint internal taxes. This act formalized a long revenue agents and inspectors, with accepted practice. the approval of the Secretary, to carry out the provisions oft he Cor- MARCH13,191 1 The Supreme poration Excise ‘l’ax Act of 1909. Court sustained thc constitutionality These appointments were required of the corporation excise tax law in to be made in accordance with civil Flint v. Stone ’Tracy Company. Thc service regulations. Court ruled unanimously that the , 1909 corporation tax was constitu- DECEMBER19, 1910 Deputy Col- tional and not a direct tax, but “an lector T. H. Baker was accidentally excise on the particular privilege of shot and wounded at Memphis, doing business in a corporate capac- Tennessee. ity” and that the excise was on prop- erty measured by income of the 1910 The AppropriationsAct of parties subject to the tax. 1910 provided that “any and all such returns shall be open to inspection APRIL 17, 1911 Accountants only upon the order.of the President employed by the Bureau of Internal under rules and regulations to be pre- Revenue were brought into thc scribed by the Secretary of the Trea- classified civil service system by an sury and approved by the President.” executive order and appointed as revenue agents under the corpora- 63, four districts were consolidated 5 tion tax law. with other districts. These included the Fourth California, the Twelfth X6 L MAY29,191 1 The Attorney General Pennsylvania, South Carolina, and 2 approved the Bureau’s ruling that the the Fourth Texas. w 1909 act prohibiting the importation of opium for other than medicinal FEBRUARY 3,1913 The minimum purposes did not repeal the provisions number of states finally ratified the of the 1890 act which provided for the Sixteenth Amendment under which manufacture and taxation of opium Congress received constitutional for smoking purposes. authority to levy taxes on the income of individuals and corpora- JUNE 29, 191 1 Posseman G.S. tions. The amendment authorized Marsh was shot and wounded in a Congress “to lay and collect taxes on raid in Van Buren County, Ten- incomes, from whatever source nessee. derived, without apportionment among the several states, and with- AUGUST17, 1911 Deputy Collector out regard to any census or enumera- Henry was shot during a raid on an tion.” By March, a total of 42 states illicit distillery in Wilkes County, had ratified the amendment- North Carolina. six more than required. The 36th state to ratify, which provided the NOVEMBER1,1911 The Bureau ?4 majority needed, was Wyoming. adopted a new system of gauging spirits by weight rather than by rod. FEBRUARY25,1913 The Sixteenth Amendment officially became part 1911 Since this year, collections of the Constitution. States voting for from internal revenue have always ratification included Alabama (1909); exceeded customs revenue. Georgia, Illinois, Kentucky, Mary- land, Mississippi, Oklahoma, South JANUARY9, 1912 A disastrous fire Carolina, and Texas (1910); occurred in a large office building in Arkansas, California, Colorado, destroying the Idaho, Indiana, Iowa, Kansas, Michi- records of many corporations. Thus, gan, Missouri, Montana, Nebraska, it was impossible for such corpora- Nevada, North Carolina, North tions to make complete returns of Dakota, Ohio, Oregon, Tennessee, annual net income within the period Washington, and Wisconsin (1911 prescribed by law. Arizona, Louisiana, Minnesota, and South Dakota (1912); Delaware, APRIL9, 1912 A prohibitive tax on Maine, New Hampshire, New Jer- white phosphorous matches was sey, New Mexico, Vermont, West passed. Virginia, and Wyoming (1913).

OCTOBER1,1912 As a result of MARCH4,1913 In his inaugural legislation limiting the number of address, President collection districts to not more than charged that the tariff, “cuts us off -- 85 from our proper part in the com- JC‘LY 1, 1913 The tax on white merce of the world, violates the just phosphorous matches took effect. principles of taxation, and makes the government a facile instrument in AUGGST1,1913 The Fourth Dis- the hands of private interests.” On trict of Iowa was consolidated with his first day in office, the President the Third District of Iowa. called a special session of Congress to take up tariff reform. SEPTEMBER 1, 1913 The District of South Carolina was reestablished. APRIL8, 1913 President Wilson Previously South Carolina had been addressed a joint session of Congress part of the Fourth District of North on the need for tariff reform. Carolina.

APRIL 12, 1913 Ways and Means SEPTEMBER9,1913 The Senate Committee Chairman Oscar W. approved the Underwood-Simmons Underwood of Alabama introduced a tariff bill. This also marked the first bill which provided for lowering tar- surtaxes ever enacted by Congress. iff rates from the 40 percent level of the Payne-Aldrich Tariff to approxi- OCTOBER3,1913 The Undenvd- mately 29 percent. To offset the loss Simmons tariff bill, with income tax of revenue, the bill included an sections drafted by Representative income tax provision, the first to be Cordell Hull, became law with Pres- written under the 16th amendment. ident Wilson’s signature. The tax was 1 percent on net personal APRIL27,1913 Royal E. Cabell incomes over $3,000 ($4,000 for mar- resigned as Commissioner. ried couples), with a surtax of up to 6 percent on incomes over $SOO,OOO. APRIL 28,1913 William H. Osbom The maximum rate of tax on indi- of North Carolina became Commis- viduals was 7 percent on taxable sioner. income over $500,OOO. This bill also repealed the corpo- MAY8,1913 The House passed ration tax of 1909 and imposed a the Underwood tariff bill and sent it new tax of 1 percent on the net to the Senate Finance Committee. income of corporations. This act No attempt was made to remove the authorized the appointment by the income tax provision from the bill. Commissioner, with the approval This led to the first income tax to go of the Secretary of the Treasury, of into effect since the expiration of all necessary agents and inspectors Civil War income taxes in 1872. to carry out the income tax laws. The concept of total secrecy for MAY 1913 Deputy Collector U.C. individual tax returns was new McFarland was wounded at a dis- with this act. tillery in Meshack Creek Hollows, The average American worker, Kentucky. Posseman J. W. Ison was putting in 12 hours a day and earn- wounded at a distillery in North Car- ing $800 a year, remained unaf- olina this same month. fected by the tax. Federal judges, - -. */ \ 86

\ - .~ state officials, and the President the first year, no money was to be of the United States were exempt returned with the forms. Instead, from paying the tax on their public each taxpayer’s calculations were salaries. verified by field agents, who sent out bills on June 1. Tax payments were OCTOBER22,1913 All deputy col- due by June 30. lectors of internal revenue were excepted by statute from the civil JANUARY5,1914 Posseman C.E. service laws. McRight was wounded in a raid on a distillery near Allsboro, Alabama. NOVEMBER1, 1913 Collection of tax at the source (withholding) JANUARY7, 1914 The Secretaries of began with 1 percent of taxable net State, Treasury, and Commerce income to be withheld. issued joint regulations to limit the exportation of opium and cocaine 1913 The Commissioner was given and any salt derivative or prepara- the power to revoke the exempt sta- tions of ether, only to those coun- tus of any organization that failed to tries which had laws regulating the meet the exemption requirements of handling of narcotic drugs. Exporta- the code. tion was only permitted upon proper certification of the purchaser’s 1913 Upon passage of the income qualifications. tax law of 1913, a Personal Income Tax Division was established in JANUARY17,1914 Congress passed the Bureau of Internal Revenue. the Narcotic Drugs Import and A Correspondence Unit with Export Act which prohibited the 30 employees was created to answer importation, exportation, transship- a flood of questions about the law ment of opium for other than medi- and its enforcement. Also, a special cinal purposes in an attempt to division was established within the regulate the manufacture of smoking General Counsel area to prepare opium within the United States. opinions interpreting the internal This act repealed the provisions of revenue laws. By the end of fiscal the McKinley Tariff Act relating to year 1913 the administrative force in the taxation of smoking opium and Washington, D.C. numbered 277 increased the rate of tax from $10 to employees while the field force $300 per pound and the bond numbered 3,723. required of opium manufacturers from not less than $5,OOO to not less JANUARY5,1914 The Treasury than $100,000. Department unveiled the filing form for the new income tax. Together MAY9,1914 A new method of with its instructions, it was four counting stamps was initiated for pages long. The form was numbered stamps received from the Bureau of 1040 in the ordinary stream of num- Engraving and Printing. This pro- bering forms in sequential order by vided an accurate count of all stamps the Bureau of Internal Revenue. In before they were shipped to Col- - . */ \ 87 lectors. The change increased the OCTOBER22,1914 Congress counting capacity of the responded to President Wilson by 16 counters by 50 percent. passing the War Revenue Tax Act of 1914, which levied various internal JULY1, 1914 The Comptroller of excise taxes to make up for lost rev- the Treasury ruled that the practice enue from diminished customs of forwarding to the Treasury Audi- receipts as a result of World War I. tor the book stamps and coupons The bill was in large part a renewal returned from collectors which were of the Spanish-Amcrican War Rev- not charged to the official who had enue Act and provided for excises on received them be changed so that fermented liquors, wines, toilet arti- such stamps and coupons would be cles, and chewing gum. It also held by and charged to the Commis- imposed special taxes on bankers, sioner, whose certificates would be brokers, tobacco dealers and manu- accepted by the Auditor as sufficient facturers, owners of amusement evidence upon which to give credit places, and reintroduced stamp taxes to collectors for stamps returned to on legal documents, telegraph and the Treasury. telephone messages. These taxes were set to expire on JULY16, 1914 The number of dis- December 31, 1915. Bankers were tricts was limited to 64. required to pay a tax of $1.00 for each $1,000 of capital used or AUGUST18,1914 The Secretary of employed. Stamp taxes of 5 cents on the Treasury delegated to the Com- each $100 of face value, or fraction missioner the execution of the thereof, of certificates of stock were United States Cotton Futures Act also part of this law. enacted on this date. This act was designed to tax the privilege of deal- OCTOBEK23,1914 Taxes on ing on exchanges, boards of trade, wines, grape brandy, and fermented and similar places in contracts of sale liquors became effective. of cotton for future delivery. NOVEMBER1, 1914 Special taxes SEPTEMBER4, 1914 President Wil- enacted as part of the War Revenue son urged Congress to raise an addi- Tax Act became effective. tional $100 million through internal taxes to meet the loss in revenue DECEMBER1,1914 Stamp taxes on brought on by World War I financing. articles enumerated on Schedules A and B enacted as part of the War OCTOBER1,1914 The number of Revenue Tax Act became effective. collectors increased to 64 as part of the appropriations act approved in DECEMBER13,1914 The contents July 1914. of the two stamp vaults in the Trea- sury Building were moved to unfinished vaults in the Auditors' Building, where the vault section of the Stamp Division had been located. DECEMBER17,1914 Congress APRIL 13, 1915 O.B. Byrd, an .passed the Harrison Anti-Narcotics informer on a still operation in Act to regulate the sale of opium. Campbell County, Tennessee, was Under this act, all persons engaged killed. in the importation, manufacture, or 6 sale of narcotics were required to MAY 14, 1915 C.P. Phlegar, register and pay an occupational tax Deputy United Sates Marshal, was as well as a commodity tax on drugs killed while on a raid acting as a pos- imported or manufactured in the seman in Patrick County, Virginia. United States. The internal revenue tax on JUNE 30, 1915 The responsibility for opium was set at 1 cent per ounce, issuing the contract for internal rev- with the tax paid by the importer, enue stamp paper passed from the manufacturer, or producer by means Commissioner to the Director of the of stamps purchased from a revenue Bureau of Engraving and Printing. agent and affixed to seal the con- tainer closed. The special occupa- SEPTEMBER14, 1915 Posseman A. tional taxes established for handling A. Holder was injured during a raid of opium ranged from $24 per year near Howard’s Saw Mills, James for importers to $1 per year for County, Tennessee. physicians, dentists, veterinarians, or persons engaged in research. Other OCTOBER3, 1915 The persons rates included $12 per year for appointed to carry out the provisions wholesale dealers and $3 per year for of the income tax law under the act retail dealers. This act gave the passed two years earlier were cov- Commissioner responsibility for rcg- ered into the classified civil service. ulating the domestic manufacture and use of some narcotics and NOVEMBER5, 1915 Special opium. employee J. A. Galloway and Posse- man k L. Owen were seriously 1914 The Bureau of Internal Rev- injured while returning from a raid enue eliminated the practice of in Jackson County, North Carolina. destroying sheet revenue stamps returned in broken lots by Collec- DECEMBER17,1915 Congress tors. Instead, such stamps were passed a resolution to extend the stored in the stamp vaults and reis- 1914 War Revenue Tax Act which sued to Collectors. had been scheduled to expire December 31, 1915. FEBRUARY10, 1915 J.S. West, act- ing as posseman, was killed while 1915 By the end of fiscal year 1915, raiding a still in Putnam County, the personnel of the Bureau of Tennessee. Internal Revenue had increased to 530 in Washington and 4,200 in the MARCH 1,1915 The Harrison Anti- field. Narcotics Law took effect.

89 2 1915 Some congressmen experi- tions from the tax to the incomes of 2 enced difficulty in filling out their the President, state and local govem- income tax returns, charging that the ment employees, and federal judges. instructions were too confusing. The tax on net corporate income dou- They turned to the House Sergeant- bled from 1 to 2 percent. at-Arms who thus became one of For the first time, taxpayers could America’s pioneer tax preparers. report income on other than the cash One congressmen, trying to explain method of accounting. Es why the tax law was getting more trusts were taxed for the first=TI ’meand complicated, said, “I write a law. while the class of organiTations You drill a hole in it. I plug the hole. exempt from tax was substantially You drill a hole in my plug.” The increased. This act, which taxed remark is widely reported, and a new income “from any lawful business,” tax word- loophole- entcred the was amended by eliminating the word language. lawful- thereby clearing the way for taxing such activities as bootlegging, 1915 The Bureau began to issue gambling and other illegal enterprises. sheet stamps rather than coupon Collection at the source (withhold- stamps with stubs to oleomargarine ing) was repealed with “information manufacturers. at the source” substituted for this pro- vision. This act also defined “divi- JULY 5, 1916 Representative dend” for the first time and required of North Carolina, taxpayers receiving stock dividends to Chairman of the Ways and Means include the value in their taxable Committee, introduced a bill to raise income. In Eisner v. Macomber, the $200 million in additional revenue Supreme Court held that this aspect for defense appropriations. of the 1916 act was unconstitutional, arguing that stock dividends did not JULY10,1916 The House passed constitute income within the meaning the tax bill by a vote of 238-142. of the 16th Amendment. This case established the requirement that SEPTEMBER6,1916 The Senatc income must be “realized” to be tax- passed the revenue bill after two able. months of debate with a vote of 42-16. This act created the U.S. Tariff Commission as an independent SEPTEMBER8, 1916 The President agency to advise the President and signed the Emergency Revenue Act Congress on trade matters. of 1916, repealing the Emergency Revenue Act of October 22,1914. SEPTEMBER9,1916 The estate tax The income tax doubled from 1 to 2 law became effective with a due date percent on incomes above $4,000 for of one year after a decedent’s death. married persons and $3,000 for sin- gles. The surtax on incomes above 1916 The first “Statistics of $20,000 was increased on a gradu- Income” report was prepared this ated scale to a maximum rate of 15 year, as required by the Revenue percent. This act granted exemp- Act of 1916. The report was released

90

\ .. 1917 0 in 1918 and contained information SEPTEMBER25, William H. n for 1913-1915. Osborn resigned as Commissioner. -I 3) m 1916 cases *r Two challenging the SEPTEMBER26,1917 Daniel C. - income tax came before the Supreme Roper of South Carolina became 2 Court- Brushaber v. Union Pacific Commissioner. u Railroad Company and Stanton v. Baltic Mining Company. Stockhold- OCTOBER3,1917 The War Rev- ers in these companies brought these enue Act of 1917 became law. This suits to prevent their corporations was a sweeping measure dealing from complying with the 1913 income with income, excess profits, bever- tax law. ages, tobacco and tobacco manufac- turers, public utilities and insurance, 1916 Fewer than 500,OOO individ- excises, admissions and dues, stamp ual tax returns were filed this year. taxes, and estate taxes. The bill also completely reorganized the adminis- 1916 Michigan, Montana, Nebraska, trative forces of the Internal Rev- South Dakota, and Utah prohibited enue Bureau. the sale of alcoholic drinks. By this This act created a tax gathering time, 24 states had enacted prohibi- task of greater magnitude than had tionary laws. ever before been undertaken by any nation. Complexities in the language 1917 Approximately 3.5 million gave rise to serious questions as to individual tax returns were filed. whether the most important provi- sions of the law were administrable. MARCH2,1917 The act providing As a result of the provisions of this for a civil government for Puerto Rico act, the administrative force in stated that all taxes collected under Washington was increased from 585 the internal revenue laws of the personnel to 2,243. United States on articles produced in The bill imposed a 2 percent tax Puerto Rico and transported to on incomes greater than $1,000 for the United States or consumed on singles and 2 percent on incomes the island would be returned into the greater than $2,OOO for married cou- , treasury of Puerto Rico. ples, with graduated surtaxes up to 63 percent. A tax of 4 percent was MARCH3,1917 Congress passed a added to the existing tax on corpora- revenue measure, signed by President tions and excess profits rates were Wilson on this date, which never graduated from 20-60 percent. The went into effect because events graduated rates for estate taxes were quickly required its replacement. raised with the exemption of estates Nonetheless this act was important as of decedents dying while serving in a pathbreaker in American finance the military or naval forces. during World War I for introducing the The Senate OCTOBER10,1917 Congress approved the much changed revenue passed an act prohibiting the manu- bill by a vote of 69-4. facture of distilled spirits for bever- age purposes beginning November understand the new tax burden. A I 10,1917. By this time, 29 states had nationwide campaign of education prohibition laws. I and publicity was organized. A spe- cial effort was made to popularize NOVEMBER 1, 1917 Taxes on I the war taxes by emphasizing the admissions to entertainments, club needs of the country and appealing dues, facilities furnished by public I to national pride and patriotism. utilities such as transportation on I trains or vessels, of oil by pipeline, 1917 The war created popular and on telephone messages and I acceptance of the income tax by telegrams, and on insurance became making the paying of it a patriotic effective. I duty. Government speakers known as “Four-Minute Men“ fanned out DECEMBER 1, 1917 Stamp taxes on i across the nation, preaching about bonds of indebtedness, issues of I the importance of “defeating the capital stock, sales or transfers of Hun” by paying taxes promptly and capital stock, sales of produce on fully. exchange, drafts or checks, promis- sory notes, parcel post packages, pas- 1917 For this tax year, require- sage tickets, and a tax on playing I ments for withholding tax on cards became effective. incomes were amended to provide for withholding only from incomes DECEMBER 8,191 7 The amount of from sources within the United food or feed material used in the States paid to nonresident aliens and production of fermented liquor was on incomes of citizens, residents, limited to 70 percent of the normal I and nonresident aliens from interest consumption for this purpose by on tax-free covenant bonds.

presidential proclamation. I 1917 In an effort to encourage 1917 In response to increased i philanthropy, Congress authorized responsibilities required by the War I the deduction of charitable contribu- Revenue Act of 1917, the Bureau tions from . I placed the field forces operating under the immediate supervision of I 1917 The Internal Revenue train- the 64 internal revenue collectors ing program began this year, mark- and 31 internal revenue agents I ing it as one of the oldest formal under the control and direction, I training programs in the federal gov- respectively, of a Supervisor of Col- ernrn en t . lectors and the Chief Revenue I Agent, who were made equal in rank 1917 An official law library was to the existing three Deputy Com- I authorized for the Bureau of Internal missioners. I Revenue Bureau. I 1917 The Internal Revenue 191 7 The Council of National Bureau launched a special public I Defense requested the Secretary of education program to help citizens I the Treasury to have the Bureau’s

92 laboratory undertake the investiga- rate than 4 percent annually in pay- z 0 tion of the chemical synthesis of ment of estate or inheritance raxes, if 2 glycerine. the bonds had been owned continu- I W ously by the decedent for at least six n 2: 1917-1920 The federal government, months prior to the date of death. - 2 whose annual expenditures had never a reached $1 billion before 1917, spent MAY27,1918 President Wilson approximately $35 billion on war- appeared before a joint session of related expenses during these years, Congress in his famous “politics is slightly less than $10 billion of which adjourned,” speech to urge highcr went for loans to the Allies. President income taxes, excess profits taxes, Wilson expressed the hope that the and excises. cost could be “sustained by the pre- sent generation” through a program of JUNE 1, 1918 The Statistics of “well conceived taxation.” Eventu- Income report for tax year 1916 was ally, tax revenues paid for approxi- published. mately one-chird of the war’s cost, the remainder by government borrowing. JUNE 5,1918 The Secretary of the Treasury wrote to Congress outlin- JANUARY 30,1918 The first delega- ing the views of the Department as tiorijo collectors of authority to audit to the principal sources from which individual income tax returns was pro- additional revenues could be sought vided in Mimeograph 1755, allowing and the manner in which the tax for the audit of all Forms 1040-A in should be applied. the field offices of collectors. JUNE 1918 The Supreme Court MARCH1918 Evidence of the declared the 1916 child labor law increasing prevalence of narcotic unconstitutional by a vote of 5-4. addiction in the United States together with difficulties encoun- SEPTEMBER16,1918 The use of tered by the Bureau of Internal food or feed material in the produc- Revenue in administering the Nar- tion of fermented liquors was pro- cotic Drugs Import and Export Act hibited after December 1, 1918 by led the Secretary of the Treasury I presidential proclamation. to appoint a committee to make a thorough study of the narcotic drug I NOVEMBER21,1918 The war pro- problem. The report was published I hibition amendment to the agricul- as “Traffic in Narcotic Drugs: tural act of this date prohibited the Report of the Special Committee I sale of intoxicating liquors manufac- of Investigation, appointed March tured after May 1, 1919 for beverage 25, 1918, by the Secretary of the purposes and designated the Com- Treasury.” missioner of Internal Revenue as the officer who should regulate the man- APRIL4,1918 Congress authorized ufacture and use of alcohol for non- the acceptance of United States Lib- beverage purposes. The constitution- erty Bonds bearing interest at a higher ality of this wartime prohibition act 2 was upheld in U.S. v. Ranier Brew- 1918 The Secretary of the Treasury OI - ing Company in 1920. selected a group of prominent busi- ness and professional men to assist 1918 Individual returns with the Commissioner in drafting excess income not exceeding $5,000 filed profits tax regulations. These men for this year were audited by collec- served as “Excess Profits Tax Advis- tors in the field for the first time. As ers.” This group was superceded by a result, 80 percent, or 3.5 million the “Excess Profits Tax Reviewers,” income and profits tax returns, were which reviewed specific tax cases. examined in the 64 collectors’ offices.

1918 The Bureau of Internal Rev- enue instituted a policy of specializ- ing auditors within industrial classifications to increase the benefits of centralized auditing out of the Washington office. PROHIBITION, APPEALS,AND DECEKTRALIZATIOX: THEBUREAU FACES AN INCREASINGLY COMPLEX SYSTEM OF TAXATION T

The national experiment with prohibition involved the Bureau of Internal Revenue as the designated enforcer of the Faced with this new and demanding responsibility, the Bureau hired and trained hundreds of Prohibition agents to enforce the law. The Bureau’s activities in other areas of law enforcement expanded during these years with the addition of an Intelligence Staff to track tax fraud and other abuses. JANUARY-JUNE 1919 The Bureau The Appeals function originated of Internal Revenue hired over with this act with the formation of 1,OOO auditors during a massive an Advisory Tax Board, consisting recruitment effort. of six non-government members appointed by the Commissioner FEBRUARY3,1919 The House and approved by the Secretary of passed the . the Treasury. This new group replaced the Excess Profits Tax FEBRUARY13, 1919 The Senate Reviewers. passed the Revenue Act of 1918. The Commissioner had the author- ity to submit any case involving FEBRUARY24,1919 The Revenue income war profits and excess profits Act of 1918 became law. This act tax law issues to the Advisory Tax codified all existing tax laws and Board 30 days after the Income Tax included income tax provisions that Unit had completed its examination. imposed a normal and surtax rate The Board’s recommendations were structure that went up to 77 per- subject to the personal approval of the cent. The act also included new Commissioner. excess profits and estate taxes and a Payment of taxes by quarterly tax on anyone who employed child installment was authorized and the labor- an attempt to ban child ~ number of deputy commissioners labor through taxation. A Child was increased to five. The number Labor Tax Division was set up in of internal revenue agents was the Internal Revenue Bureau to hereafter limited only by the administer this portion of the law. amount of the appropriation avail- Also, as a forerunner of today’s able to pay them. exempt organization law, this act listed 14 categories of organizations FEBRUARY1919 A Civil Division exempt from income taxation. The was established under the office of filing deadline was also extended the Solicitor of Internal Revenue for individuals from March 1 to with responsibility for trial prepara- March 15. The act provided amorti- tion of all civil internal revenue zation allowances to permit manu- cases. facturers who invested in special war equipment to write off the cost. FEBRUARY1919 Upon the enact- The Commissioner was authorized ment of the Revenue Act of 1918, to require inventories when he the Bureau created a position for a believed they were neccssary to deputy commissioner in charge of a properly reflect income. new Division, charged For the first time, corporations were with interpretation and administra- granted an exemption of $Z.ooO, but tion of the taxes on transportation, corporate tax rates were raised to 12 telegraph, telephone, radio, cable, percent of net taxable income. A and ocher facilities, insurance poli- profits tax escalating from 30-80 per- cies, soft drinks and other bever- cent of excess or “war” profits was ages sold in closed containers, ice instituted for corporations. cream, admissions and dues, manu- - -. */ \ facturers, works of art and jewelry, 1 or more than six days a week, or LI.. z motion-picture films, toilet and before 6:OO a.m. or after 7:OO p.m. ;r: medicinal articles, motor boats and The amount of tax was 10 percent - 9 stamp taxes. of the annual net profits of the tax- 9 i payer. FEBRUARY1919 Treasury Deci- sion 2788 was issued, providing the MAY1, 1919 The Beverage Spirits procedures under which high proof 1 Division and the Non-Beverage and spirits could be distributed for non- Industrial Alcohol Division were beverage purposa, including medi- established as separate branches of cinal and sacramental purposes. the technical unit of the Bureau.

MARCH1, 1919 Prior to this date, JUNE 7, 1919 A general examina- a very simple accounting system of tion of about 3,000 field deputies single-entry bookkeeping was was held simultaneously in all col- employed in collectors’ offices. On 1 lection districts to discover the this date, a new system of double- special qualifications and deficien- entry accounting was instituted in 1 cies of collectors; to eliminate collectors’ offices. incompetent employees; and to I provide a basis for more intelligent MARCH13, 1919 The Advisory review of the recommendations of Tax Board was organized and collectors in connection with per- immediately began to analyze and sonnel matters. interpret those provisions of the Revenue Act of 1918 whose appli- JUNE 27, 1919 An Executive cation gave rise to complex ques- Order created 10 new collection tions. districts in Maine, Vermont, Rhode Island, Delaware, Mississippi, APRIL 1, 1919 Due to delays in North Dakota, Wyoming, Idaho, the printing and distribution of tax 1 Utah, and New Mexico. forms under the Revenue Act of With this action, every state 1918, the filing deadline for returns I except Nevada had its own collec- was extended from March 1 to April 1 tion district and collector of internal 1 this year. revenue. To retain the total number of districts within the 64 allowed APRIL25, 1919 Title XI1 of the by law, the following collection Revenue Act of 1918 placed a tax districts were abolished: Second, upon the employment of child Sixth, Seventh, and Eighth Districts labor. The basis for the tax was of Kentucky; the Seventh District employment in a mine or quarry of of Indiana; the Fifth and Thir- a child under 16 years old, or in a teenth Districts of Illinois; the First mill, cannery, workshop, factory, or District of Wisconsin; the Ninth manufacturing of establishment of a District of Pennsylvania; and the child under 14 years old, or of a Fifth District of North Carolina. child between the ages of 14 and 16 for more than eight hours a day + 97 JCLY 1, 1919 The Bureau of Inter- liquors for medicinal, industrial, and nal Revenue established the Intelli- religious uses. gence Unit to root out and prevent The implementation of Prohibi- tax fraud. Many serious complaints tion prompted the need to develop had reached Commissioner Roper a whole new concept of revenue concerning alleged tax frauds and collection and enforcement. From dishonest employees. Since he had 1868 through 1913, nearly 90 per- served as Postmaster General and cent of internal revenue came from was familiar with Post Office taxes on distilled spirits, tobacco, inspector work, Roper decided to and fermented liquor. Almost create the lntelligence Unit within immediately, bootleggers began the Bureau. Six Post Office inspec- operating around the country. tors were transferred to Internal Revcnue on this date. OCTOBER28,1919 As the National Prohibition Act became JULY 1919 .Instructions were effcctive, all distilleries and indus- issued to collectors of internal rev- trial distilleries producing alcohol enue to confer with United States were required to rcqualify as indus- attorneys and local health authori- trial alcohol plants. ties in their districts to devise plans whereby bona fide narcotics cases NOVEMBER 8,1919 A committee might be properly treated. appointed by the Commissioner immediately after the passage of the OCTOBER1,1919 The Advisory Tax Volstead Act submitted a recomrnen- Board was dissolved because its mem- dation to create a new unit, one bers preferred to return to their for- branch of which was to enforce the mer occupations. This was replaced penal and regulatory provisions of the by the Committce on Appeals and law and the other to supervise the Review- a quasi-judicial appellate permissive features of the law. body staffed with five members from the Bureau of Internal Revenue. NOVEMBER12,1919 Thc Com- missioner and the Secrccary of the ~OBER27,1919 Shortly after the Treasury approved the establish- ratification of the Eighteenth Amend- ment of the Prohibition Unit within ment, Congress passed the National the Bureau of Internal Rcvenuc. Prohibition Enforcement Act, also known as the Volstead Act, over Pres- DECEMBER1, 1919 The Tobacco ident Wilson’s veto. The act prohib- and the Miscellaneous Divisions ited the manufacture, sale, and use of were placed under the jurisdiction intoxicating beverages and gave the of the Sales Tax Unit. Commissioner of Internal Revenue primary responsibility for investigat- DECEMBER22,1919 The Prohibi- ing and enforcing prohibition. The tion Unit was formed within the Commissioner was given authority to Bureau of Internal Revenue with an issue permits for the manufacture, appropriation of $2 million under the sale, and transportation of alcoholic -Volstead Act. */ \ . 1917-1919 The personnel of the ' 1919 The Bureau of Internal Rev- z Washington office of the Bureau of 1 enue appointed a committee to -c Internal Revenue increased from , study the simplification of tax forms. 5 585 to 4,088 in this period. -4 1 1919 The close work between the $ 1919 The Bureau of Internal Rev- , Personnel Division and the Train- enue proposed a campaign to train ing Division in the recruitment of and recruit women for work "hith- 1 auditors and technicians for the erto done exclusively by men" 1 Income Tax Division led to the because the personnel ranks had combination of these two functions been depleted by wartime demands. 1 into a single division- the Staff Division. 1919 The chemical laboratory of 1 The Audit and Administration the Bureau was expanded and 1 Division was divided into two inde- established as the Division of 1 pendent divisions- the Adminis- Technology. tration Division, responsible for ' mails and files, space, equipment, 1919 The Bureau experimented I and supplies, and the Internal Audit with giving collectors in field offices Division, responsible for auditing responsibility for reviewing and ver- all but specialized returns. ifying all 1918 returns with incomes The Income Tax Unit estab- up to $5,OOo. lished the Field Audit Division responsible for the field forces 1919 The Bureau initiated a ser- engaged in investigation of income vice of providing information relat- and profits tax cases. Prior to this, ing to income and profits taxes in the field forces were under the the form of printed bulletins and direction of the Chief of Revenue monthly digests. ' Agents, who reported directly to the 1 Commissioner. 1919 The Bureau of Internal Rev- enue, in Commissioner's Mimeo- 1919 A Charitable Bequest Sec- graphed Published Opinion 2228, tion was organized as part of the formally announced that it was lim- Estate Tax Division to consider iting rulings to completed transac- deductions allowed under the Rev- tions and would require a full enue Act of 1918. statement of facts and the names of all interested parties. This was the JANUARY 1, 1920 An order went first published statement by the into effect requiring that appoint- IRS concerning its ruling policy and ments to clerical positions in the was the result of the number and field would be made from a register complexity of questions arising of eligibles obtained as a result of under the Revenue Act of 1918. Civil Service Commission examina- tions or by transfer from other classified positions.

- -. I JANUARY7,1920 The Tobacco Divi- MARCH31,1920 Daniel C. Roper sion and the Miscellaneous Division resigned as Commissioner. were consolidated into the Tobacco and Miscellaneous Division. APRIL1, 1920 William M. Williams of Alabama became Com- JANUARY16, 1920 Prohibition missioner. went into effect. APRIL 1, 1920 An order provided JANUARY26,1920 A stenographic that all supcrvisory office positions reserve was created in the Prohibi- would be filled by promotion of tion Unit to which all stenographers classified office or field employees, and typists not engaged in special by selection from civil-service duties or those with free time were certificates, or by transfer of assigned. classified employees from other branches of the government service. FEBRUARY1920 The position of Supervisor of the Narcotic Field APRIL 1920 The Bureau of Inter- Force was created. nal Revenue hosted a conference of all agents-in-charge in Washington, FEBRUARY1920 Importers and D.C. manufacturers as well as wholesale dealers registered under the Harri- MAY1, 1920 A central mail control son Narcotic Act were required to facility was established for the Pro- render monthly returns of cransac- hibition Unit through which all tions in narcotics. incoming and outgoing mail passed.

MARCH1, 1920 The Solicitor’s MAY1, 1920 On this date, all Office underwent a complete reor- qualified, unassigned storekeeper- ganization, resulting in five divi- gaugers who had been performing sions: Interpretative Division I, guard duty at bonded warehouses Interpretative Division 11, Penal were transferred to the position of Division, Civil Division, and warehouse agents. Administrative Division. MAY1920 The Solicitor of Inter- MARCH6, 1920 Congress passed nal Revenue organized a Confer- an act which required warehouse ence Committee, with the Assistant agents to be stationed at bonded Solicitor serving as Chairman, and warehouses throughout the United the four Assistant Solicitors in States to guard stored spirits. charge of the divisions.

MARCH11, 1920 The Sixth Vir- 1 JULY 1, 1920 The Accounts Unit ginia District was consolidated with was reorganized and a budget sys- the Second Virginia District. tem of accounting was installed. A Revenue Collection Division was created to deal with all internal rev- enue receipts, all certificates of deposit issued to collectors of inter- the work formerly administered by ; nal revenue by Federal Reserve the Division of Technology. banks and branches thereof, all I quarterly accounts, and all statistical OCTOBER19,1920 The Permit work. A Disbursement Division was Division of the Prohibition Unit E created to handle all matters relat- was created by dividing the Divi- ing to accounts of disbursing agents. sion of Technology into the Permit An officer designated as the Super- Division and the Industrial Alcohol visor of Accounts had control over and Chemical Division. these two divisions and was respon- sible for the preparation of esti- DECEMBER13-16, 1920 A second mates of appropriations submitted conference of agents-in-charge of to Congress. all divisions except Honolulu was held in Washington, D.C. JULY1,1920 The Office of Counsel and the Legal Division of the Prohi- DECEMBER1920 The Sales Tax bition Unit were consolidated. Bulletin Service was established in an effort to make immediately JULY1,1920 The office of the available to officers and employees Internal Revenue Agent-in-Charge of the IRS and to others concerned, at Little Rock, Arkansas was moved important rulings bearing upon to Oklahoma City, Oklahoma to be those provisions of the revenue acts nearer the large oil fields furnishing grouped as sales taxes. the major portion of its work. 1920 By the end of the fiscal year, JULY1,1920 The Second Collec- the Bureau established 11 new col- tion District was established in lection districts. These included Texas. districts in the states of Maine, Ver- mont, Rhode Island, Delaware,Mis- AUGUS~1,1920 The Review sissippi, North Dakota, Wyoming, Division of the Income Tax unit Idaho, Utah, New Mexico, and was created to meet the demands of Nevada. This also completed the the increased workload since the Bureau’s program to provide at least passage of the income tax law in one collection district in each state. 1913. 1920 The Internal Revenue legal AUGUST1, 1920 Beginning on this office was organized into five spe- date, all capital-stock and child- cialized divisions. labor tax returns requiring field investigation were handled by a 1920 The American Mining Con- force of deputy collectors specially gress urged the establishment of a trained for the work. board or committee to hear appeals of tax cases in dispute. OCTOBER15,1920 The Industrial Alcohol and Chemical Division was organized, taking over a portion of - -/ ;; 1920s The business boom during uicts conform more nearly to judicial 2 the 1920s enabled taxes to be cut 1 district boundary lines. five times while receipts remained high. 1 Aucusr 4, 1921 Secretary of the Treasury appeared JANUARY 1, 1921 Tax rate before the Ways and Means Com- decreases provided by the Revenue 1 mittee to recommend repeal of the Act of 1921 became effective. excess profits tax, reduction of the maximum income surtax from 65 FEBRUARY1,1921 The office of 1 percent to 32 percent, retention of the Internal Revenue Agent-in- ' normal income tax rates of 4 per- Charge at Columbia, South Carolina cent and 8 percent. He ended up was moved to Greenville, South 1 with a bill that reduced surtax rates Carolina due to the inability to to 40 percent and reduced the obtain suitable space in Columbia. excess profits tax. MARCH4, 1921 Warren Harding ' AUc[jST 9, 1921 Prohibition stressed the need to put "our public Mimeograph 201 stipulated that all household in order," in his inau- 1 criminal information, indictments, gural address. A first step in that injunctions, libels, and search war- direction, Harding insisted, lay in rants in brewery cases, with sup- lighter tax burdens. The new Secre- I porting affidavits, be prepared in tary of the Treasury, Andrew the Prohibition Unit and filed Mellon, became the architect of through the Department of Justice. that tax reduction program. NOVEMBER23,1921 The Revenue APRIL 11, 1921 William M. I Act of 1921 became law, substan- Williams resigned as Commissioner. tially reducing individual and corpo- 1 rate tax rates. The tax rate in the MAY27, 1921 David H. Blair highest bracket was 73 percent. This of North Carolina became Com- 1 act permitted taxpayers to appeal missioner. cases prior to assessment, but after determination of deficiency. MAY 1921 The Fordney Emer- ' Before any additional assessment gency Tariff Act reinstated protec- could be made, the taxpayer was tive tariffs on wool and a large 1 given 30 days to filc an appeal and variety of agricultural products. show cause as to why the additional tax should not be paid. Jurisdiction JCLY 1,1921 Fifteen counties in the of the district courts in hearing cases second collection district of Texas regarding refunds of taxes paid in were transferred to the first district of dispute was expanded from the pre- Texas and two counties from the first vious limit of cases involving not to the second district. This was an 1 more than $lO,OOO to unlimited effort to make the two Texas districts amounts if the collector had died more nearly equal in size and to have before action was commenced. the boundaries of the collection dis- -. This act also established a Tax 1921 Congress authorized the tax- Simplification Board to investigate ation of capital gains at a lower rate. the administration of the internal revenue laws. The Board consisted 1921 The Statistical Division of three members appointed by the issued the President to represent the public report for 1919 and the preliminary and three members from within the report for 1920. Bureau of Internal Revenue. This act prohibited unnecessary 1921 The personnel of the Commit- examinations or more than one tee on Appeals and Review were inspection of a taxpayer’s books for a increased from five to ten members taxable year unless the taxpayer due to the increasing volume of work. requested the additional audit or the Commissioner, after investigation, 1921 Legal opinion in the case of notified the taxpayer that the addi- Smietanka v. Indiana Steel Com- tional examination was necessary. pany held that a suit had to be The excess profits tax enacted in maintained against the collector 1917 was repealed. who was in office when the tax was collected, even if at the time the NOVEMBER23,1921 Congress suit was commenced the collector enacted the Willis-Campbell Act, had left office. supplementing the national prohibi- tion act by prohibiting the dispens- 1921 Suboffices of the Field Audit ing of malt liquors on physicians’ Division were opened in Houston, prescriptions and prohibiting the Dallas, Wichita Falls, Texas; Bridge- further importation and manufac- port, Connecticuq and Memphis, ture of distilled spirits, except alco- Tennessee. hol, until the quantities in storage in the United States were reduced 1921 During the year, the to an amount which, in the opinion Supreme Court ruled that the muni- of the Commissioner, was insuf- tions tax was valid; that gains real- ficient for any but lawful uses. ized from the sale of capital assets were taxable income; that state DECEMBER1921 Congress made a inheritance taxes could not be significant additional appropriation deducted from the gross estate to enable the Bureau to recruit 300 before computing the federal estate auditors for the consolidated returns tax; and that the estate tax act of subdivision, 75 engineers for the 1916 was constitutional. natural resources division and the amortization section, and 300 1921 During the year a prohibition clerks. Authorization was also made patrol service was organized consist- to recruit 600 field auditors and 120 ing of six boats of the submarine field clerks. chaser vpe, assigned at various points along the Atlantic coast for the suppression of . Five motor patrol boats were placed on -. 103 the Great Lakes to apprehend liquor I 1922 The General Audit Division smuggled from Canada. was reorganized into two dix‘wions, ’ the Personal Audit Division and the MAY15, 1922 The Supreme Court Corporation Audit Division. The Nat- declared the child labor tax law ural Resources Division was created unconstitutional and the Child- from the former subdivision of that Labor Tax Division went out of name of the Special Audit Division. existence. 1 1922 Membership on the Com- MAY23, 1922 In accordance with 1 mittee for ‘Tax Appeals was a recommendation from the Tax increased from five to ten. Simplification Board, the Accounts Unit and the Office of the Supervi- 1922 In the Administration Divi- sor of Collectors’ Offices were abol- sion, the Returns Control and Files

offices” as “supervisors of accounts “United States Court of Appeals on and collections.” Internal Revenue Questions.”

MAY26,1922 Congress passcd the JAWARYIY, 1923 Instructions Narcotic Drugs Import and Export were issued to collectors outlining a Act of 1922 which prohibited the procedure whereby they were importation of smoking opium and required to file monthly reports opium used in the manufacture of showing the amounts outstanding heroin. These were also of all classes of tax by years. extended to other narcotics such as coca leaves and morphine.This act FEBRUARY1923 The Prohibition authorized the Commissioner of Nar- Unit issued an annotated compila- cotics to determine the legitimate lev- tion of “Laws Relating to Prohibi- els of imports needed for medical and tion Enforcement.” scientific purposes and prohibited all other imports. Tougher Treasury bfARCII 10, 1923 The head of the Department regulations, however, Narcotics Division was designated provided greater controls on illegal Secretary of the Federal Narcotics drug trafficking. Control Board and began to admin- ister the permissive provisions of 1922 The Bureau of Internal Rev- the Narcotic Drugs Import and enue introduced form letters to EXPOITAct, known as the Jones- increase the speed and accuracy of Miller Act and directed the disposi- correspondence with taxpayers. tion of drugs seized thereunder. MARCH1923 Congressman JUNE16,1923 The Sales Tax Division was consolidated with C William Green of Iowa, Chairman 3 of the Ways and Means Committee, the Estate Tax and Capital Stock requested that Secretary of the Tax Unit. E z Treasury Andrew Mellon appoint U an ad hoc committee to study revi- JUNE19,1923 The President L1 sion of the signed an Executive order transfer- and make recommendations to ring administration of the national remove “inequalities” in tax law, to prohibition act in the Virgin Islands close “loopholes,“ and to “simplify” from the Secretary of the Treasury tax administration. to the Secretary of the Navy.

APRIL 1, 1923 An additional collec- AUGUST18,1923 The first move tion district was established in New toward decentralization of tax pro- York City, comprising that portion of cessing work from Washington, Manhattan Island from Twenty- D.C. to the field offices was made Third Street North. This district was when revenue agents-in-charge designated as the Third Internal were directed to retain reports of Revenue District of New York investigations in their offices for a period of 20 days and were autho- APRIL16, 1923 A commission on rized to consider protests of taxpay- the importation of wine and expor- ers filed with them within that tation of spirits held its first session. period.

APRIL 1923 The field supervisors’ NOVEMBER10,1923 The Mellon force of the Prohibition Unit was Plan of 1923 was presented to the reorganized and the employees Ways and Means Committee, were assigned to duty under the proposing a reduction of the normal supervision of the Chief, General income tax rates by one-fourth, Prohibition Agents. reduction of the surtax to 25 per- cent, and creation of a Board of Tax MAY29,1923 A Special Commit- Appeals independent of the Bureau tee on Appeals and Review was of Internal Revenue to hear tax formed to consider and dispose of cases. This plan was the result of the lar.ee- number of smaller cases the committee created in March to with tax controversies of over $2,500. I investigate current tax law. MAY1923 The Bureau of Internal DECEMBER16, 1923 The Tobacco Revenue created a special section and Miscellaneous Division was to consider and recommend the consolidated under the Miscella- assertion of fraud penalties. Known neous Tax Unit. as the Special Adjustment Section, this organization functioned inde- DECEMBER17, 1923 Secretary pendently from the Penal Division. Mellon sent draft legislation to the Ways and Means Committee to implement his recommendations of

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- the past month, which included cre- MARCH14, 1924 Hearings in an 01 - ation of a Board of Tax Appeals. Six investigation into the Bureau of months later, the Revenue Act of Internal Revenue by a select com- 1924 became law, providing some mittee of the of the most sophisticated tax legis- began under the authority of Senate lation to date. Kcsolution No. 168. The hearings were indcfinitely adjourned on 1923 Mabel G. Reinecke was April 9, 1924. appointed to the Office of the Col- lector of Internal Revenue in APRIL 1, 1924 Most of the func- Chicago- the first woman to tions of the Scamp Division were achieve this status. transferred to the Bureau of Engraving and Printing. This 1923 Membership on the Com- ! included transferring all stamps in mittee for Tax Appeals was the vaults of the Division with the increased from 10 to 20. Prior to this I exception of tobacco stamps year, hearings before the Commit- imprinted on tin-foil wrappers. tee could only be held in Washing ton, D.C. This year a field MAY16,1924 A Central Commit- Committee was established to hold tee of the Prohibition IJnit was hearings for taxpayers west of the ! appointed to consider major ques- Mississippi. tions and to ensure that all work relating to permits was coordinated 1923 President Coolidge’s first I and kept up-to-date. annual message to Congress announced support for a World I MAY26, 1924 In the case of Court, enforcement of Prohibition, I Lynch v. Tilden Produce Company, and lower taxes. At some point the Supreme Court rendered a deci- during his Presidency, Coolidge I sion holding that the Commissioner made the memorable statement, was without authority to specify by “Collecting more taxes than is I regulation that butter containing 16 absolutely necessary is legalized percent or more of moisture was robbery.” I adulterated, based solely upon that fact. This meant that in order to JAVUARY 1,1924 In a further move sustain a case under section 4 of the towards decentralization and to elimi- act, insofar as the moisture content nate unnecessary handling of returns. of butter was concerned, it had to all individual income tax returns filed be shown that some material or on Form 1040 showing gross income process was used with the intent or under $lS,ooO were retained in the 1 effect of causing the absorption of offices of the collectors of internal rev- abnormal quantities of moisture. enue and audited using the same pro- cedures in effect for the audit of 1 JUNE 2, 1924 President Coolidge returns filed on 1040-A. This elimi- signed the into nated forwarding several thousand law, significantly reducing income returns to Washington, D.C. I tax levels and creating a Board of Tax Appeals. This act eliminated transferring control of the distribu- .c the requirement for a taxpayer to tion, warehousing, and denaturing c present his protest against the pay- of alcohol to prohibition administra- ’ ment of taxes either prior to or with tors, and leaving internal revenue : the tax payment. With this act, suit collectors with the responsibility of could be commenced after a claim collecting the tax. h\L for a refund was denied or after six months from the filing of the claim, JULY2, 1924 President Coolidge whichever was sooner. selected the first 12 members of The act required that the name, the Board of ‘I‘ax Appeals, seven address, and tax payment of every from the public and five from the taxpayer be made available to the Bureau of Internal Revenue. public. Congressional committees, state officials, and upon order of the JULY15,1924 The Reviews Divi- President, the public, were given sion of the Office of the Solicitor access to tax returns. was created, taking over functions Estate tax rates were increased previously exercised by the Com- and the first was imposed as mittee on Appeals and Review and part of this act. The income tax law the Special Committee on Appeals became Title 26 of the United and Review. Its function was to States Code. Prior to this, tax laws hear and determine all protests had simply been published in against the action of the Income “Statutes at Large.” Tax Unit wherein a deficiency of This act abolished the Commit- tax had been determined. tee on Appeals and Review and established the Board of Tax JULY 16,1924 The United States Appeals, the predecessor of the Tax Board of Tax Appeals, created by Court, to provide taxpayers with an the Revenue Act of 1924, was for- independent review of asserted mally organized to hear appeals from deficiencies. additional assessments after June 2, Taxpayers were required to pay 1924, in cases involving income, taxes by quarterly installments. excess-profits, estate, and gift taxes. Interest did not accrue on the A total membership of up to 28 was installments, except to the extent authorized for a period of two years. that payments became delinquent, On this date, the first 12 members of in which case the balance could be the Board of Tax Appeals were demanded by the Commissioner. sworn in. The Committee on Special taxes on proprietors of the- Appeals and Review was abolished aters, public exhibitions, shows for by Treasury Decision 3616. money, and circuses were repealed, effective June 30, 1924. SEFTEMBER1,1924 Field offices of the Income Tax Unit were allocated JUNE30, 1924 The Bureau of up to eight supervisory districts and Internal Revenue revised its regula- a supervising internal revenue agent, tions for the administration of Title acting in an advisory capacity to the 111 of the National Prohibition Act, deputy commissioner in charge of the Income Tax Unit, to supervise 1924 The Board of Tax Appeals the work of each of the districts. I ruled that Certified Public Accoun- Also, the office of the assistant I tants and attorneys were the only deputy commissioner in charge of I representatives qualified to.appear field divisions was abolished. before them on behalf of taxpayers. I NOVEMBER1924 After testing in JANUARY 1925 A Sacramental I eight field offices, the Bureau of Wine Withdrawal Section was Internal Revenue decentralized the I established to guard against abuse audit of income tax returns, leaving of the privilege of using wine for only the duty of review to the I sacramental and religious obser- Washington, D.C. office. I vances. DECEMBER1,1924 The Income FEBRUARY24, 1925 Dollar limita- Tax Unit adopted a procedure I tions on cases involving payment of whereby the taxpayer was requested I refunds on taxes in dispute were to file protests or appeals with the I removed if at the time the suit was local agent-in-charge in all cases. commenced the collector was out I of office. DECEhlBER 29, 1924 The gross I income limit for income tax returns I hlARCH 18, 1925 The membership retained and audited in the field of the Board of Tax Appeals was I was raised from $15,000 to $25,OOO, increased by four, to a total of 16. effective January 1, 1925. i I APRIL24, 1925 The Appeals Divi- 1924 The Bureau of Internal Rev- I sion was established in the Solici- enue abandoned the policy of provid- I tor’s Office to alleviate the growing ing specialized auditon in industrial 1 workload of the Board of Tax classifications. Appeals. Its initial staff included 26 The Special Audit, Natural I lawyers and 5 assistants. Resources, and Administration Divi- I sions of the Income Tax IJnit were I MAY2, 1925 The Metals and Nonmetals Valuation Sections of abolished. The Consolidated Returns I Subdivision was made a division and the Engineering Division were the Records Division and the Service I abolished and replaced with a sin- Division were created from the for- I gle section designated as the Metals mer Administration Division. I and Konmetals Valuation Section. 1924 Senate Resolution 168 of the I MAY 6, 1925 Personal Section No. 68th Congress appointed a commit- I 6 of thc Personal Audit Division tee to investigate the Bureau of I was abolished and their work trans- Internal Revenue. ferred to the remaining five audit I sections. I I

108 . MAY11, 1925 A Supreme Court OCTOBER1925 A second division E- decision in the case of Lewellyn v. of the Board of Tax Appeals visited Frick held that St. Louis and Kansas City. payable to specific beneficiaries who had been named prior to the NOVEMBER1, 1925 The head- 1918 revenue act could not be quarters of supervisory field Dis- taxed. trict No. 3 was moved from Baltimore to Philadelphia. MAY1925 The first division of the Board of Tax Appeals was sent out- NOVEMBER23, 1925 Coal valua- side the Washington, D.C. area to tion and the metals and non-metals hear appeals from taxpayers in sections of the Engineering Divi- other parts of the country. This sion were combined and designated field session visited Milwaukee, St. as the Mining Section. Paul, Seattle, Portland, San Fran- cisco, and Los Angeles. NOVEMBER30, 1925 To ensure that the benefits of the Training JULY 1, 1925 The Staff Division Section were accessible to all was abolished and its work and employees of the Bureau, the responsibilities distributed to various Training Subsection of the field- other units. An Efficiency-Record Procedure Section was abolished Section and a Field-Procedure Sec- and its functions transferred to tion were created and were attached the Training Section of the to the Office of the Assistant Deputy Appointment Division. Commissioner. DECEMBER1, 1925 The Pitts- JCLY1, 1925 The Bureau of Inter- burgh Division was withdrawn from nal Revenue initiated a policy of supervisory Field District No. 3 and assigning engineers to certain field established as the headquarters of divisions to advise and assist super- supervisory Field District No. 2. vising internal revenue agents and Also on this day, the State of agents-in-charge of field work. Florida was withdrawn from the These individuals were designated boundaries of the Atlanta Division as engineer revenue agents and and a new division with headquar- worked directly under the supervis- ters at Jacksonville was created. ing internal revenue agent. This action was considered neces- sary due to the rapid increase of OCTOBER19,1925 Secretary of land values in Florida. the Treasury Mellon appeared before the Ways and Means Com- 1925 Senator James Couzens of mittee to recommend further tax Michigan charged that millions of reduction, including lowering the tax dollars were being lost through surtax to 20 percent and repealing the favorable treatment of large cor- federal estate and gift taxes. porations by the Bureau of Internal Revenue.

109 1925 By the end of this period I 2 calls for construction of a new facil- icy to house the Bureau of Internal j 5 Revenue became more pro- nounced. While the Commissioner and the Intelligence Unit were located in the main Treasury Department building, the remain- der of the Bureau’s Washington, D.C.-based employees were I housed in 10 separate buildings. The Income Tax Unit alone worked out of six buildings. Many of the units were located in tempo- rary structures erected during World War I and intended for emergency use only. This year, the Commissioner issued an urgent plea for funding and support for a new consolidated building. I DEPRESSIONAND ORGANIZED CRIME: TAXRATES AND GANGSTERSFALL

The downfall of AI Capone for income tax evasion is probably the most famous coup in the history of internal revenue criminal tax enforcement. During the years of the Depression, the Bureau of Internal Revenue continued its tax collection and enforcement responsibilities even though the economic conditions throughout the country resulted in decreases in most tax rates. JANUARY2,1926 A Prior Year Audit Solicitor of Internal Revenue in the Section was created within the Per- Department of Justice. sonal Audit Division, with responsi- Congress authorized a depletion bility to audit all open returns for tax allowance of 27.5 percent for oil and years 1917-1919. gas resources. This “oil depletion allowance” came under almost con- JANUARY15,1926 The Affiliations stant attack for the next half-century Section and the Production Commit- as a tax loophole for the rich. This act tee of the Consolidated Returns enlarged the jurisdiction of the Board Audit Division were abolished and of Tax Appeals and provided a their functions combined with the method of appeal from its decisions Administrative Section of the same by either the Commissioner or the division. taxpayer to a circuit court of appeals or to the Court of Appeals of the Dis- JANUAHY15,1926 The headquar- trict of Columbia. ters of supervisory Field District No. A special congressional committee 7 was relocated from Atlanta to was appointed to investigate the Louisville. administration of the Bureau of Inter- nal Revenuc, in a continuation of FEBRUARY26,1926 The Revenue work begun by Senator James Act of 1926 lowered surtaxes on Couzens of Michigan. The Joint higher incomes, lowered tax rates on Committee on Internal Revenue large estates, and repealed the gift Taxation was to consist of five mem- tax The gift tax was replaced with a bers from the House Ways and Means provision that treated all gifts made Committee and five from the Senate within two years of death as being Finance Committee, including six part of a decedent’s estate. Income majority and four minority members. tax rates were reduced to 1 X percent, 3 percent, and 5 percent, and exemp- MARCH1, 1926 As a result of the tions were increased. These reduc- repeal of various taxes by the Rev- tions were possible due to the enue Act of 1926, the Miscellaneous Revenue Act of 1924 “producing Division was organized, taking over more revenue than was necessary to the work of the former Sales Tax carry on the functions of the Govem- Division and the administration of ment.” the miscellaneous taxes from the This act also slightly increased the Tobacco and Miscellaneous Divi- rates on corporations, inuoduced sion. installment reporting, and repealed the “publicity provisions” of the 1924 MARCH27, 1926 A prior year Audit act. A list of names and addresses of Section was established in the Cor- those filing returns was still made poration Audit Division to audit all available for public inspection. open excess profits returns. Congress also directed the creation in the Treasury Department of thc APRIL 30, 1926 The Records Divi- Office of General Counsel for Internal sion was abolished and the Statistical Revenue and abolished the Office of Division redesignated as the Statisti- cat Section. A new Clearing Division correspondence, and memorandum 5 and a new Records Division were be filed with the returns. -4 established. The Clearing Division N\o was charged with reviewing the DECEMBER18,1926 Mimeograph classification placed on tax returns 3498 withdrew all 1040 returns from and the final closing of those returns the collectors and left them with the designated as "accepted." 1040-A returns only for audit, effec- tive January 1, 1927. MAY24,1926 The Public Buildings 1 Act of 1926 authorized construction 1926 The Bureau of Internal Rev- funding for the . enue prepared Bulletin A which con- I tained all the income-tax forms M.~Y26, 1926 President Coolidge under the and announced the names of the 16 men Bulletin B, "Withholding of Income he would appoint to the Board of Tax at the Source and Information Tax Appeals. at the Source."

JUNE2,1926 The terms of office of JANUARY 1,1927 The field service of the original members of the Board of the Income Tax Unit was reorganized Tax Appeals expired. Members I with the discontinuance of the eight appdinted after this date would be supervisory districts. Each division appointed for ten year terms. I was constituted as an independent organization, wich each revenue JULY 1,1926 The Capital Stock agent-incharge responsible to the Tax was repealed. head of the unit in Washington, D.C.

JULY26,1926 A decision was made FEBRUARY1,1927 The Fourth to proceed as soon as possible with Collection District of Michigan in construction of both the Internal Rev- ' Grand Rapids was consolidated with enue and Department of Commerce the first Collection District in buildings in an attempt to alleviate I Detroit. dangerous conditions which threat- ened both employees and records in AFWL 1,1927 The Prohibition Unit the temporary buildings. was uansferred to the Treasury Department and became the Prohibi- Aucr!sr 1, 1926 The Service Divi- tion Bureau by Public Act 951. sion was abolished and its work and personnel transferred to a new Ser- MAY10,1927 The Supreme Court vice Section. reversed a lower court's decision and ruled that profits from crime were AUGU.W26,1926 Elliot Ness taxable. "We see no reason to doubt joined the Prohibition Service. the interpretation of the [Revenue] Act, or any reason why the fact that a NOVEMBER 12, 1926 Instructions ' business is unlawful should exempt were issued directing that all rev- it from paying the taxes that if lawful enuc agents' reports, copies of audit i it would have to pay."

113 MAY31,1927 The Engineering pending income tax cases in the OI- Division was abolished and a new I Bureau. The functions and person- >.4 Engineering Section was established nel of the 60-day conference unit of E and assigned to the Consolidated thc corporation and personal audit Returns Audit Division. divisions were transferred to this Committee. This Committee was a 6 JUNE 10, 1927 The audit of all forerunner of the Appeals function. transportation and public utilities cases was centralized in the Consoli- JULY1927 An Audit Section was dated Returns Audit Division. established in the Income Tax Divi- sion of the office of each field collec- JULY1, 1927 The Special Assess- tor of internal revenue. The ment Section was transferred from responsibility for the initial audit of the Income Tax Unit to the Corpo- tax returns was shifted to the field ration Audit Division. with the Washington, D.C. office reserving authority to verify field JULY 1,1927 The Office of the actions. Internal Revenue Agent-in-Charge in Trenton, New Jersey was moved AUGUST1, 1927 The Corporation to Newark and the Internal Revenue Audit Division, Personal Audit Divi- Agent-in-Charge in San Antonio was sion, and the Special Assessment moved to Dallas. Section were abolished and the Field Audit Review Division was JULY1, 1927 The administrative crcated. organization of many collector's offices was changed to eliminate the OCTOBER1927 The Bureau chief office deputy and chief field adopted overassessment procedures deputy positions and instead have a for the collection of estate taxes simi- single position, known as the Assis- lar to those used in income tax cases. tant to the Collector, to direct the activities of both the office and field NOVEMBER21,1927 Ground was forces. broken for the Internal Revenue building in Washington, D.C. JULY28, 1927 A Special Advisory Committee was formed as part of 1927 Organizational changes dur- the Commissioner's Office to help ing the year included merging the alleviate the workload of over 18,000 Personnel Office and the Efficiency cases pending before the Board of Records Section into a Personnel Tax Appeals. The Committee was Section, abolishment of the adminis- composed of a Chairman and 12 trative section of the Consolidated members in Washington, D.C., Returns Audit Division, transfer of assisted by 20 revenue agent confer- the Photostat Laboratory from the ees throughout the country. These Income Tax Unit to the administra- conferees held conferences with tax- tive function, and abolishment of payers and examined the reasons thc Distribution Section of the underlying the accumulation of Records Division. 1927 The Bureau initiated the use Division, of the Commissioner’s I of form letters to request that the Office. -5 taxpayer appear in the office of the cN special agent-incharge with his APRIL 12,1928 A new section, des- c+i records for an office audit. ignated as the Personnel Section, was created in the Deputy Commis- 1927 To shorten procedures and sioner’s Office, comprised of the for- & economize, the Bureau issued insrmc- mer Office of the Personnel Officer tions that cenified copies of tax and the Efficiency Records Section returns and related papers requested which were abolished. by taxpayers would be furnished by the Records Division of the Income MAY1, 1928 A new field division Tax Unit in Washington. Previously, known as the Upper New York Divi- this responsibility had been split sion was established, including part between the Income Tax Unit and of the New York Division north of the General Counsel, resulting in 23rd Street and New York City. The duplication of effort. former New York City Division was designated the Second New York JANUARY31,1928 The Review Division. Section of Consolidated Returns Audit Division was abolished with MAY1, 1928 The Consolidated the personnel and functions of this Returns Audit Division and the section transferred to other sections Field Audit Review Division were of the Division. abolished and replaced with a new division designated as the Audit FEBRUARY13,1928 The Distribu- Review Division. tion Section of the Records Division was abolished. MAY20,1928 The Review Section of the Appeals Division of the Office MARCH12,1928 The Capital of the General Counsel was created Stock Tax Division of the Miscella- to consider appealed cases with the neous Tax Unit was abolished and a goal of reaching settlement without Capital Stock Tax Section was cre- a hearing before the board. ated in the Miscellaneous Division. MAY29, 1928 The Revenue Act of APRIL10,1928 The Field Service 1928 became law. Income and surtax was transferred to the immediate rates remained unchanged from supervision of the deputy commis- 1926 (lX, 3, and 5 percent); corpo- sioner in charge of the Income Tax rate net income tax rates were Unit. reduced from 13.5 percent to 12 per- cent; the excise tax of 3 percent on APRIL 10,1928 The Photostat Sub- manufacturers prices of passenger section, Service Section, was trans- autos was repealed. Employee plan ferred from the Income Tax Unit rules began with this act as did the and placed under the supervision first failure to pay penalty, with a flat and control of the Administrative rate of 25 percent of the tax due on

115 the return as the penalty regardless 1928 A Legislative Research Sec- 2 of how late it was. tion was created in the Internal Rev- w z enue Bureau. 2. JUNE 29,1928 The tax on grape brandy or wine spirits used for the 1928-1936 Construction of Internal fortification of wines was reduced Revenue building. from 60 cenu to 10 cents per proof gallon effective this date. Wines MARCH5, 1929 The Interpretative could be removed or sold for the Division was abolished in the Gen- production of vinegar or dealco- eral Counsel’s office. holized wines tax free and the tax on dealcoholized wines containing less MARCH14, 1929 An Executive than one-half of 1 per cent of alcohol Order required the Review Division was repealed. to allow taxpayer’s hearings and gave this organization responsibility for JULY 1, 1928 The special tax on preparing the public decision, upon retail dealers in narcotic drugs was claims for refund, credit, or abate- reduced from $6 to $3 a year. ment of income, war-profits, excess- profits, estate and gift taxes, when JULY 19,1928 The General Coun- the allowance exceeded $2O,OOO. sel’s office created a Review Divi- sion as the successor to the Review APRIL 1, 1929 Acentral waiver file Section of the Appeals Division. was established in the Bureau to This unit had the mission of trying safeguard these important docu- to settle cases pending before the ments and institute a system that Board of Tax Appeals. would permit notification of auditors 60 days in advance of waivers on file 1928 By this year, 2.57 Prohibition which were about to expire. employees of the Bureau of Internal Revenue had been prosecuted and MAY31, 1929 David H. Blair 706 removed from their positions resigned as Commissioner. for violations of the law or corrupt practices. JUNE 21,1929 Robert H. Lucas of Kentucky became Commissioner. 1928 Branch offices of thc General Counsel’s office were established in OCTOBER8,1929 Ralph Capone the field to bring about closer coop- was arrested with a warrant signed eration with United States attorneys, by Arthur P. Madden, Agent-in- collectors of internal revenue, and Charge of the Intelligence Unit in revenue agents in the handling of Chicago. federal tax matters. Permanent rep- resentatives were assigned to New DECEMBER16,1929 President York, Chicago, Pittsburgh, Boston, Hoover signed a new revenue act Miami, Los Angeles, and Seattle. providing for a $160 million cut in Later, an additional representative the income tax. This act lowered was assigned to St. Paul. income tax rates to %, 2, and 4 per- - -. -/ \ 116 cent and lowered corporate tax MARCH16,1930 The state of Ari- rates from 12 to 11 percent. zona was withdrawn from the bound- aries of the Denver Division and 1929 A legal division was estab- annexed to the Los Angeles Division. lished with the duty of reviewing cases involving substantial amounts JLXE 1, 1930 The main section of of tax refunds. the new Internal Revenue building was completed and occupied. The 1929 The Bureau instituted a sys- building was built on Constitution tem of punched cards to develop sta- Avenue as part of the Federal Trian- tistical data from additional taxes I gle complex of government build- assessed. ings at a cost of approximately $10 million. The design was inspired by 1929 The National Tax Founda- Somerset House on London’s tion estimated that the average Strand, which houses Britain’s tax American worked 19 minutes each collection agency. day to pay his or her federal income The contract was completed 16 taxes. months ahead of schedule with a total construction cost of 1929 In the case of Mcllon v. $6,395,026.33. Designed for 4,500 United States, it was held that in the workers, the building was originally absence of statute, no interest would occupied by 3,391 Internal Revenue be paid on a disputed refund after employees, 147 from the Board of the issuance of certificate requiring Tax Appeals, 22 from the Customs the United States to pay judgment Court and Patent Appeals, and 252 against the collector. The United from the Public Buildings and Pub- States became liable for the refund lic Parks Commission. but not the interest. JUNE 16,1930 The Audit Review 1929 The Treasury Department Division was reorganized upon a geo- announced plans to improve Prohi- graphical basis rather than on a type bition enforcement. of return basis.

J~VUARY16, 1930 The IRS estab- JUSE 17, 1930 President Hoover lished a Welfare Fund to assist signed the Hawley-Smoot Tariff Act employees in financial need. which imposed the highest rates in American tariff history. FEBRUARY1, 1930 The Sixth Cali- fornia Collection District was with- JULY 1, 1930 The Valuation Divi- drawn from the boundaries of the sion was created, with five sections: San Francisco Division and a new appraisal, mining, oil and gas, tim- division, the Los Angeles Division, ber, and securities. Personnel from was established. the Miscellaneous Tax Unit and the Income Tax Unit involved in the determination of values were trans- -ferred to this new Division.

117 JULY2,1930 The role of the Spe- JUNE5,1931 The indictment against cial Advisory Committee was AI Capone was returned on this day expanded to include cases involving and Capone turned himself in. legal questions, estate tax cases, income tax cases, and profits tax JUNE16,1931 A1 Capone appeared cases. before Judge James H. Wilkerson and pled guilty to all charges, includ- Aucvsr 15,1930 Robert H. Lucas ing income tax evasion and prohibi- resigned as Commissioner. tion charges.

AUGUST20, 1930 David Burnet of JCLY19,1931 Capone’s counsel Ohio became Commissioner. withdrew his guilty plea after charges were made that a deal had 1930 The Justice Department took been struck with the court for a over primary enforcement duties for reduced sentence. Prohibition from the Prohibition Unit of the Treasury Department The SEFTEMBEK28,1931 The Securities duty remained with Justice until the Section of the Valuation Division was repeal of Prohibition in 1933. charged with assembling all pertinent facts and relevant data concerning 1930 The “George M. Cohan corporate reorganimions. Rule” came into effect when a court ruled in favor of the Broadway OCTORER6, 1931 AI Capone’s trial star that the Bureau of Internal for income tax evasion began. Revenue had to accept his word that some entertainment deduc- OCTOBER17,1931 AI Capone was tions were part of his business even convicted of evading income taxes. though he could not produce records or receipts. 1931 The Wickersham Commis- sion reported that enforcemcnt of FEBRUARY9-13,1931 The 31 rev- the Eighteenth Arnendmcnt was enue agents-incharge in the field breaking down and recommended offices of the Income Tax Unit met in revision, but not repeal, of the Prohi- Washington, D.C. for a conference. bition law.

MARCH13,1931 A1 Capone was JUNE6,1932 In the midst of the indicted for income tax evasion. Depression, Congress passed the The statute of limitations on the , raising tax charges against Capone would have rates, lowering exemption levels, expired on March 15. and reinstating excise taxes on many manufacturers. This act was an MAY1931 A Grand Jury brought attempt to balance the federal bud- additional indictments against A1 get and uphold national credit by Capone for tax years 1924-1929. providing one of the greatcst increases in taxation ever enacted in peacetime.

118

\ __ The rates rose to 4 percent on the duction and raising farm prices. The first $4,000 of income above the AAA countered the problem of farm exemption level and 8 percent on surpluses by paying rentals for income over $4,000. Corporate tax acreage withdrawn from production or rates were also increased. Surtaxes by subsidizing restricted crops. climbed to a maximum of 55 per- The funds for this program were cent, estate tax rates were increased, faised by a tax on the processors of and the gift tak'was restored. those farm products. The Bureau of This act removed the Internal Revenue was given the duty for a taxpayer's "earned" income of collecting the taxes authorized on and initiated a one cent federal gaso- wheat, cotton, field corn, hogs, rice, line tax. Excise taxes were also intro- tobacco, and milk products. duced on motor vehicles, radios, phonographs, long distance telephone JUNE 10,1933 The House of Rep- calls and telegrams, and checks. The resentatives authorized a Ways and federal deficit for fiscal year 1931 Means Committee investigation to was $903 million. fortify and simpliEj the tax system, The final report of the investigation, DECEMBER31,1932 The Travel with extensive recommendations to Unit of the Audit Review Division close loopholes, was issued in was abolished and examiners were December 1933. transferred to field divisions. JUSE 16,1933 The National 1932 The income tax law was Industrial Recovery Act became amended to provide that U.S. presi- law, levying a 5 percent tax on divi- dents were liable for the tax on their dends to be deducted and withheld salaries. Franklin Roosevelt became at the source, an excess profits tax, the first president since Lincoln to and numerous changes to the pay federal income tax on his presi- income tax provisions of the Rev- dential salary. enue Act of 1932.

1932 President Hoover and his sup- JUNE 23,1933 Orders were issued porters had put forth a proposal for a directing the Income Tax Unit to national sales tax, but the measure administer the provisions of section was defeated in the House of Repre- 213 of the National Industrial Recov- sentatives by a vote of 236-160. ery Act (the excise tax on dividends). I MARCH22, 1933 An act legalized JUNE 1933 The Miscellaneous the sale of fermented liquors with Division was abolished and a new alcoholic content of not more than Sales Tax Division was established 3.2 percent alcohol by weight. to administer the new excise taxes imposed by the Revenue Act of MAY12, 1933 Congress enacted the 1932. Agricultural Adjustment Act (AAA). This act sought to ~estoreagricultural purchasing power by restricting pro- -. \ JULY1-NOVEMBER 15,1933 The I the Supreme Court of the District 3. - settlement of tax cases was carried of Columbia, to the Department of 5 on by a Special Advisory Committee Justice. 2 prior to the creation of the Technical Staff. ~OVEMBER16,1933 The Special Advisory Staff was abolished and JULY5, 1933 A committee was I succeeded by the Technical Staff organized in the office of the Gen- which had as its primary purpose ~ era1 Counsel known as “the General settling tax disputes in cases dock- Counsel’s Committee,” and com- eted by the United States Board of posed of six members, including the Tax Appeals and cases in “90-day’’ General Counsel. The purpose of status. The Technical Staff was the committee was to expedite final given authority to bind the Commis- decisions in cases and to coordinate sioner to any settlement involving a rulings to minimize conflicting deficiency of $5,000 or less for any results in similar cases in different 1 year. sections of the office. DECEMBER 6,1933 The 21% JULY9, 1933 The Secretary of 1 amendment to the Constitution took Agriculture announced the first pro- effect, resulting in the repeal of Pro- cessing tax under the Agricultural hibition. Adjustment Act. This was a tax of 1 30 cents per bushel of 60 pounds on DECEMBER31,1933 President the first domestic processing of Roosevelt issued a proclamation ter- wheat. minating the provision of the National Industrial Recovery Act SEfTEhfBER 1,1933 The Confer- which imposed a five percent excise ence Unit of the Audit Review tax on dividends. Division was established as an inde- pendent section operating under 1933 The Beer and Wine Revenue the immediate supervision of the Rill became law. This bill legalized office of the Deputy Commissioner. I the manufacture and sale of beer The Conference Section was I and light wine and also levied a $5 designed to act as the settlement tax on 31-gallon containers of beer, body for the unit with responsibility wine, lager bill, ale, and porter. and authority similar to that of the Technical Staff. 1933 The gasoline excise tax was raised to 1 X cents per gallon. OCTOBER10, 1933 A Presidential ’ order issued on June 10, 1933 I MARCH10, 1934 The office of became effective, allowing thc Civil Commissioner of Industrial Alcohol Division of the Office of the Gen- was abolished by Executive Order eral Counsel to gradually turn over and the functions and duties of this all civil internal revenue cases aris- position were transferred to the ing in federal district courts, the Commissioner of Internal Revenue. United States Court of Claims, and By the same order, the functions 7 120 and personnel of the Alcoholic Bev- FEBRUARY16,1934 Agents-in- erage Unit of the Division of Inves- charge were directed to assign cases tigation, Department of Justice, for examination to avoid continued were transferred to the Bureau of referral of particular cases to the Internal Revenue. This executive same officer for successive years. order took effect on May 10, 1934. FEBRUARY27,1934 A committee MAY 15,1933 David Burnet was designated to develop procedures resigned as Commissioner. for coordinating the work of the Income Tax Unit and the Miscella- JUNE 6,1933 Guy T. Helvering of neous Tax Unit in the examination of Kansas became Commissioner. He excess-profits tax returns and capital- served the longest tenure of any stock tax returns to insure a proper Commissioner- over 10 years- administration of section 216 of the until October 1943. National Industrial Recovery Act.

NOVEMBER16,1933 The Techni- FEBRUARY28,1934 Treasury Deci- cal Staff began to provide a more sion 4422 was issued to clarify direct and expeditious procedure to depreciation deductions. The House settle its tax disputes. Ways and Means Committec had issued a report in late 1933 indicat- 1933 The Internal Revenue ing that many claims for deprecia- Bureau received broad legislative tion were excessive. Treasury authority under which it could real- Decision 4422 was an effort to locate items of income, deductions, resolve this issue without additional credit or allowances between related legislative action. organizations. This is now Section 482 of the . MARCH10, 1934 Prohibition was officially repealed. The Bureau of JANUARY 1,1934 The Department Prohibition turned over its responsi- of Justice established a Tax Division. bilities from the Department of Jus- tice to a newly created Alcohol Tax JANUARY11,1934 Congress passed Unit within the Bureau of Internal a Liquor Taxing Act raising the tax Revenue. on distilled liquors from $1.10 to $2.00 per gallon and increasing taxes MARCH27, 1934 An act required on wine. businesses awarded contracts to build naval vessels or aircraft to pay JANUARY16-18, 1934 Internal rev- any profits in excess of 10 percent of enue agents-in-charge in the field the contract price into the Treasury. were called to Washington, D.C. for This law also provided that if this a general conference with Bureau “excess profits tax” was not volun- officials. tarily paid it would be collected under the internal revenue laws in the same manner as income taxes. APRIL 21, 1934 Congress passed and credits, and tax payment, while the Bankhead Cotton Act which not authorizing release of the income taxed the ginning of cotton effective tax returns themselves. June 1,1934 and provided for pay- ment of this tax by exemption MAY10, 1934 The Bureau of certificates issued to cotton produc- Industrial Alcohol was consolidated ers by the Secretary of Agriculture. with the Bureau of Internal Rev- Payment of the tax was shown by I enue. The Alcohol Tax Unit was tags affixed to bales of cotton. established in the Bureau, charged I with the administration of internal MAY10,1934 The Revenue Act of revenue laws relating to the produc- 1934 became law, with the primary I tion, warehousing, and tax payment purpose of preventing I of distilled spirio;, alcohol, wines, and evasion. The act imposed a flat fermented liquors, cereal beverages, tax rate of 4 percent on the first I denatured alcohol. $4,OOO of individual net income. The act also changed surtax brackets by I b1AY 18, 1934 Congress enacted increasing the rates on upper incomes legislation which made killing a fed- and graduated the taxes on capital I eral officer a federal offense. gains. I The most controversial provision JUNE4, 1934 By order of the Com- was a 35 percent tax on the undistrib- I missioner, offers in compromise uted profits of personal holding com- involving income tax liability were panies. This act revived the excess I transferred to the Technical Staff. profits tax at a rate of five percent of income in excess of 12.5 percent of 1 JUNE4, 1934 The constitutional- the adjusted declared value of the I ity of new federal firearms regula- capital stock of corporation income. tions was upheld by the U.S. Section 512 created the basic legal i District Court for the Southern organization of the Treasury Depart- I District of Florida in U.S. v. Joseph ment- the office of the General H. Adarns, et al. Counsel of the Treasury. Also, the I Office of the Assistant General Coun- JUNE 12, 1934 The Reciprocal sel for Internal Revenue was con- Act of 1934 was ceived. The first General Counsel for signed into law. This was actually Internal Revenue was Robert H. an amendment to the existing Jackson, later to become a justice of I Srnoot-Hawley Tariff of 1930. The the Supreme Court. new law authorized the President to The statutory period for filing a I negotiate bilateral crade agreements petition was extended from 60 to 90 I to raise or lower existing tariff rates days after issuance of a deficiency by as much as 50 percent. notice. A publicity amendment, spon- The law marked a turning point sored by Senator Robert LaFollette, ! in tariff history wich Congress dele- Jr., authorized the release to the pub- gating to the executive branch the lic of each taxpayer’s name, address, I authority for rate-setting that it had total gross income, total deductions I controlled for over 150 years. JUNE 18,1934 Congress approved sale price of the tobacco, established E three acts relating to the taxation of by proclamation of the Secretary of alcohol, including laws relating to the Agriculture. ; m regulation of production, marking, Effective July 1, 1935. the rate rn and sale of containers of less than five was fixed at one-third of the sale -P wine gallons, the control of materials price. Adhesive stamps were pro- P10u commonly used in the production of vided by the Bureau as evidence of illicit spirits and the repeal of sections payment of the tax. The tax was not of internal revenue laws which for- applicable to Maryland and Virginia c bade the erection of a rectifying plant sun-cured tobacco and cigar-leaf within 600 feet of a distillery. tobacco.

JUNE 19,1934 The Silver Purchase JUNE 30,1934 The Assistant Gen- Act of 1934 provided for the imposi- eral Counsel for the Bureau of Inter- tion of a tax equal to 50 percent of the nal Revenue was delegated the net profit realized on the transfer of functions and duties of the former an interest in silver bullion. This tax General Counsel for Internal Rev- was payable by stamp. enue (delegated authority came from the newly established General JUNE 26,1934 The National Counsel for the Department of the Firearms Act became law, aimed at Treasury). preventing criminals from acquiring and using machine guns, silencers, JULY 22,1934 John Herbert sawed-off shotguns, etc. The act Dillinger was gunned down by three imposed special taxes on manufac- FBI agents outside the Biograph turers, importers, and dealers in Theater in Chicago. This marked firearms as well as transfers of cer- the beginning of a new effort by the tain firearms. The act also regulated federal government to control some the importation and exportation and of the most violent criminal activity interstate transportation of such witnessed in the nation. firearms and required the registra- tion of all firearms as defined by the JULY 1934 The Silver Tax Division act on or before September 24, 1934 1 was organized to administer the tax and a report of all transfers of such imposed under the Silver Purchase firearms on or after the effective 1 Actof 1934. date of that act. The Alcohol, Tobacco, and Tax SEPTEMBER12, 1934 By proclama- Division became responsible for inves- tion of the President, the processing tigation and detection of violations of and related taxes with respect to this act. This represented the first fed- sugar under the Agricultural Adjust- eral gun control law. ment Act were made applicable to the Philippine Islands, thus widen- JUNE 28,1934 Congress passed the ing the geographic scope of the act. Kerr-Smith Tobacco Control Act which taxed the sale of leaf tobacco. The tax was set at 25 percent of the SEPTEMBER25, 1934 The Reorga- I NOVEMBER16, 1934 Tax Unit nization Section of the Office of the Orders Numbers 297 and 301 pre- Assistant General Counsel was I scribed a standardized organization established to protect the claims and I for field divisions of the Income Tax interest of the U.S. in corporate reor- Unit. These orders provided stan- ganization proceedings instituted dard methods for assigning income under the National Bankruptcy Act. I tax returns for verification and the I preparation of reports by agents on SEFTEMBER1934 Bruno Richard I the income tax liability of taxpayers; Hauptmann was arrcsted in the I established uniform methods for thc Lindbcrgh kidnapping case after an preparation of monthly production intensive investigation in which thc I reports and annual efficiency ratings; Intelligence Unit of the Bureau of I and revised the descriptions of all Internal Revenue provided assistance. positions in the field servicc. I SEPTEMBER1934 A committee of I 1934 The Bureau created a Legisla- Internal Revenue agents-in-charge tive and Kegulations Division to assist met in Washington, D.C. to review I in the development of tax legislation the organiz~tionand procedures in I and regulations. the field divisions of the Income I Tax Unit. 1934 The Silver Purchase Act of I 1934 imposed a tax equal to 50 per- OCTOBER1, 1934 The processing I cent of the net profit realized on the and compensating taxes of the Agri- I transfer of an interest in silver bul- cultural Adjustment Act were made lion, with certain exemptions and applicable to peanuts. rights of abatement.

NOVEMBER1, 1934 ‘The first of 1934 Thc statute of limitations to several special projects to investigate assess additional taxes for returns evasions of manufacturers’ excise filed for 1934 and beyond was taxes on jewelry, radios, furs, sport- increased from two to three years. ing goods, and cosmetics and taxes on admissions, dues, and documen- tary stamps began in the Third New York Collection District.

NOVEMBER1, 1934-JUNE16,1935 Under the provisions of Executive Order No. 6166, the function of dis- bursing was transferred from collec- tors’ offices to regional offices of the Division of Disbursement, Treasury Department. 1935 -1941 SOCIAL SECURITY AND FIREARMSCONTROL: NEWRESPONSIBILITIES FOR THE TAXCOLLECTOR

The repeal of Prohibition did not reduce the responsibilities of the Bureau of Internal Revenue. In 193.5, Congress passed the Social Security Act, with the Bureau given the task of collecting payroll taxes and turning them ovcr to the Social Security Trust Fund. Added responsibilities came with the Federal Firearms Act which gave the Alcohol and Tobacco Tax Division of the Bureau of Internal Revenue the job of enforcing violations of firearms registration requirements. JANUARY1,1935 The tax on MAY1,1935 The Valuation Divi- checks was repealed. I sion was reorganized and renamed the Engineering and Valuation Divi- 1,1935 JANUARY The Capital Stock I sion. The Oil and Gas Section and Tax Division was created, succeed- 1 the Mining Section were combined ing the Capital Stock Tax Section of into the Natural Resources Section. the Sales Tax Division. The enact- I The Timber Section was abolished ment of Section 701 of the Revenue 1 and its work transferred to the Nat- Act of 1934 made administration of ural Resources Section. A Public the capital stock tax a permanent I Utilities Section was created. and major function of the Bureau, necessitating creation of a division- I MAY1,1935 The Bureau of Inter- level function to administer this tax. I nal Revenue hired 300 new revenue agents. Training schools were estab- JANUARY22,1935 The Reorganiza- lished in Brooklyn, Chicago, Cleve- tion Section of the Office of the land, Dallas, Detroit, Manhattan, Assistant General Counsel was con- Newark, Philadelphia, and San solidated with the Bankruptcy and Francisco. Receivership Section. JUNE 19,1935 President Roosevelt FEBRUARY26,1935 The Technical 1 sent Congress a message recom- Staff took over handling applications mending drastic changes to the fed- for extension of time to pay income I eral system of taxation to prevent tax and deficiencies in income tax concentration of wealth and eco- I nomic power. Roosevelt criticized MARCH1,1935 All breweries were the existing revenue system and rec- required to install beer meters on or ommended increasing surtaxes on before this date so that the tax could high incomes, inheritance taxes, and be collected on the basis of meter graduated corporate income taxes. readings. J~JNE30, 1935 The part of the MARCH7,1935 A Ways and Means upper New York division included Committee report recommended in the fourteenth collection district that Section 55(b) of the Revenue of New York, with the exception of Act of 1934 (commonly referred to as Bronx and Westchester Counties, the 'pink slip' section) be repealed. was assigned to the Buffalo division, This section provided for publishing relieving the upper New York divi- the name, address, gross and net sion agent-in-charge of extraterritor- income, deductions, credits, and tax ial responsibilities, and permitting payable of individuals. his full attention to be given to the New York City area. APRIL 1, 1935 The processing and compensating taxes of the Agricul- JULY 31, 1935 President Roosevelt tural Adjustment Act were made held a press conference in which he applicable to rice. informed the public that 58 persons reporting incomes over $1 million

126

\ in 1932 had paid no federal taxes SEPTEMBER1,1935 The Bureau I> z on 37 percent of their net incomes, began an inspection of retail liquor s primarily through holding tax dealers in 91 cities to ensure that the $ 4 exempt securities. dealers complied with the require- L \D ments of the law. 0.W AuGufl14,1935 Roosevelt signed the Social Security Act. Employers OCTOBER1,1935 The Social Secu- and employees originally paid one rity Division was created to adminis- percent of the first $3,000 of salaries ter the taxes imposed under the and wages to finance the benefits. Carriers Taxing Act and the Social This new law introduced a new Security Act (title VIII). system of and the Bureau of Internal Revenue was 1935 The right to inspect individ- given responsibility to collect the ual tax returns was extended to state payroll taxes and turn them over to tax officials for the first time. This the Social Security Trust Fund. The provision was not formalized until law also created a program of unem- 1950. ployment compensation, funded by a federal to be adminis- 1935 The Federal Alcohol Adminis- tered by the individual states. tration Act (FAA) was passed, creating licensing and permit requirements AUGUST30,1935 The Revenue and establishing regulations designed Act of 1935, also known as the to ensure an open and fair market- “ Act,” became law and place to the legal businessman and increased surtax rates on net consumer. incomes above $50.000, from 63 to 79 percent. The act also established 1935 The Bureau of Internal Rev- a graduated income tax on corpora- enue emphatically restated its policy tions and increased gift and estate against answering questions with taxes. The rate of interest on unpaid respect to proposed transactions, federal taxes was set at 6 percent noting that such rulings would only and an inheritance tax was imposed. be issued where required by law.

AUGUST30,1935 Congress JANUARY 1,1936 The Social Secu- approved the Coal Act which imposed rity tax took effect. The tax was an excise tax of 15 percent upon the essentially an excise on employers sale or other disposal of all bituminous with eight or more employees, with coal pioduced in the United States. a rate of one percent on wages for 1936 with provision for credit not AUGUST-SEPTEMBER1935 The exceeding 90 percent of the tax for Bureau of Internal Revenue began contributions to state unemploy- administering two Works Progress ment funds. The tax was due on Administration projects, including a January 31 following the close of “survey of miscellaneous taxes” and the year. an income tax project. JAWARY 6,1936 The Supreme 1 This was the first major effort to Court, in United States v. Butler, 1 decentralize the work of the Bureau ruled that the Agricultural Adjust- and to provide a more convenient ment Act and the taxes imposed by ,I and less costly method for taxpayers it were unconstitutional. The tax on I dispose of their income tax cases. processors of agricultural commodi- I ties was determined to be an integral { MRILIO, 1936 The National part of an improper regulatory I Firearms Act was amended to scheme that took money from one , exclude any rifle having a caliber of group to benefit another. The collec- I .22 or smaller, if the length of its bar- tion of processing taxes was immedi- rel was 16 inches or more, from the ately suspended. I provisions of the act.

MAY 18, 1936 The Supreme Court declared the coal act and the taxes imposed by this act invalid.

JUXE 22,1936 ‘The levied an undistributed profits tax and imposed surtaxes known as the “accumulated earnings tax” ranging from 7 to 27 percent on undistributed profits from corporate incomes. Title 111 of this act included the Unjust Enrichment Tax which imposed a tax of 80 per- cent on certain sources of income. ‘The Income Tax Unit was given responsibility for collecting these the , a temporary taxes. The failure to pay penalty was agricultural products processing tax, changed to 5 percent per month and a graduated tax on undistributed with a maximum of 25 percent. The penalty could be waived if failure to file was due to reasonable cause and not due to willful neglecr

JUNE 26,1936 The Liquor Tax Administration Act of 1936 permit- ted withdrawals of distilled spirits for tax payment in packages and tank cars direct from distillery cis- tern rooms and from internal rev- enue bonded warehouses. The Federal Alcohol Administra- MAY12,1937 The Revenue $ tion was separated from the Trea- agents-in-charge of divisions in the c sury Department and set up as an field assembled in Washington, D.C. G independent establishment of the for a three-day conference with Trea- government by this act. sury and Bureau officials to study (1 This act also prescribed and issues confronting the field forces and defined penalties for the possession to recommend improvements. of machine guns and devices to pro- duce smoke screens while violating MAY24,1937 The Supreme Court any law relating to liquors. held that taxes imposed by Titles VI11 and IX of the Social Security AUGUST19,1936 The Audit Review Act were valid. Division was abolished and the sec- tions making up that division were JUNE1, 1937 Rooscvelt sent a mes- established as independent divisions sage to Congress citing the problem designated as Divisions A to E. This of tax evasion and requested legisla- was part of an ongoing effort to tion to make “the present tax struc- increase cooperation between the ture evasion-proof.” field and Washington divisions of the Unit. The Review Unit of the Audit JUNE29, 1937 The Carriers Taxing Review Division was designated as Act was approved to collect employ- the Review Division. ers’ and employees’ taxes.

DECEMBER1936 The first overseas JULY1, 1937 Thc Bureau of Intcr- representative of the Bureau of nal Revenue completed plans to Internal Revenue arrived in Manila. establish a Social Security Tax Unit, to be responsible for adminis- APRIL 1, 1937 An automatic exten- tration of taxes imposed by Titles sion for filing social security taxes for VI11 and IX of the Social Security 1937 was granted until this date for Act and the Carriers Taxing Act of all taxpayers. The normal due date 1937. was January 31. AUGUST26,1937 The Revenue APRIL26, 1937 Congress approved Act of 1937 raised tax rates on the Bituminous Coal Act of 1937, undistributed adjusted net income imposing an excise tax of 1 percent of personal holding companies. per ton of 2,000 pounds upon the This was seen as a step toward sale or other disposal of bituminous closing some loopholes in the coal produced within the United income tax laws. This act also States when disposed of by the pro- introduced constructive ownership ducer and an additional excise tax rules for determining stock owner- equal to 19.5 percent of the sale ship, to prevent deductions arising price at the mine of coal disposed from “family” transactions. of by nonmembers of the Bitumi- nous Coal Code. The tax took effect June 21,1937. - - */ . t. t. F, SEPTEMBER1,1937 The tax JANUARY 1938 'The Bureau of 01- imposed on manufactured sugar Internal Revenue and the Social cz Y took effect. Security Board approved a plan for m coordination between the two 3 f, 1937 k OCTOBER The Marihuana organizations. w Tax Act of 1937 became effective v) and imposed an occupational tax MARCH1,1938 An experimental upon certain dealers in marihuana program of decentralization of func- Q and transfer taxes upon certain deal- tions of the Bureau of Internal Rev- ings in marihuana. This law was enue began with the establishment administered jointly by the Bureau of the Los Angeles Division of the of Internal Revenue and the Bureau Technical Staff. The head of this of Narcotics. Division was given authority to act for the Commissioner in settling cer- NOVEMBER1, 1937 Responsibility tain income and profits tax cases of for the final audit of social security taxpayers located in southern Cali- tax returns was transferred to the fornia and Arizona. field from the headquarters office in Washington, D.C. APRIL 1,1938 The Accounts and Collections Unit assumed responsi- 1937 The first union of employees bility for administration of the taxcs of the Bureau of Internal Revenue, under the Social Security Act and the National Association of Internal the Carriers Taxing Act of 1937, Revenue Employees (NAIRE), was as'suming responsibilities previously formed in the Milwaukee District. performed by the Social Security Tax Unit. 1937 The Railroad Retirement Tax Act of 1937 placed a tax on the APRIL26,1938 The Revenue Act compensation of railroad employees of 1938 overhauled corporate tax and required the employer to with- rates and altered the method of tax- hold the tax, providing a new use of ing capital gains. The act reduced withholding. taxes on large corporations while increasing taxes on small corpora- JAVUARY 1,1938 A system of quar- tions. The excise tax on furs was terly returns for collecting social secu- repealed. rity taxes was adopted, replacing the previous 14 returns required each year MAY23, 1938 The Supreme Court from employers under title VI11 of the held state employees subject to the Social Security Act. federal income tax.

JANUARY14,1938 The Ways and MAY28,1938 The Revenue Act of Means Subcommittee on Internal 1938 became law without the Presi- Revenue Taxation submitted a report dent's signature. Roosevelt recommending changes in taxes and expressed disapproval of the large the administration of the tax system. tax break it provided for large corpo- rations. This act curtailed the wind- -. \ 130 fall profits tax and reduced capital i JULY 1, 1938 The decentralization i gains taxes. Congress approved a I of the Technical Staff began with : provision allowing for the inspection I the creation of the Pacific Staff Divi- : of federal tax records by designated I sion and was completed with the : tax I state officials. I establishment of the Atlantic Staff Division on May 1, 1939. A total of JUNE 12,1938 A new division was IO staff divisions were created. The established in the Income Tax Unit number was raised to 12 in 1948. 4 to administer claims for refund of processing taxes and related floor SEFTEMBER 3,1938 The final audit stock tax claims requiring field of returns under the Carriers Taxing investigation beginning July 1, 1938. Act of 1937 was transferred from the Such claims had been administered Bureau headquarters in Washington by the Processing Tax Division of to field collectors because it was the Miscellaneous Tax Unit. believed that such audit could be conducted more efficiently through closer contact with taxpayers. Unemployment Insurance Act was approved, to be administered by the 1938 The Bureau of Internal Rev- Railroad Retirement Board. This act enue opened an overseas office in provided exclusion from the tax Paris. This was the second interna- tional post put in operation.

1938 Legislation authorized the Bureau of Internal Revenue to enter 1 into formal closing agreements with JUNE25,1938 Provision was made a taxpayer under which both parties in the Second Deficiency Appropria- I were legally bound to the interpreta- tion Act for refunding taxes col- tion agreed upon for the particular lected under the Bankhead Cotton I transaction. Act of 1934, the Kerr Tobacco Act, I and the Potato Act of 1935. FEBRUARY10,1939 Internal rev- enue laws were codified as the JUNE30, 1938 The Federal i “Internal Revenue Code of 1939,” Firearms Act became law. This act 1 bringing logic and simplification to was designed to regulate the inter- the tax system. state traffic in firearms and ammuni- tion by making it a federal crime for MARCH1939 The Bureau of Inter- felons and fugitives to receive nal Revenue and the Railroad firearms in interstate commerce. I; Retirement Board adopted a plan for The Alcohol and Tobacco Tax Divi- ; coordination similar to that in effect sion was responsible for investiga- I I between the Bureau and the Social tion and detection of violations. The I Securicy Board to achieve uniformity aarequired licensed dealers to and consistency in the interpretation maintain purchase and sales records and application of similar provisions of all firearms transactions. 1 -of the Carriers Taxing Act of 1937. \ 131 APRIL12, 1939 The Public Salary SEPTEMBER14,1939 The Com- Tax Act of 1939 amended the missioner issued a mimeograph gov- income tax code to provide for taxa- erning the functions and jurisdiction tion of compensation of state and of the field divisions of the Techni- local employees, teachers in Alaska cal Staff, creating 10 field divisions. and Hawaii, and judges of the courts of the United States who took office 1939 The National Office Techni- on or before June 6, 1932. cal Staff was formed, under the direction of Aubrey R. Marrs. JUNE29,1939 Congress enacted the Revenue Act of 1939, which revised 1939 The Public Salary Tax Act the two-year net operating loss carry- extended the income tax to federal, forward for corporations from the state, and local judges and federal 192oY, increased corporate tax rates to judges who had taken the oath of a flat rate of 18 percent on those with office before 1932. incomes above $25,000, and extended the excise taxes scheduled to expire 1939 The National Tax Founda- in 1939 for two years. This act failed tion estimated that the average to extend the undistributed-profits American worked 40 minutes cvery tax beyond 1939, in effect abolishing day to pay his or her federal taxes, the windfall profits tax. more than double the 19 minutes estimated 10 years earlier. JULY 1, 1939 Appointive power for The average American blue-collar deputy collectors was transferred worker paid no income tax at all; the from collectors to the Secretary of average lawyer or doctor paid about the Treasury. $25 a year; a highly successful busi- nessman with an annual net income AUGUST 10,1939 The Social Secu- of $16,000 owed the federal govern- rity Act Amendments retitled the pay- ment less than $1,000. roll tax “insurance contributions” under the Federal Insurance Contri- JUNE 25, 1940 The Revenue Act of butions Act (FICA) as part of the 1940 raiscd the federal debt limit to Internal Revenue Code (Subchapter $4 billion in order to authorize the A of Chapter 9) and Subchapter C as issuance of defense bonds. This act the Federal Unemployment Tax ACL increased federal surtaxes on most Taxes imposed in these areas were individual income tax brackets by now generally referred to as “employ- imposing a defense supertax of 10 ment taxes.” percent on most existing internal revenue taxes. Personal exemptions SEPTEMBER6,1939 In continua- were reduced by 60 perccnt and cor- tion of the effort to decentralize porate tax rates increased only operations, the jurisdiction over slightly in anticipation of a new offers in compromise of income, excess profits tax. profits, and unjust enrichment taxes This act also raised excise taxes was delegated to the field divisions on distilled spirits, wines, cigarettes, of the Technical Staff. and playing cards. This act imple- mented the use of the gross rather taxes, if such person showed that by than net income to determine the reason of such military service his need to file an income tax return. ability to pay the tax was affected. This act increased tax rates on cor- porations, individual surtax rates, 1940 The first series of articles pre- and nonresident aliens. This act pared by the Bureau of Internal imposed a of 10 percent of Revenue for publication in newspa- the tax computed, designated as a pers under the title “Your Federal “Defense Tax,” effective for a five- Income Tax,” appeared this year. year period. The success of this publication established the taxpayer publica- JUNE 30, 1940 The Federal Alco- tions program as a major part of the hol Administration merged with effort to provide taxpayer assistance. the Alcohol Tax Unit of the Bureau of Internal Revenue to combine 1940 The Bureau of Internal Rev- related law enforcement and regu- enue began informing taxpayers by latory authorities as a result letter, when an inquiry was made, of of the Federal Alcohol Administra- the position it would take if a closing tion Act. agreement were entered into. This marked the birth of the private letter JULY 1,1940 President Roosevelt ruling process. sent a special message to Congress requesting immediate enactment of MARCH7,1941 Congress amended “a steeply graduated excess profits the Excess Profits Tax Act of 1940, tax, to be applied to all individuals providing relief for certain items not and all corporate organizations with- covered by the original act. out discrimination.” This was in accordance with Roosevelt’s promise APRIL 23, 1941 An Executive of May 22. that “not a single war Order placed deputy collectors millionaire will be created as a result under classified civil service laws. of the war disaster.” This order was issued under the authority of the Ramspeck Act of OCTOBER8, 1940 Congress enact- November 26, 1940. At this time ed the second about 8,000 persons were holding which increased corporate tax rates positions with the title of Deputy and imposed a graduated excess Collector. profits tax on corporations with rates up to 50 percent. JULY 1, 1941 As of this date, all appointments to positions of OCTOBER17,1940 Congress enact- Deputy Collector of Internal Rev- ed the Soldiers’ and Sailors’ Civil , enue were to be made in accor- Relief Act of 1940 which provided dance with civil service rules. Prior that no sale of property of a person to this, appointments to these posi- in military service shall be made, or tions were made without regard to any proceeding or action com- civil service rules. Positions of col- menced, to enforce the collection of lector were still political appointees. AUGUST4,1941 The House of OCTOBER1, 1941 The Bureau creat- Representatives passed a tax bill put ed a Miscellaneous Division with bY forth by Representative Robert L. responsibility for administering docu- 3 0 Doughtons of North Carolina which mentary stamp taxes, taxes on oleo- 3 4 eventually became the Revenue Act margarine, narcotics and marihuana, of 1941. bituminous coal, silver, hydraulic min- ing, transportation of oil by pipe line, 8 AUGUSI,9, 1941 A position for an admissions, dues, safe deposit boxes, executive assistant was established telephone, telegraph, radio and cable in the office of the Commissioner. facilities, processing of coconut oil This individual was responsible for and other vegetable oils, and the supervising and coordinating the administration of the National actiyities of the Administrative and Firearms Act and the Federal Personnel Divisions. Firearms Act. The administration of these taxes was transferred from the AUGUST29,1941 The Alcohol Tax Sales Tax Division and the Process- Unit was given responsibility for ing Tax Division. The Processing administering the Federal and Tax Division was abolished. National Firearms Acts. DECEMBER26,1941 The termina- SEPTEMBER20,1941 The Revenue tion date of the taxes on sugar was Act of 1941 became law and was postponed from June 30, 1942 to hailed by the New Yod Times as “by June 30,1945. far the heaviest and most broadly based ever adopted by this 1941 The Bureau of Internal Rev- country.” This act was the largest enue adopted a new and shorter single revenue measure passed in income tax 1040 return. American history to this time and increased the income tax by raising 1941 The surtax rates and corporate rates, was introduced in the tax tables this bringing total tax year. to $13 billion. The act made the 10 percent Defense Tax permanent, imposed a variety of new excise taxes, and increased overall rates.

- c I, e -IC---_ L

L---.-.--.l-P _._--_ -I..-- ?sa----- In 1943, Conpspasscdan addittonaltax, bmnas dc Victory Tax, which was IO &pad along mth regr//ar income taxes on Ihe 1040fonnfor thatyear. 1942 -1949 WORLDWAR I1 AND THE INCOMETAX: A MARRIAGEOF CONVENIENCE THAT SURVIVED

The entry of the United States into World War 11 placed heavy economic demands on the country. To raise revenues, Congress dropped the threshold for payment of income taxes to the lowest level ever, bringing over 50 million new taxpayers into the system for the first time. To educate these new taxpayers, the Bureau of Internal Revenue launched a major educational campaign. This resulted in widespread acceptance of the income tax into virtually all American households for the first time. JAYUARY 24, 1942 Congress Wages and salary regulations of authorized the withdrawal of dis- the Economic Stabilization Direc- tilled spirits without payment tor conferred authority upon the of tax uhder certain circumstances Commissioner of Internal Revenue during World War 11. to administer the provisions relat- ing to the stabilization of certain MARCH7, 1942 Congress extend- salaries. ed under certain circumstances the time for filing income tax returns . OCTOBER8, 1942 Production of and the payment of income taxes in distilled spirits for beverage pur- the case of individuals in the armed poses was discontinued, with the forces and civilian officers and exception of brandy and rum. employees of any department or . 1 agency of the United States. OCTOBER21, 1942 Presidcnt Roo- I sevelt called the 1942 Revenue Act MARCH28,1942 The Public Debt "the greatest tax bill in American Act of 1942 removed tax exhption history." The act sharply increased privileges on dividends, earnings, I most existing taxes, introduced the or other income or gain from Victory Tax (a 5 percent surcharge shares, certificates, stock, or other I on all net income over $624 with a evidences of ownership issued on postwar credit), lowered exemp- or after March 28, 1942 by the I tions, began provisions for medical United States or any agency or and dental expenses and investors' instrumentality thereof. expense deductions, and began in a small way the collection at the APRIL28, 1942 Congress made 1 source procedure which was later to the services of the Bureau of Inter- be carried out on a larger scale. nal Revenue available to the War ' Increased tax rates in this act were and Navy Departments and the l applicable to earnings for the year Maritime Commission to the extent 1942. Overall. this act added enor- determined by the Secretary of the mous complexities to the tax system Treasury for the purposes of mak- and broadened the tax base by over ing examinations and determina- 100 percent. The Secretary of the - tions with respect to profits derived Treasury recorded that President from the renegotiation of certain Roosevelt said, "The bill might as government contracts. well have been written in a foreign language." The Board of Tax OCTOBER2,1942 The Salary Sta- Appeals became the Tax Court. bilization Act amended the Emer- gency Price Control Act of 1942 and DECEMBER11, 1942 Congress became law. This act authorized passed the Opium Poppy Control and directed the President to issue Act of 1942 which provided for an order stabilizing wages and domestic control of the production salaries on the basis of the levels and distribution of the opium which existed on September 15, poppy and its products through 1942. licensing. Because of widespread

136 use of opium to relieve the pain of OCTOBER8,1943 Guy T. Helvering 5 wounded soliders in World War 11, resigned as Commissioner. b Congress deemed it unwise to pro- hibit production of opium com- OCTOBER9,1943 Robert E. Hk- pletely at this time. negan of Missouri became Com- missioner. 1942 A Gallup Poll revealed that of the 34 million Americans skbject NOVEMBER1, 1943 A Processing to the income tax for the first time,. Division, under the Accounts and fewer than 15 percent were setting Collection Unit, was established aside money to make the payment. in New York City to provide a cen- tralized organization for performing 1942 The Bureau of Internal Rev-. new tax collection tasks- using em; created a special section to electronic typewriters and key-dri- handle cdlection and compromise ven booking machines to match matters in bankruptcy and receiver- withholding forms to returns on a ship proceedings. limited basis. This was the first recognition of the potential benefits 1942-1969 The Board of Tax of centralized, modern data process- Appeals became the Tax Court of ing techniques in the Burcau. the United States. The organiza- tion was given jurisdiction over DECEMBER22,1943 Congress refunds‘of certain processing taxes. amended the Internal Revenue Code to suspend automatic increases in JUNE 9, 1943 The Current Tax social security tax rates under the Payment Act of 1943 was passed Federal Insurance Contributions Act and provided for a 20 percent with- for the first two months of 1944. holding tax after July 1, 1943 with forgiveness of 75 percent of the 1943 A five percent Victory Tax lesser of 1942 or 1943 tax liability. was withheld at the source during The act provided a permanent sys- the first six months of the year. tem of withholding and quarterly estimated tax payments from cer- 1943 The Supreme Court sanc- tain sources of income. This act tioned the validity of using the \. ‘eliminated installment payments “net worth theory” in investigating and introduced prepayment of tax criminal tax cases in United States obligations in the form of the esti- v. Johnson. This decision did not mated tax. specify acceptable procedures for

L conducting net worth investiga- JULY1, 1943 Withholding of tions, leading to additional ques- wages and salaries went into effect tions regarding this investigative and put taxpayers on a pay-as-you- technique through the mid-1950s. go basis. 1943 The Bureau of Internal Rev- enue provided taxpayer assistance on an informal basis by broadcasting I tax information over public address MAY29, 1944 The President systems in federal buildings. 1 signed the Individual Income Tax Act of 1944. This act simplified the JANUARY22.1944 Robert E. 1 income tax for persons with’small Hannegan resigned as Commissioner. I incomes, replaced the Victory Tax with a new 3 percent normal tax on JANUARY 1944 President Roosevelt 1 net incomc, lowered tax rates, and recommended tax simplification in his I increased surtaxes. 1944 budget message to Congress. Adoption of the standard deduc- Ways and Means Committee Chair- 1 tion of 10 percent and uniform per- man Robert Doughton of North sonal exemptions of $500 were part Carolina promised simplification I of this act, which expanded the tax would be the top priority. base to cover nearly all Americans. ’ Tax rates ranged from 20 to 91 per- FEBRUARY22, 1944 President 1 cent with taxes withheld directly Roosevelt vetoed the Revenue Act from paychecks. of 1943- the first veto of a revenue I bill in American history. Roosevelt 1 JUNE 9, 1944 The Public Debt referred to this bill as “not a tax Act of 1944 reduced the war tax rate bill, but a tax relief bill, providing I on amounts paid at cabarets, roof relief not for the needy but for the gardens, etc., from 30 percent to 20 greedy.” percent.

FEBRUARY24-25,1944 The JUNE20, 1944 Congress repealed House (299-95) and the Senate (72- the tax on sugar after June 30,1947. 14) overrode the President’s veto and enacted the Revenue Act of JUNE30,1944 Congress extended 1943, making this act the first rev- the provisions of the wage and ,enue bill to become law over a salary stabilization program through presidential veto. ‘This act repealed June 30, 1945. the earned income credit and the victory tax credit, reduced the vic- DECEMBER22,1944 Congress tory tax rate from 5 to 3 percent, authorized collectors of internal rev- increased the excess profit tax rate enue to receive certified, cashiers’ and from 90 to 95 percent, increased treasurers’ checks drawn upon many excise taxes, and made many National and State banks and trust other changes in the tax code. companies, and U.S. postal, bank, express, and telegraph money orders MARCH1, 1944 Joseph D. Nunan, in payment for internal revenue taxes. Jr., of New York became Commis- sioner. 1944 Permission was granted for taxpayers with income from wages of APRIL1, 1944 The tax rate on fer- less than $5,000 to have their tax com- mented malt liquors was increased puted by the Bureau of Internal Rev- from $7 to $8 a barrel. 1 enue. This limit was increased to +$lO,OOO in 1%9. JULY31, 1945 The Tax Adjust- I 1945 The Bureau of Internal Rev- 5 X ment Act of 1945 provided for enue began selling a booklet n speedy tax refunds and relieved I explaining how to fill out Form -X smaller businesses of some of the 1040 titled, “Your Federal Income rce burdens of the excess profits tax. ‘, Tax.” P SEPTEhlBER 1945 The Alcohol 1941-1945 The Roosevelt admin- 8 Tax Unit began an intensive inves- istration hoped to pay for at least guns, machine pistols, and other increased taxation. Wider ranging firearms under the purview of the tax laws and the new policy of with- National Firearms Act. holding taxes from paychecks led to a doubling of individual returns NOVEMBER8,1945 The Revenue during this period. Still, the goal of Act of 1945 was passed to improve meeting 50 percent of the war’s cost “the cash position of business by by taxation was not met. Approxi- advancing the time of payment mately 43 percent was raised of postwar tax refunds and credi ts... through taxes. ”the major thrust of this bill was to speed refunds from net operating JANUARY1,1946 The Revenue loss carrybacks. This act provided Act of 1945 repealed the excess tax reductions for individuals and profits tax effective this date. businesses. MARCH8,1946 Congress amend- DECEMBER 16, 1% A new division ed the Internal Revenue Code to was formed in the Miscellaneous Tax include among the narcotic drugs Unit, known as the Tobacco and Cap- taxable and otherwise controlled ital Stock Tax Division, assuming the under the Code, any opiate found duties formerly performed by the to have addiction-forming or addic- Tobarn Division and the Capital tion-sustaining properties similar to Stock Tax Division. This new divi- morphine or cocaine; and to permit sion was concerned with adminis- producers of fiber or fiber products tration of laws relating to taxes on to secure supplies of the plant the manufacture, sale, or removal Cannabis sativa L, from which mar- of tobacco, snuff, cigars, and cig- ihuana was produced, without pay- arettes, etc. ment of the tax on the transfer of marihuana. 1945 The first planning office for Internal Revenue was established, MARCH25,1946 The Employ- called the “Management Staff‘ and ment Tax Unit was created to directed by an assistant to the corn- administer employment taxes under missioner. the Internal Revenue Code. Prior to this, the work was performed by the Accounts and Colleqions Unit. APRIL1, 1946 The Commissioner OCTOBER31, 1946 The Secretary proposed that the Bureau create a of the Treasury addressed a lctter to board to administer the excess all Bureau chiefs urging the stream- profits tax. lining of operations and other administrative improvements. MAY25, 1946 The Excess Profits Tax Council was established as a OCTOBER1946 The Excess Profits field group within the Technical Tax Council began reviewing Staff to supervise and settle cases specific taxpayer cases. pending before the Bureau of Inter- nal Revenue with respect to applica- NOVEMBER15, 1946 A Special tions for relief under the provisions Committee on Administration in of Section 722 of the Code. The the Bureau of Internal Revenue was original membership of the commit- appointed to appraise the ideas and tee was limited to 15. suggestions submitted by key officials at the October manage- JULY16-17, 1946 The Excess ment conference. This Committee Profits Tax Council held its first submitted its final report in August organizational meetings. 1947.

JULY25,1946 Congress extended NOVEMBER9, 1946 'The President the provisions of the wage stabili- terminated all wage and salary con- zation program through June 1947. trols provided for by the Stabiliza- tion Act of 1942. SEPTEMBER1,1946 Elmer Irey retired as Chief of the Bureau's DECEMBER12, 1946 The President Intelligence Unit. Irey had served transferred the functions of the in this position sincLl919. National Wage Stabilization Board to the Department of the Treasury. OCTOBER 7-9,- 1946 The roots of the reorganization of tax administration DECEMBER16,1946 The Com- took hold when Treasury Secretary missioner delegated part of his John W. Snyder called a meeting of responsibilities in the area of audit to key revenue officials to plan for the collectors in a mimeograph issued \ streamlining and modernizing the this date. This included authority for Bureau of Internal Revenue and to investigation and audit of all individ- start a management improvement ual returns with adjusted gross program to ease the transition to income of less than $7,000 and busi- peacetime operations. This was the ness returns less than $25,000. This first such conference held in Wash- also included authority to make ington, D.C. in a decade. refunds in connection with returns retained for audit of less than $l,OOO. 1946 An internal proposal advocat- of possessing and handling these Ic 2 ed a return to the old policy of ruling items. m I only on completed transactions, but 9P the informal procedure established MAY29, 1947 The functions, u in 1940 continued throughout the duties, and powers of the Secretary 1940s and into the 1950s. of Agriculture relating to thc enforcement of agricultural wage JANUARY14,1947 The Treasury and salary regulations under the Sta- Secretary set up a Committee on bilization Act of 1942 were trans- Employee Awards, inviting all ferred to the Secretary of the Trea- employees to send in ideas and sug- sury. In turn, this responsibility was gestions for improving operations. transferred to the Commissioner of The program included cash incen- Internal Revenue. tive awards for employees whose ideas resulted in economies. JUNE6, 1947 President Truman vetoed a tax reduction bill, arguing MARCH7,1947 The functions of that it was “the wrong tax reduction the National Wage Stabilization at the wrong time.” A House motion Board were transferred from the to override the veto failed by two Treasury Department to the Com- votes. A new bill was passed which missioner of Internal Revenue. delayed the tax cuts from July 1, 1947 to July 1, 1948. Truman vetoed MARCH11, 1947 Congress this bill and the House overrode the approved the Excise Tax Act of veto, but the Senate sustained the 1947 which continued the increases veto by two votes. in excise and other miscellaneous tax rates made by the Revenue Act JUNE11,1947 Effective at mid- of 1943. night, sugar rationing was discontin- ued and sugar controls were there- MARCH25,1947 The Treasury after limited to an allocation system Department sent another letter to applying to industrial users, whole- Bureau heads urging accelerated salers, and retailers. efforts to improve management and reduce expenses. JUNE 30,1947 Joseph D. Nunan, Jr. resigned as Commissioner. MAY23, 1947 In an effort to com- bat the importation of thousands of JUNE30, 1947 The Stabilization dangerous war trophies by military Act of 1942 expired. The Salary Sta- personnel (semiautomatic firearms, bilization Unit.in the Bureau of , land mines, projectiles, Internal Revenue continued to etc.) the Treasury, Navy, Army, Air process cases involving wages and Force, National Rifle Association, salaries. Customs, and Coast Guard com- bined efforts to develop a public JUNE1947 The Bureau of Inter- relations program to bring to the nal Revenue initiated a work sim- attention of the public the danger - plification program with a ‘‘pilot’’ I 141

I installation in the collector’s office 1 1947 The Processing Branch in St. Paul, Minnesota. 1 moved to Kansas City. JULY 1,1947 George J. Schoene- 1 FEBRUARY20,1948 A report by man of Rhode Island became Corn- 1 the House Committee on Appropri- missioner. ations made a number of recom- I mendations for improving the oper- JULY 1, 1947 Title I of Public ations of the Bureau of Internal Law 147 (Treasury Department Revenue. Consequently, the Secre- Appropriation Act of 1948) autho- tary of the Treasury instructed the rized and directed the Joint Com- Commissioner to implement broad- mittee on Internal Revenue Taxa- scale management improvements. tion to study enforcement of inter- nal revenue laws to determine the MARCH23,1948 An organizational number of deputy collectors, rev- meeting of the Treasury Department enue agents, and other personnel Management Committee was held. needed to ensure the maximum net This Committee was to act as a con- return from internal taxes. sulting organiwtion for improving management throughout the Depart- AUGUST14,1947 Mimeograph ment. 6176 extended the collectors’ audit jurisdiction over individual 1040 APRIL2, 1948 The Revenue Act returns to include all returns clas- of 1948 was passed over the Presi- sified as worthy of field examina- dent’s veto. This act embodied a tion or office audit. desire to equalize the tax burden of those who did and did not reside in AUGUST1947 The Special Com- community property states, giving mittee on Administration issued its married couples the option of filing final report, adopting over 100 of joint returns and increasing the the ideas or plans resulting from standard deduction for joint the October 1946 confdrcnce. returns. Overall, the law reduced individ- NOVEMBER1,1947 The Wage ual and estate tax rates, This law and Excise Tax Division was also allowed an additional exemp- formed in collector’s offices by tion for a taxpayer or spouse of a combining the Miscellaneous and taxpayer age 65 and older or who Employment Tax Divisions and was blind. the Withholding Tax Subdivision of the Income Tax Division, per- APRIL 22,1948 The Commissioner mitting the consolidation of some established a management staff to forms and records. improve management throughout the Bureau. 1947 The Bureau began a micro- filming program aimed at preserv- ing permanent records as well as saving space and equipment. L APRIL 1948 The Advisory Group SEPTEMBER30,1948 \o The man- e to the Joint Committee on Internal agement firm of Cresap, McCormick, m Revenue Taxation released a report and Paget was hired to make a with a number of recommendations, comprehensive analysis of organiza- including decentralization of routine tion and procedures in collectors’ work to field offices, establishment offices around the country, with rec- of a management staff in the Com- ommendations for improvement. missioner’s Office, improvements in tax return forms, the use of modem SEPTEMBER1948 Officers in sampling techniques to measure the charge of field offices were autho- adequacy of enforcement methods, rized to approve most personnel and the employment of outside actions for their offices, eliminating management specialists to study the much paperwork in the central office organization and operations of the of the Bureau in Washington, D.C. Bureau. OCTOBER22,1948 The member- JUNE14, 1948 Congress provided ship of the Excess Profits Tax that the term “employee” in regard Council was increased from to Federal insurance contributions 15 to 25, including a five member did not include any individual who executive committee vested with had the status of an independent final authority over issues arising contractor or any individual who under section 722. was not an employee under such rules. 1948 Commissioner Nunan testified before the House Appro- JUNE30,1948 Congress amended priations Committee that taxes section 3150(a) of the Internal Rev- brought in through the investiga- enue Code providing that the tax tive and enforcement activities of imposed on beer and othcr fer- the Bureau of Internal Revenue mented liquor was applicable also were being collected at the rate of to beer, etc., imported into the $20 for each $1 spent. This 201 United States. ratio was used to justify personnel increases, but this comparison ulti- JULY2, 1948 The iecretary of the mately resulted in acceptance of a Treasury established a Committee quota system. to Direct the Management Studies of the Bureau of Internal Revenue 1948 The first step in using mod- to study the management problems ern data processing equipment was of the Bureau and to recommend taken when the Bureau of Internal improvements. A.L.M. Wiggins Revenue introduced punch card was named chairman of this group, equipment to process notices. The composed of leaders from both computation of income tax liability inside and outside the government. 1 on Form W-2 returns was tested in I the Clevcland collector’s officc.

1 43 - 1948 Taxpayer records and 1948 Photocopying was intro- returns as well as excise tax returns 1 duced in many offices to reduce were shifted from Washington, the typing workload and relieve D.C. to collector’s offices for man- the shortage of typists and steno- agement and retention. i graphers.

1948 The htiscellaneous and 1948 The Estate and Gift Tax Employment Tax Divisions and Division was transferred from the the Withholding Tax Subdivision Miscellaneous Tax Unit to the in each collector’s office were com- Income Tax Unit. bined into the Wage and Excise Tax Division. JANUARY 29,1949 The Bureau received the final report of the 1948 The Paris Office of Internal management consulting firm Revenue reopened. World War I1 Cresap, McCormick and Paget had closed all three overseas on its study of collectors’ offices. offices. Also, the Bureau of Inter- The next month, the same man- nal Revenue conducted a survey of agement consulting firm was Americans living in foreign loca- engaged to study the overall organi- tions which revealed a low level of zation of the Bureau of Internal Rev- compliance due to lack of taxpayer enue. assistance. APRIL1, 1949 The Bureau trans- , 1948 The first formal long-range ferred the Estate ’fax Division to planning of organization, person- the Income Tax Unit and changed nel, and budgeting began with a its designation to Estate and Gift study made by the Advisory Group Tax Division. of the Joint Committee on Internal Taxation. APRIL1949 The Bureau of Inter- nal Revenue began a pilot program 1948 The Bureau rewrote the to exchange abstracts of audit booklet “Your Federal Income information between collector’s Tax,” in nontechnical language and offices and state tax departments. it became a bestseller. Instructions to taxpayers enclosed with income MAY1949 ’I‘he retention of per- tax return forms were clarified so the sonnel and retirement accounts taxpayer would !wow not only what and records was decentralized to to report but what was legally omis- eight field offices in the New York sible or deductible. City area as an experiment to determine the feasibility and 1948 The Bureau introduced a advisability of transferring this new short form 1040A. paperwork to the field. After a suc- cessful test period, the transfer of retirement record maintenance was decentralized to all field offices later this year. L AUGUST23, 1949 Tax-stamp ' DECEMBER16, 1949 Collectors v) machines were introduced for the were authorized to make refunds Pv) payment of taxes on fermented under $10,000 rather than having liquors. requests for review and scheduling of refunds sent to Washington, D.C. AUGUST1949 The management consulting firm Cresap, McCormick, 1949 The Bureau revised its pro- and Paget submitted its report on cedures for preliminary review of the organization of the Bureau. individual tax returns so that returns The findings and recommendations for taxable years after 1947 were of the report presaged many of the reviewed and classified in the field results of the 1952 reorganization. rather than in Washington, D.C. The consulting firm recommended 'The preliminary review of other the replacement of political returns continued in the Income appointees with career civil servants, Tax unit in Washington, D.C. the establishment of six regional offices (San Francisco, Atlanta, 1949 The use of key punch Kansas City, New York City, Dallas, equipment was extended to seven and Chicago), and the creation of an additional collection districts from executive development program. the original installation in Cleve- The separate field structure of audit land. From use only on 1040A and collection functions would returns in 1948, the experiments remain intact. It would take the were extended to 1040 returns, scandals of the early 1950s to bring 1040ES returns, and related docu- action on many of these recommen- ments. dations. 1949 The National Tax Founda- FALL1949 The Processing Divi- tion estimated that the average sion in Kansas City began to insert American woiked one hour and and mail income tax forms and 16 minutes of each work day to pay instructions for several collector's his or her federal taxes- up from offices using mass production 40 minutes IO years earlier. methods. 1949 The Bureau initiated an NOVEMBER14,1949 The Com- audit control program to improve missioner defined the authority enforcement of the tax laws by and responsibilities of the two sampling a selection of individual assistant commissioners. One was income tax returns for field investi- given supervision over the operat; ' gation. Examination was made of ing activities of the Bureau and 162,000 individual income tax one was given responsibility for returns for 1948 in an effort to the technical functions of the determine how best to deploy the Bureau. examining force of the Bureau and on what types of returns.

145 $ 1949 Collectors were authorized -m to assert delinquency penalties for late filing on all types of returns as well as authority for handling all 6 requests for certified copies of individual income tax returns and for the transcript service for the states with such returns.

1949 The Bureau began to exper- iment with electric typewriters, continuous forms, dual roller plaFens, and posting machines for processing individual income tax returns. TAr hWyr of& Natioaal Ofiudoubhias ofi spare in & 1950s. 1950 - 1953 INVESTIGATION AND TURMOIL: THEDEPOLITICIZATION OF TAX COLLECTION

Congressional investigations into alleged fraud on the part of Bureau of Inter- nal Revenue employees reached a zenith during these years. By the conclusion of the investigations, several hundred Bureau employees had left the agency, either voluntarily or under indictment for offenses against the tax laws. The result was a sweeping reorganization plan developed by President Harry Truman which transformed the Bureau from an organization whose top positions were filled with political appointees to one in which only one posi- tion, that of the Commissioner, was a political appointee. JANUARY--APRIL 1950 Electronic APRIL1, 1950 The administration computers were used with punch of withholding income taxes from card tabulating equipment for calcu- 1 wages was transferred from the lating tax liability on income tax Income Tax Unit to the Employ- returns during the filing season. ment Tax Unit. JANUARY1,1950 Federal Insurance i ALGUsT 28, 1950 The Social Secu- Contributions Act (FICA) and rity Amendments Act of 1950 income tax withholdings were com- amended the old-age and survivors bined in a single form (Form 941), insurance provisions of the Social and the depository receipt system Security Act by extending coverage was extended to FICA taxes. The to many persons not previously cov- depository receipt system was also ered, including most self-employed reSised to permit use of a new punch except farmers, certain domestic card receipt for deposits made workers in private homes, regularly directly with Federal Reserve banks employed agricultural workers, etc. or through authorized local banks. 1 SEPTEMBER1, 1950 Bulk gauging FEBRUARY6,1950 Initial arrange- tanks were installed in Internal ments for the exchange of tax data Revenue bonded warehouses, were made with North Carolina and 1 which saved considerable time for Wisconsin and were expanded to storekeeper-gaugers. Numerous pro- include Colorado, Kentucky, and cedures for simplified reporting of Missouri over the next two years. i alcohol taxes were instituted. FEBRUARY7,1950 Congress SEPrEhlBER 23, 1950 The Revenue amended the Federal Firearms Act Act of 1950 provided new, claborate to provide for the seizure, forfeiture, avoidance provisions dealing with and disposition of any firearm or tax-exempt organizations and chari- ammunition involved in any viola- table trusts and capital gains and tion of the act or its regulations. losses. This act also raised individual and corporate tax rates and reduced FEBRUARY21,1950 Congress wartime excise taxes. amended the Internal Revenue Code to provide for the use of tax- I SEPTEMBER 23,1950 The Internal stamp machines or other devices for Security Act of 1950 provided that paying the tax on domestic distilled I no deduction for fedcral income tax spirits and alcohol and prescribed purposes and no exemption under penalties for fraudulent acts relating section 101 of the Internal Revenue to tax-stamp machines. ~ Code (non-profit organizations)would be allowed for any organization reg- MARCH16, 1950 Section 2301 of istered by the Subversive Activities the Internal Revenue Code relating Control Board as a Communist to the tax on oleomargarine and the 1' organization. occupational tax on manufacturers of oleomargarine was repealed. I OCTOBER30,1950 The Bureau enue Laws of the House Committee stopped preparing separate reports on Ways and Means erupted into a of concurrent examinations of major corruption and embezzlement income tax returns covering two investigation which ultimately impli- years or more. cated 167 Internal Revenue employ- ees and led to a major administrative NOVEMBER1950 The California reorganization in 1952. Crime Commission charged the Bureau of Internal Revenue with JAN~JARY2,1951 The Bureau failing to prosecute tax-dodging established an office of Budget and racketeers. Finance responsible for budget operations and internal accounting DECEMBER13-20, 1950 The Joint work pursuant to the Budget and Committee on Internal Revenue Accounting Procedures Act of 1950. Taxation held executive session The first three regional finance hearings in Washington, D.C. with offices were established during the top Bureau officials. year in Boston, Philadelphia, and Richmond to provide better and DECEMBER27-28,1950 lheJoint more economical fiscal service. Committee on Internal Revenue Taxation held executive session JANUARY 3, 1951 Congress enacted hearings in New York concerning the Excess Profits Tax Act of 1950 to the Office of the Collector of Inter- raise revenue through taxing the nal Revenue for the third district of excess profits of corporations and New York. increasing the corporate tax rate by two percent. This was eliminated 1950 The Bureau began an audit after the Korean War ended in 1953. control program with the examination of a scientifically selected sample of JANUARY15, 1951 A Legislative 1948 individual income tax returns. and Operative Planning Task Com- mittee began operating under the 1950 The House Ways and Means Income Tax Unit, with the primary Committee voted out a bill provid- responsibility of studying legislative ing for withholding of tax at a rate of problems affecting the administra- 10 percent on dividends. Ultimately, tion of the revenue laws. this bill did not pass. JANUARY 1951 The Bureau institut- 1950 The Bureau tested a new sys- ed an operational cost system in col- tem of numbering tax returns, using lectors’ offices, providing data for an alphabetical prefix to designate businesslike cost control in collec- the classification of the returns in tors’ offices, making it possible to seven of its field offices. staff offices on the basis of workload.

1951-1952 A series of investiga- tions by the Subcommittee on Administration of the Internal Rev- FEBRUARY5,1951 Senator John J. MAY1951 The Subcommittee on Williams of Delaware demanded Administration of Internal Revenue the removal of Collector James W. Laws began its investigation of the Johnson of New York for inefficiency, Bureau of Internal Revenue. citing the conviction of eight deputies in Johnson’s office on bribery charges MAY7, 1951 Delaware Senator since 1946. Williams charged that the St. Louis grand jury investigating Collector FEBRUARY20,1951 Deputy Col- Finnegan’s office was not given all lector W.D. Malloy of San Francisco the facts. was fired. JUKE27, 1951 Collector Dennis W. FEBRUARY27,1951 Commissioner Delaney of Boston was suspended. Schoeneman testified that 50 to 60 employees were fired each year for JUNK30, 1951 Deputy Collector taking bribes and announced the Sidney Jacobs and Mrs. Ann B. creation of a special fraud section in McAdoo Serge of the New York col- the Bureau. lector’s office were arrested.

FEBRUARY28, 1951 Congress JULY1, 1951 New systems for amended the Internal Revenue appropriation accounting and admin- Code relating to the powers of istrative control over budget and the Joint Committee on Internal expenditures were placed in effect Revenue Taxation to obtain data in the offices of those collectors who directly from the Bureau of Internal handled their own accounting. Revenue, executive departments, and independent establishments. JULY1. 1951 The Bureau of Inter- nal Revenue adopted a uniform MARCH20, 1951 Two San Francis- stock control system to provide bet- co employees were indicted (Ernest ter control of inventories and requi- M. Schino and Patrick Mooney). sitions. Decentralized stationery pro- 1 curement was implemented to sim- APRIL4, 1951 The St. Louis Col- plify procurement. lector, James P. Finnegan, resigned from the first district of Missouri. JULY2, 1951 Collector James W. Johnson of New York was fired.

JULY16, 1951 Coliector Delaney of Boston was fired.

JULY19,1951 President Truman APRIL 27,1951 The Special Tax authorized the establishment of an Fraud Drive was created to investi- Inspection Service in the Bureau of Internal Revenue. The position of Director of the Inspection Service was also established. JULY31,1951 George J. Schoene- SEPTEMBER27, 1951 Collector man resigned as Commissioner citing James F. Smyth of San Francisco health reasons, and eight others in his office were suspended. AUGUST 1951 A joint investigation was begun by the Subcommittee on SEPTEMBER1951 A report on the Administration of Internal Revenue management improvement efforts of Laws and the Bureau of Internal the Bureau was completed. Revenue of the income tax returns and activities of various high ranking OCTOBER1,1951 The Inspection Bureau officials. Servicc of the Bureau of Internal Revenue was created to inspect field AUG~T1,1951 John B. Dunlap of offices for efficiency and integrity. Texas became Commissioner. OCTOBER3, 1951 Secretary of the AUGUST 4, 1951 Assistant Commis- Treasury John W. Snyder agreed to sioner Daniel A. Bolich cited health let the House investigating commit- reasons for requesting a transfer. tee circulate a questionnaire among Internal Revenue employees on AUGUST 8, 1951 James B.E. Olson, their income. The Committee had District Supervisor, Alcohol Tax made this request in July. Commis- Unit, District 2, New York and sioner Dunlap ordered the examina- Puerto Rico, resigned. tion of the income tax returns of all Bureau employees. AtJGtisT 17,1951 Monroe D. Dowling succeeded James W. John- OCTOBER4, 1951 Several rev- son as Collector of Internal Revenue enue agents resigned rather than for the third district of New York. fill out the questionnaires. Scnator Blair Moody of Michigan put forth A~JGUSI.29,1951 Seven employees charges of irregularities in the Detroit from the Wisconsin Office were sus- collector’s office. pended for violating the Hatch Act. OCTOBER5,1951 Carroll E. Mealey, SEPTEMBER10-12,1951 James Deputy Commissioner in charge of B.E. Olson testified in public hear- the Alcohol Tax Unit, resigned citing ings in New York that he was paid health reasons. The House Commit- $750 a month by American Litho- tee widened its probe of Bureau activ- fold, a St. Louis printing firm, whilc ities to include St Louis, Boston, he was head of the New York Alco- New York, and Philadelphia. hol Tax Unit. OCTOBER10,1951 Treasury Secre- SEPI‘EMBER14, 1951 Collector tary Snyder testified that he advised Delancy of Boston was indicted for Finnegan to quit in August 1950. accepting bribes. Senator Williams charged that the scandals will “reach right into Wash- ington’’ and revealed that Schoene- man had testified in the spring that OCTOBER31,1951 Lipe Henslee there was nothing wrong in St Louis resigned as Collector of Internal or San Francisco. Revenue for Tennessee.

OCTOBER11, 1951 St. Louis Col- OCTOBER1951 In response to the lector Finnegan was indicted on widening scandals, two new require- bribery charges. ments are announced for Internal Revenue employees. First, income OCTOBER15, 1951 Dominic Vita of tax returns of all officials and various the Alcohol Tax Unit in Newark was enforcement personnel would be suspended. subjected to special examination and second, all high grade and enforce- ~OBER19,1951 The Bureau of ment personnel must submit finan- Internal Revenue denied a slowdown cial statements. in the handling of tax evasion cases. Congressmen ask why more tax eva- NOVEMBER1, 1951 Congress sion cases are not brought to trial. passed new wagering tax laws, pro- viding a tax on organized gambling. OCTOBER20,1951 President These taxes were challenged as Truman signed the Revenue Act of unconstitutional but were ultimately 1951, raising individual and corpo- upheld. rate tax rates as well as many excise taxes. The act included a provision NOVEMBER1, 1951 President for additional withholding upon Truman announced that he would ask agreement between the employer Congress to place all Collectors and employee as well as numerous under the Civil Service system. special tax benefits, including deduction of medical expenses for NOVEMBER1, 1951 Increases in the elderly, mine exploration excise taxes on alcoholic beverages, expenses, unharvested crops and cigarettes, gasoline, automobiles, and depletion allowances for clam and related products under the Revenue oyster shells. Act of 1951 went into effect.

OCTOBER21,1951- Commissioner NOVEMBER2,1951 Joseph Fried- Dunlap called all field chiefs to man, New York agent, was arrested. Washington for a three-day confer- The House committee accuscd a ence. Nashville Collector Lipe U.S. attorney in San Francisco of Henslee was suspended for health refusing to cooperate with the inves- reasons. tigation.

OCTOBER23,1951 Joseph P. Mar- NOVEMBER2,1951 The Income celle, Collector for the first district of 'I'ax Unit was reorganized to reduce New York, was fired. the number of organizational units from 13 to 5, eliminating OCTOBER24,1951 Two more New 113 positions. York agents were suspended. NOVEMEER6,1951 The House ing the health of the taxpayer as a Committee announced the probe basis for refraining from recom- into Bureau management issues mending criminal prosecution for tax would be extended to North Caroli- violations. na and Michigan. 1951 Assistant to the Commissioner NOVEMBER7, 1951 The Treasury T.C. Atkeson told the House Appro- Department created a Special Board priations Committee that uwe should of Inquiry and Review to investigate get away from the 20 to 1 ratio ...,” the handling of tax fraud cases. referring to the quota system.

NOVEMBER14,1951 All tobacco 1951 The Bureau initiated a proce- dure to provide an alphabetical prefix ’ tax functions were transferred from the Excise Tax Division to the Alco- in the classification and numbering hol Tax Unit and the Unit’s designa- of income tax returns to provide for tion was changed to the Alcohol and quick identification of the class of Tobacco Tax Division (AT&T), return and simplify numbering. consolidating field inspection and enforcement activities in one staff. 1951 Beginning this tax year, the Bureau used punch card tabulating NOVEMBER19,1951 Assistant machines to prepare a punch card Commissioner Daniel A. Bolich bill form for “Estimated Income Tax resigned. Installment Due Notices,” used for 39 percent of all such accounts. NOVEMBER29, 1951 James G. Smyth was dismissed as Collector of 1951 Authority for audit of Form Internal Revenue for the first district 940 was decentralized to collectors, of California. expediting the process by allowing collectors to deal directly with state DECEMBER5,1951 Charles unemployment compensation agen- Oliphant resigned as Chief Counsel cies. for the Bureau of Internal Revenue. 1951 The Bureau installed a new DECEMBER7,1951 The Treasury method of processing monthly Department revised regulations returns of manufacturers of tobacco relating to tax practitioners to products and annual accounts of require their periodic re-enrollment. dealers in leaf tobacco.

DECEMBER7,1951 The Technical 1951 The Bureau received author- staff was renamed the Appellate ity from the Civil Service Cornmis- Staff and the Technical Staff District sion to make probational appoint- became the Appellate Staff District. ments rather than temporary indefinite appointments to positions DECEMBER11,1951 The proce- of internal revenue agent, special dure for consideration of criminal agent (tax fraud), and engineer spe- fraud cases was revised by eliminat- cial agent.

153 JANUARY8,1952 The Secretary of MARCH13,1952 The Senate the Treasury announced revised pro- approved President Truman’s Reor- cedures for handling criminal tax ganization Plan #1 after voting down fraud cases, providing for the direct the last motion to defeat the plan. referral of such cases from thc ficld to the Department of Justice. MARCH15, 1952 Reorganization Plan #1 took effect. The Plan orga- JANUARY10, 1952 The Secretary nized the Bureau of Internal Rev- of the Treasury ordered abandon- enue along functional lines; aban- ment of the former policy under doned the system of political which criminal prosecution was not appointments to positions below the recommended in cases where tax- Commissioner; integrated most field payers made voluntary disclosures revenue programs under district of intentional violation of internal directors; established a system of revenue laws prior to initiation of regional administration under investigation by the Bureau. regional commissioners; consolidat- ed inspection functions under the JANLJARY14, 1952 President Tnspection Service. This reorganiza- Truman submitted Reorganization tion establishcd the basis for a three- Plan #1 of 1952 to Congress, calling tiered structure of organization- for a comprehensive reorganization the National Office; regional offices; of the Bureau of Internal Revenue. and district offices. Key elements of the reorganization plan included replacement of the MARCH17,1952 Monroe D. patronage system with a career ser- Dowling, Collector of Internal Rev- vice; improving the coordination enue for the third district of New process; decentralizing service to York, resigned. the taxpayers; restoring the integri- ty of and public confidence in the MAKCH1952 For the first time, a Bureau; creation of an independent manufactured flat package of tax Inspection Service. forms and instructions was used for two states, Indiana and Massachu- JANUARY 30,1952 The House setts. This test demonstrated that approved Truman’s Reorganization higher manufacturing costs were off- Plan and the Bureau established ten set by savings in labor costs. task forces to work out details of plans and procedures to implement APRIL1952 A standard mail-opening the plan. system was installed in all collectors’ offices, providing a more rapid and 1952-1959 During this period the efficient handling of mail and remit- Chief Counsel was appointed by the tances. Secretary of the Treasury. MAY15, 1952 The Appellate Staff FEBRUARY12,1952 FrankScofield became the Appellate Division. resigned as Collector of Internal Rev- enue for the first district of Texas. -. */ , \ MAY20,1952 The Midwest Region directly to the Commissioner and was established as the Office of the positions of Assistant District Com- District Commissioner of Internal missioner (Administration) were Revenue, Chicago District, with juris- established in each district office. diction over district headquarters in Chicago and Springfield. OCTOBER6,1952 The Northeast Region was established as the Office MAY20, 1952 A gradual reorganiza- of the District Commissioner of tion of field offices began as provid- Internal Revenue, Boston District, ed by the Reorganization Plan No. 1 comprised of Connecticut, Maine, of 1952. Audit work formerly per- Massachusetts, New Hampshire, formed by collectors was transferred Rhode Island, and Vermont. to the new audit division in each ' director's office. OCTOBER21,1952 Wisconsin was added to the Chicago District. JULY1,1952 The Office of the District Commissioner for New York OCTOBER23,1952 The Southeast was established. Region was established as the Office of the District Commissioner of JULY11,1952 Ernest E. Killen Internal Revenue, Atlanta District, resigned as Collector of Internal Rev- comprised of Florida, Georgia, enue for the district of Delaware. North Carolina, South Carolina, and the Panama Canal Zone. AUGUST4,1952 An Internal Rev- enue Manual system, adapted to the NOVEMBER12,1952 The Mid- new plan of organization, was estab- Atlantic Region was established as lished in a revisable looseleaf style the Office of the District Commis- to provide a single authoritative sioner of Internal Revenue, compilation of the policies and pro- Philadelphia District, comprised of cedures having continuing effect on Delaware, New Jersey, and Pennsyl- the administration and operation of vania, with jurisdiction over districts the Bureau. in Wilmington, Camden, Newark, Scranton, Philadelphia, and Pitts- AUGUST11,1952 The complete burgh. reorganization of the National Office on a functional basis rather than on NOVEMBER18,1952 John B. the former type-of-tax basis took Dunlap resigned as Commissioner. effect. The reorganization of Inter- , nal Revenue abolished the Office of NOVEMBER19,1952 The South- the Director of the Inspection Ser- west Kegion was established as the vice and this position was given Office of the District Commissioner higher status by establishing the of Internal Revenue, Dallas District, Office of the Assistant Commission- comprised of Texas and Oklahoma. er (Inspection). A position of Admin- istrative Assistant to the Commis- sioner was established reporting DECEMBER1,1952 By this date, 17 approved for full implementation in offices of Regional Commissioners the 1953 filing season. This involved had been established under the reor- combining the instructions and tax ganization plan. A total of 25 such returns in book form and mailing the offices were planned. The established entire assembly in a flat package with offices included Atlanta, Baltimore, an envelope. Birmingham, Boston, Buffalo, Chica- go, Cleveland, Dallas, Denver, 1952 Albert Einstein made the Detroit, Los Angeles, Louisville, statement, “The hardest thing in the New York City, Philadelphia, St world to understand is income taxes.” Louis, St Paul, and Seattle. Under this reorganization,the 1952 There was a movement in Appeals function changed from a Congress to require that the IRS national organization to a regional make public all rulings issued to tax- organization.The major field pro- payers. Instead, the IRS made a grams, including alcohol and tobacco commitment to publish all com- tax enforcement, were integrated munications to taxpayers and field under district ditectors. The appellate offices involving substantive ques- program and the permissive alcohol tions and procedures affecting the and tobacco tax functions were placed rights and duties of taxpayers in the in the offices of regional commission- Internal Revenue Bulletin. ers. In the National Office all activi- ties were placed under three assistant JANL~ARY9, 1953 The Office of the commissioners (inspection, opera- Director of Practice was established tions, and technical); an assistant to by order of the Secretary of the the commissioner; and an administra- Treasury to assume functions relat- tive assistant to the commissioner. ing to enrollment and disbarment of tax practitioners before the Treasury 1952 The Appellate Division Department (excluding custom- received jurisdiction over federal house brokers), formerly performed estate taxes and employment taxes. by the Treasury Department’s Com- mittee on Practice and the Attorney 1952 The issuance of enrollment for the Government. The Director cards good for a period of five years of Practice was placed under the for persons entitled to practice supervision of the Commissioner of before the IRS began. Before this, Internal Revenue. cards were issued for unlimited duration. JANUARY 1953 A kit containing a teaching text, enlarged copies of tax 1952 Forms 1040 and 1WA return forms, and regular return were revised to include a uniform forms, was mailed to 30,000 junior exemption schedule designed and senior high school principals and to focus attention on dependency school superintendents in the begin- tests. Also during this filing season, ning of what became known as the a “package” mailing unit for distribu- ‘Teaching Taxes” program. tion of the 1040 was tested and

156 FEBRUARY4,1953 T. Coleman JUNE 1953 The Assistant Commis- Andrews of Virginia became Com- sioner (Administration) met with all 5- missione r . Assistant Regional Commissioners z (Administration) to outline program C,J APRIL 10, 1953 The organizational objectives and standards of perfor- structure of the National Office was mance expected during the next revised and strengthened. A position year. for a Deputy Commissioner and a staff was established in the Office of 1 JULY 1,1953 Treasury Department the Commissioner. , Order 150-26 formallv enacted sever- The staff was comprised of five I al organizational refinements, includ- assistant commissioners- adminis- ing reducing the number of regions [ration, planning, operations, techni- from 25 to 9 and establishing the cal, and inspection. The positions of 1 position of Deputy Commissioner. Administrative Assistant to the New regional offices were estab- Commissioner and Assistant to the 1 lished in Cincinnati, Omaha, and Commissioner were abolished. San Francisco while offices in Balti- 1 more, Birmingham, Buffalo, Cleve- APRIL 1953 A new procedure was 1 land, Denver, Detroit, Los Angeles, established for issuing and recording Louisville, St Louis, St Paul, and special occupational tax stamps, 1 Seattle were abolished. The others using an inexpensive printed stamp were designated as Regional Com- rather than more expensive 1 missioners of Internal Revenue. engraved stamps formerly issued. The Central Region was estab- The new stamps were issued begin- ' lished as Office of the Regional ning July 1, 1953. 1 Commissioner of Internal Revenue in t Cincinnati, comprised of Indiana, MAY1953 The Secretary of the 1 Kentucky, Ohio, Virginia, and West Treasury approved plans to stream- 1 Virginia with jurisdiction over district line the overall administrative setup offices in Indianapolis, Louisville, in the regional offices, including a 1 Cincinnati, Cleveland, Columbus, reduction in the number of regional 1 Toledo, Richmond, and Parkersburg. offices from 17 to 9 and a change in The Western Region was established title from District Commissioner of 1 as the Office of the Regional Com- Internal Revenue and office of missioner of Internal Revenue in San Director of Internal Revenue to 1 Francisco, comprised of Arizona, Regional Commissioner of Internal Utah, California, Nevada, Hawaii, Revenue and District Director of ' Idaho, Montana, Oregon, Washington, Internal Revenue respectively. 1 and Arkansas. The field operations of Alcohol and JUNE 12, 1953 The responsibility Tobacco Tax were centralized at the for processing claims to reward 1 regional level while the delinquent informers was transferred from the Audit Service Branch of the Audit transferred from the Audit Division in Division in Washington to the dis- trict directors. Division.

157 JULY 1, 1953 Authority to reject istration at the University of Michi- offers in compromise was delegated gan. The contract was awarded to to district directors. Also transferred I the University of Michigan after to the district directors were many soliciting proposals from institutions functions previously performed in of higher learning. the Collection and Audit Divisions I of the National Office and the Office 1 NOVEMBER1953 Inspection field of the Chief Counsel. offices were consolidated into 9 I offices, each headed by a regional JULY7, 1953 Commissioner’s Reor- inspector. ganization Order No. 17 officially I redesignated the Bureau Headquar- DECEMBER31, 1953 The excess ters’as the National Office. I profits tax enacted during the Kore- an War expired. JULY 9,1953 Treasury Department i Order 150-29 officially changed 1953 The procedure of informing taxpayers by mail of the IRS posi- the name from Bureau of Internal ~ Revenue to Internal Revenue Ser- tion on proposed agreements devel- vice. I oped into the two-part private letter ruling program. SEPTEhfBER 30,1953 This marked the end of the first quarter in which I 1953 The Supreme Court upheld excise taxes were paid on Form 720, the wagering tax law, clarifying the a quarterly return rather than the obligation of those involved in gam- previous system of monthly returns. I bling activities to purchase registra- t tion stamps and pay the 10 percent SEPTEMBER1953 The first classes excise tax on gross amount wagered were held in the Advanced Training ! monthly. Center established under contract with the School of Business Admin- I I I ! I I 1954 -1959 REBUILDINGA REPUTATION: “SERVICE” BECOMES MORE THAN JUST A NAME T

In the aftermath of the 1952 reorganization, the Bureau of Internal Revenue struggled to improve its public image. Focusing on the positive impact of service to the taxpayer, the Bureau began to rebuild its reputation. A new organiiational structure replaced the network of Collector’s Offices with District Offices operating under the intermediate supervision of Regional Offices. Another important change during this period was the new designation of the agency as the Internal Revenue Scrvice. JAVUARY 1,1954 The Federal ment taxes to several million addi- Insurance Contribution Act rates rose tional taxpayers, beginning with the from 1.5 to 2 percent on employees 1956 tax year. and employers. DECEMBER6,1954 The Supreme MARCH31,1954 President Eisen- Court handed down four decisions hower signed the Excise Tax Reduc- which set forth the Courr's conclu- tion Act which cut rates in half on sions that the "net worth theory" most items and retained surtaxes on was a valid investigative technique automobiles, liquor, and tobacco. in pursuing criminal tax evasion, thereby endorsing a technique used JUNE2,1954 The Committee on by special agents for many years. Appeals and Review and the Special Committee were abolished. 1954 Child care expenses became deductible for widows, single par- JULY30, 1954 Jury trials were ents, and certain other taxpayers. authorized for cases involving refunds of taxes paid in dispute. All 1954 In Revenue Ruling 54-172, dollar restrictions on such cases were the IRS issued the first published removed. guidance concerning the private let- ter ruling process. AUGUST16, 1954 The new Inter- nal Revenue Code of 1954 was 1954 A standardized badge was enacted to encourage structural tax adopted for all IRS special agents. reform. This was the first complete revamping of tax laws since the JANLNRY1955 The shift from a enactment of the income tax in 1913 stamp to a return basis for the pay- and was called the most monumen- ment of beer and wine taxes began tal revision of tax law in history, with the introduction of Form 2034 making some 3,000 changes in for beer and Form 2050 for wine this income tax rules. month. A new title under the Code of Federal Regulations was established APRIL 15, 1955 This was the first and designated "Title 26- Internal year that individual income tax Revenue, 1954," under which all of returns could be filed on this date the regulations and Treasury Deci- instead of the traditional date of sions pertaining to the 1954 Code March 15 which was retained for cor- appeared. poration and all income tax returns other than individual returns. SEPTEMBER1, 1954 'I'he Social Security Amendments of 1954 JIWE30, 1955 A Memorandum of required that the unemployment Agreement was signed between the tax applied to employers of four or Secretary of the Treasury and the more persons, instead of eight or Attorney General for carrying out more as in prior years, extending the provisions of Public Law 725 the employment and self-employ- which provided for investigation by I branch at the Midwest Service Cen- Z the FBI ofcertain criminal cases. ter. This marked the first time any -5 1 major processing operation was \c AUGUST22, 1955 A Foreign Opera- attempted on a region-wide basis. U tions District was established with 1 In fiscal year 1955, 1.1 million its headquarters in Washington, 1040As from the IO districts of the 8 D.C. as a division of the Internal 1 Omaha Region were processed in Revenue District in Baltimore. this manner. I OCTOBER 4,1955 Two service 1955 The Office of International centers were established through I Operations (010)was established an Internal Revenue Mimeograph under the Assistant Commissioner (#554 16) this date, including 1 for Compliance. Responsibility for the Kansas City (Midwest) and tax administration in all areas of the Lawrence (Northeast) Service Cen- world except the continental United ters. The Kansas City Service Cen- I States, Alaska, and Hawaii was cen- ter was the first service center to be tralized in this new function. Previ- opened 0n.a pilot basis. ' ously, these responsibilities were I.divided among all district and OCTOBER 31, 1955 T. Coleman regional offices as well as the Andrews resigned as Commissioner. 1 National Office.

DECEMBER5, 1955 Russell C. 1 1955 The Bloch brothers- Henry Harrington of Rhode Island became and Richard- set up a company in Commissioner. Kansas City, Missouri, to help peo- ple prepare their tax returns. DECEMBER15,1955 Renovation to space for the Northeast Service Cen- FEBRUARY7,1956 The Treasury ter in Lawrence, Massachusetts, was Department published its interpreta- completed and the building was tion of its rules of practice set forth in occupied on this date. Circular 230 in the .

1955 The IRS purchased an elec- MARCH19,1956 The inspection tronic computer to be operated joint- function assumed responsibility for ly with the Bureau of the Census. conducting Federal Tort Claim This was used to compile the Statis- investigations in cases requiring for- tics of Income publication. mal investigations. This function was previously performed by the 1955 Since automated equipment Alcohol and Tobacco Tax Division. required a large-scale operation, test- ing of the centralization of returns MAY1, 1956 The Foreign Opera- processing using tabulating equip- tions Division was transferred to the ment and IBM 650 computers to Assistant Commissioner for Opera- process all 1040A tax returns tions in the National Office from the received in the Omaha Region Baltimore District. began this year in the processing - - *I . 161 JUNE 25,1956 The first 1956 The Kansas City Service with a Latin American country was Center was reorganized as the Mid- signed on this date with Honduras. west Service Center and the

in the Executive Development Pro- 1 vice Center. gram graduated from the six-month training program and were placed in 1956 h new excise tax, the high- assistant district director or equiva- way on trucks and buses, was lent executive positions. levied as part of the huge federal highway construction program JULY 1,1956 A new tobacco tax authorized by Congress this year. return, required to be filed monthly by manufacturers and importers of 1956 Provisions for a comprehen- cigars, became effective. sive long-range operational and financial planning system were JULY 1956 Congress passed the established in the IRS. Social Security Act Amendments of 1956. This act increased the rate of I 1956 The IRS launched the Blue tax on self-employment income by Ribbon Program- a major effort to ?4 of 1 percent and the rates of the improve the caliber and productivity employee tax and the employer tax 1 of its work force. This was basically were each increased by X of 1 per- a college recruitment and training cent. These changes resulted in a program. large increase in the total number of returns filed during the year. The 1956 Several forms were revised extension of FICA coverage to more during the year, including the elimi- workers, particularly farm laborers, nation of payments and refunds of was responsible for most of the rise. less than one dollar on the 1040 and reduction of Form 1120, U.S. Corpo- AUGUST1,1956 The Panama ration Income Tax Return, from Canal Zone was removed from the legal to letterhead size. Form 1WOA Internal Revenue District, Jack- allowed the taxpayer to have the sonville and Puerto Rico and the IRS compute his or her tax. Virgin Islands were removed from Internal Revenue District, Lower j 1956 The IRS published a &-page Manhattan, and placed under the booklet entitled “Farmers’ Tax International Operations Division. Guide,” for the first time this year. This booklet was prepared in colla- SEFTEMBER1956 The Western boration with the U.S. Department Service Center in Ogden, Utah was of Agriculture Extension Senrice. activated at the U.S. Army’s Utah One million booklets were distrib- General Depot. i uted to farmers during the year. 1956 Corporate taxes were investigative work on major violators ; payable in two equal installments of liquor tax laws. I for the first time for tax year 1955. : Until 1950 corporate taxes were 1957 The House Ways and Means Z paid in four equal installments Committee launched a review of the : when the portion of taxes paid in accomplishments of the 1952 reorga- the first two installments was grad- nization of the IRS. ually increased until all taxes were paid in two installments. 1957 The Tax Rate Extension Act of 1957 extended existing corporate JANUARY 1,1957 The first income income tax rates and the rates of cer- tax treaty between the United States tain excise taxes which otherwise and a Latin American country took would have been reduced on April 1, effect between the United States 1957 to July 1, 1958. and Honduras. 1957 The training function was sep- JANUARY 2,1957 Accounting for tax arated from the personnel function payments received through banks and established as a Separate division under the depository receipt system in the National Office. . was improved as a result of a new system under which the Bureau of 1957 Several organizational Accounts of the Treasury Depart- changes in the National Office ment performed centralized occurred this year. The position accounting for these payments of Assistant Commissioner (Adminis- instead of through the 64 district tration) was changed to Administra- offices performing this work. tive Assistant to the Commissioner

1950 pilot and was designed to cre- missioner’s staff with additional ate a truly operative federal-state duties in the management planning cooperative program. Other state and reporting field. Finally, the Fis-

163 delinquencies. In essence, this law Also, the law eliminated many required separate accounting for cer- I unintended benefits and hardships tain taxes when the person who col- in existing income, estate, and gift lected them failed to pay the taxes I tax provisions of the internal rev- over to the government. enue code. This act authorized the I Commissioner to send deficiency MAY19, 1958 The Office of Plan- I notices by either certified or regis- ning and Research, headed by an tered mail. Previously, such notices Assistant Commissioner, was created I could only be sent via registered to bring together the previously frag- mail. mented areas of research, planning, I and policy formulation. The new SEPTEMBER22,1958 Congress \ office included the Plans and Policy enacted the Excise Tax Technical Division, the Research Division, the I Changes Act of 1958. This act incor- Systems Development Division, and porated IRS recommendations for the Statistics Division. I modernizing the distilled spirits pro- I visions of the code and ocher revi- JUSE 30, 1958 The Tax Rate sions of wine, beer, and tobacco Extension Act of 1958 cook effect, I statutes. extending until July 1, 1959, the pre- sent corporation income tax rate and I SEPTEMBER30, 1958 Russell C. the rates of certain excise taxes and i Harrington resigned as Commis- repealing taxes on the transportation sioner. of property. I I OCTOBER1958 Payroll processing JULY 7, 1958 The Government for the entire IRS workforce was I Employees Training Act opened automated and consolidated in the new avenues for strengthening train- I Western Service Center in Ogden, ing programs in the government. Utah. I Au~vsr28, 1958 Congress enacted I KOVEMBER5, 1958 Dana Latham of California became Commissioner. the Social Security Amendments of I 1958, increasing the rates of self- employment income tax and the I DECEMBER 1, 1958 For the first FICA tax on employees and employ- I time, all major tax forms were avail- ers beginning January 1, 1959. The able in IRS offices by this date. income tax base for these taxes was raised from $4,200 to $4,800. DECEMBER1958 The IRS released the first issue of “Tax Analysis of SEPTEMBER2,1958 The Technical I Individual Income Tax Returns.” Amendments Act of 1958 was enact- ed, requiring U.S. citizens residing DECEMBER1958 The Planning and in foreign countries to file US. tax I Research Staff prepared a “Summary returns and report all income, even of Operational Plans for Electronic though no tax was due. I Data Processing” for the develop ment of a data processing system for

164 the IRS. The plan consisted of a tax I 1958 The IRSheld its first formal 5 processing system installed on com- classroom training for estate and gift F D puters and a series of service centers, tax examiners. -X a permanent identification number for I .n \oVI each taxpayer, and a centrally located 1958 An IBM 650 computer was and maintained master file to serve as installed at the Northeast Service a computerized data base. Center.

1958 A Technical Amendments 1958 The Columbia and Jack- Act added the subchapter S rules to sonville District offices moved into permit income to be taxed at the new buildings, designed speci- shareholder rate rather than at the fically for their use, while the Cam- corporate rate. i den District moved into new quar- I ters as well. 1958 The title “Collection Officer” was changed to “Revenue Officer” 1958 The IRS ruled that taxpayers to identify these positions more with expense accounD had to itemize closely with the IRS and to show unreimbursed expenses on the that the primary concern of these returns, providing the first big push to positions was with the revenue. use credit adsin the United States. To avoid tedious record-keeping, 1958 A program for preappointmenc many corporations provided credit investigations of trainees selected cards for their executives. Ninety days for revenue agent and revenue after the ruling, Diners Club reported officer positions began in an effort to 60,OOOnew members- the biggest eliminate unsuitable candidates membership surge in its history. prior to appointment. 1958 The Personnel Division of 1958 The Pittsburgh and Phoenix the National Office established an Districts developed and tested a Employee Relations Branch.

I new organizational alignment of the collection division, whicb included MARCH15, 1959 Revised Treasury a Taxpayer Service Branch, con- Department rules governing the centrating all taxpayer inquiries rel- practice of attorneys, agents, and evant to collection functions in one other persons before the IRS took central area for the first time. Even- effect. The revised rules permitted tually, this arrangement was irnple- unenrolled persons to represent tax- mented in all district offices. payers in district directors’ offices on returns prepared by them for the 1958 A Work Planning and Control taxpayer and permitted special System installed in the collection enrollment through a simplified divisions of all district offices to pro- examination procedure of experi- vide for control over the processing enced persons not eligible under phase of the collection activity. general enrollment rules. MARCH16,1959 The House of JUNE 24 & 25,1959 Approximately Representatives passed a bill to 2,100 applicants took a special exam encourage the establishment of vol- to become enrolled agents under new untary plans by self- rules established in March 1959. employed individuals. JUNE 25, 1959 Congress passed a MARCH1959 The Secretary of the law providing a new set of rules and Treasury and Congress approved IRS a permanent formula for taxation of plans to proceed with the installation life insurance companies. of a nationwide automatic data pro- cessing system. JUNE 30, 1959 Congress enacted the Tax Rate Extension Act of 19.59, MAY,1959 Changes in the organi- extending the corporate income tax zational structure of district audit divi- rate and some excise taxes to July 1, sions were authorized to provide 1960 and reducing the tax on trans- greater flexibility, a more effective portation of persons from 10 percent span of control, and better use of to 5 percent, effective July 1, 1%0 supervisory and technical personnel. and terminated the tax on general telephone service effective July 1, MAY1959 The Atlanta Region was 1960. selected as the test region for the automated data processing program. SEPTEMBER21,1959 Congress passed the Federal Aid Highway Act JUNE 17,1959 The Advisory Group of 1959, imposing an additional one- to the Commissioner of Internal Rev- cent tax on gasoline, diesel fuel, and enue was established. This 12-mem- special motor fuels for a 21 month ber committee represented profes- period, beginning October 1. 1959. sional and other private groups con-

I cerned with federal taxation and was SEPTEMBER22, 1959 Congress to serve as a clearinghouse for sugges- amended the Internal Revenue tions from practitioners and the public Code to provide for appointment of for improvements in tax administra- the Chief Counsel by the Presidcnt, tion. restoring this position to its prc-1952 status. JUNE 24,1959 The IRS instituted a semi-monthly return system for the NOVEMBER12, 1959 A manage- _.vavment of federal taxes on alcohol ment study report by a task group and tobacco products, eliminating the appointed by the Assistant Commis- use of stamps for this purpose. The l sioner (Operations) recommended abolition of the historic stamp system creating an organization to imple- (in use since 1868) marked a signi- I ment the automated data processing ficant change in the method of col- 1 plan in three phases (transitional, lecting these taxes. This year had intermediate, ultimate). marked a peak in revenue stamp use with 20 billion stamps used on ciga- I rette packages. I - 24, 1959 I 0 NOVEMBER The Assistant the International Film Festival in ‘a Commissioner (Operations) announ- Edinburgh, Scotland and was select- 0 ced that Phase I of the automated 1 ed by tclevision stations in the U.S. data processing plan would proceed. as one of the 50 best films in the 1 news and documentary categories. 1959 The IRS prepared a Long- Range Plan for the first time this 1 1959 Form 112OS, US.Small Busi- year to provide an overall view of the ness Corporation Return, was issued Service’s long-term program objec- to implement subchapter S of Chap- tives and resource requirements. \ ter I of the Code as added by the Technical Amendments Act of 1958. 1959 The IRS designed a emblem to be,given to retirees with at least IO 1959 The 1040A was revised to

fying existing operations to use such tiveness and better serve the public. equipment. Up to this time, the IHS had used

I ences to quotas and to emphasize 1959 The IRS created Form 2688, quality standards. “Application for Extension of Time to File U.S. Income Tax Return.” 1959 The National Office Intelli- gence Division was expanded from 1959 The IRS began to provide two to four branches and the Intelli- television announcements through- gence function in New York City out the entire year as well as during was decentralized from the regional the filing period. to the district level to achieve uni- formity of organization nationally. 1959 The National Tax Founda- tion estimated that the average 1959 IBM 650 Computers were American worked one hour and 36 insylled at the Kansas City and minutes each day to pay his or her Ogden Service Centers. federal income taxes- up from one hour and 16 minutes 10 years earlier. 1959 The success of the East Coast Plan and the Major Violator 1959-1963 The “Untouchables” Program spawned the establishment television series aired 118 episodes of the “Junior East Coast Program,” during this period. to be used against violators who did not come within the category cov- ered by the parent program.

1959 The IRS created the 1040W form- “U.S. Individual Income Tax Return-Optional Short Form for Wages and Salary Income and Not More Than $200 of Interest and Dividends,” designed for use by tax- payers who did not require the more detailed 1040 form. 1960 -964 COMPUTERIZATIONAND INTERNATIONALAID: THEIRS GEARSUP TO SUPPORT THE GLOBAL REACHOF THE UNITED STATES 7

The vast increase in the number of tax returns filed during the years following the expansion of the income tax base in World War I1 required the IRS to develop innovative processing methods. The IRS found itself at the forefront of the automated data processing revolution as it established a series of “service centers” around the country with the primary job of processing tax returns. The expanding global responsibilities of the United States also prompted the IM to assist many third world nations in establishing their own internal tax collection systems during these years. $ 1960s TheIRSbegantouack , FEBRUARY 11, 1960 IRs executives OI - error statistics to look at ways to pre- recommended that the proposed vent common errors made by tax- centralized computer center be Q payers. located within easy commuting dis- tance of Washington, D.C. JAKUARY 1.1960 The IRS consoli- dated several district offices to FEBRUARY26,1960 Announce- improve operating efficiency. The ments for openings in automated Upper Manhattan and Lower Man- data processing positions were circu- hattan Districts in New York City lated throughout the IRS. were combined to form the Manhat- tan District. The four Ohio districts FEBRUARY 26, 1960 The former were merged into two- Toledo into Engineering and Valuation Branch the Cleveland District and Colum- of the Assistant Commissioner bus into the Cincinnati District. (Technical) was abolished. In its place three engineering branches- J~VUARY1,1960 Organizational Natural Resources, Appraisal, and changes in the National Office Court Defcnse- were established. included realignment of the Audit Division into six branches instead of I MARCH 29, 1960 A comprehensive three; assignment of responsibility study of personnel problems exper- for implementing and operating the I ienced by other organizations facing automated data processing system of 1 change on the scale of automated IRS to the Collection Division; and data processing implementation in reorganization of the Intelligence the IRS was undertaken jointly by Division into four branches instead I the Collection and Personnel Divi- of two. I sions. JANUARY 8,1%0 Detailed SPRING,1960 An initial cadre of specifications developed by employees were recruited and the Planning and Research Staff, trained as systems analysts for the the Collection Division, and the 1 automated data processing system. management consulting firm of McKinsey and Company for the APRIL 14, 1960 The IRS recom- automated data processing system mended locating the computer cen- were sent to 42 manufacturers. ter outside the 20-mile national I security limit established by JAWUARY 11,1960 An Executive Defense Mobilization Order 1-19. Council was formed to coordinate and approve activities of the auto- APRIL1960 The IRS received mated data processing plan. The proposals for the automated data Council included Robert Jack, processing system from six Bertrand Harding, William Smith, 1 companies. Robert Hall, and Bruce Rohrbacker. I I 7 MAY1960 The IRS created a SEPTEMBER1,1%0 The Office of Reports Division to develop and the Chief Counsel underwent its 4 0 m coordinate the policies, procedures, first major organizational change m and standards for a Servicewide since 1952 by streamlining and con- - \o Reports Program. solidating litigation and technical 0. functions under two Associate Chief JUNE 28,1960 The IRS proposed Counsels. a location in the eastern panhandle of West Virginia for the computer SEPTEMBER8,1960 The President center. vetoed a tax bill that would have allowed filing a claim after JUNE 30, 1960 Congress passed the the statute of limitationshad expired. Public Dept and Tax Rate Exten- sion Act of 1960 which postponed SEPTEMBER13,1960 Congress reductions in tax rates on corporate passed the Social Security Amend- incomes, termination of the excise ments of 1960 which extended and tax on telephone service, and other improved coverage and raised the excise tax rates until July 1,1%1. tax rate on employers from 3 to 3.1 percent. JULY 1,1960 Robert H. Terry was named director of the yet to be SEPTEMBER1960 Administrative located service center for the Atlanta activities in the National Office were Region. regrouped and placed at the Assis- tant Commissioner level and a new JULY 20,1960 The IRS announced Assistant Commissioner (Adminis- the contract award to IBM for model tration) was created. 1404 computers to be installed in the new service centers and IBM SEPTEMBER1960 Programmer 7070s for the National Computer classes began in Washington, D.C. Center for the automated data pro- in the “Digital Computer Systems cessing system. Programmer Course.”

JULY 20,1960 The IRS announced OCTOBER 10, 1960 Authority to the selection of Martinsburg, West approve trade names to be used Virginia, as the site for the Comput- under the Federal Alcohol Adminis- er Center. tration Act was delegated from the National Office to the Assistant AUGUST 1, 1%0 Programmer train- Regional Commissioner, Alcohol ing classes began at the IBM Wash- and Tobacco Tax. ington Training Center. OC~OBER1960 The IRS held an AIJGUST1960 The International executive seminar with 23 top officials Operations Division was redesig- to orient management to the role and nated the Office of International capabilitiesof the new automated Operations. data processing system.

171

. .- NOVEMBER15,1960 Atlanta was 1 1%0 The IRS produced ia second selected as the site of the new auto- I documentary film, “The Inevitable mated data processing service center. I Day,” as well as a short documentary I film of President Kennedy’s visit to DECEMBER19, 1960 The IF6 initi- I the National Office for internal use. ated the “Poison Moonshine Public- ity Program” to warn the public of I 1%0 The first tax model was health hazards associated with the I developed using individual income consumption of illegally manufac- 1 tax returns from this year. This con- tured alcohol. sisted of a sample of tax return data recorded on magnetic tape that DECEMBER29,1960 The IRS could be readily manipulated by announced initiation of Phase 11 of computer to yield estimates of the the automated data processing plan revenue impact of various changes in and establishment of the new Auto- 1 the taxlaws. mated Data Processing Division in I the National Office. 1 JANUARY6,1%1 The Anchorage 1 District was established. 1960 A major study of the taxpayer I service function was undertaken l JANUARY18,1961 The Chief which showed that errors could be , Counsel established branches for all National Office divisions. avoided through outreach efforts. I This resulted in the issuance of the

agement policies and procedures. FEBRUARY7, 1961 hiortimer M. 1960 Payroll systems at the North- Caplin of Virginia became Commis- east and Western Service Centers sioner. were converted to IBM 650 electron-

172

...... __ k ca. This program involved land, tax, tobacco taxes in each area and the c and other reforms. concentration of investigative effort 2 w toward their apprehension. 10 MARCH30,1961 The IRS pub- 0‘ lished ADP Redeployment Guide- MAY1%1 The IRS offered a new line Number 1 with information on course in “ADP Installation Man- personnel policies in regard to indi- agement” for the first time. viduals expected to be displaced through implementation of the new JUNE 1,1961 Ground was broken ADP system. for the National Computer Center in Martinsburg, West Virginia. The APRIL3, 1%1 The Operating building was completed in record Facilitjes Division was reorganized time, with full occupancy on and became the Facilities Manage- November 1,1961. ment Division. JUNE 30, 1961 Congrcss passed the APRIL5, 1961 Sealed bids for con- Social Security Amendments of 1961 struction of the National Computer which increased the self-employment Center were opened. Scott S. Bair, tax rates and the Federal Insurance an investment broker of Westmin- Contributions Act tax rates. ster, Maryland, received the contract to construct and lease to the govern- J~JI.Y14, 1%1 ADP Redeployment ment a $750,000 facility on five acres Guideline Number 2- Position formerly part of the Veterans Classification was published and the Administration hospital grounds. Civil Service Commission autho- rized special personnel procedures APRIL 20, 1%1 President Kennedy, to facilitate conversion to automatic in his tax message to the Congress, , data processing. recommended enactment of a tax pro- gram aimed at stimulating economic JULY7, 1961 John E. Stewart, recovery, removing tax advantagcs for Chief of the Programming Branch in American overseas investments, and the ADP Division, was appointed removing defects in the income tax the first Director of the National structure. Computer Center. He served ten years in this position, until 1971. MAY31,1%1 ’The IRS announced selection of the Philadelphia area as JULY 1961 The Assistant Regional the site of a new service center. Commissioner (Administration) was detailed through the Agency for MAY2,1%1 Internal management International Development to par- instructions were issued to establish ticipate in the U.S. Operations Mis- a Major Violator Program in each sion to Chile to set up a tax adminis- region, after a successful beginning tration school in Santiago. in the Southeast Region. The pro- gram involved identification and list- ing of major violators of alcohol and i

173 JULY1961 The National Office SEPTEMBER15, 1961 The Assistant 0. Administrative Intern Program Commissioner (Operations) was -r -1 began under a training agreement redesignated the Assistant Commis- 2, with the Civil Service Commission. sioner (Compliance).

AUGUST 1%1 The position of SEPTEMBER19,1%1 Less than a 6 Assistant Regional Commissioner year after its establishment as a sep- (Data Processing) was created in the arate division, the Automatic Data Atlanta Region. Wayne S. Kegerreis Processing Division became the was selected for this new position. Office of Assistant Commissioner (Data Processing). ACGUST1961 Ground was broken for,the new Atlanta Service Center. SEPTEMBER27,1961 Robert Jack Computer equipment was delivered was named the Assistant Commis- to the temporary site. Pending com- sioner (Data Processing). pletion of the new facility, the Atlanta Service Center was estab- SEPTEMBER1%1 The National lished in a foimer furniture ware- Computer Center completed thir- house as a pilot center to test the teen reels of tape, comprising the new data processing system. Opcra- first phase of the business master tions were also conducted out of the file, and forwarded them to the old Georgia Power Company build- Adanta Service Center. ing until 1962. OCTOBER1961 Commissioner AUGUST1961 The Commissioner Caplin and Deputy Commissioner appointed a Special Training Advi- Harding attended the Inter-Ameri- sory Committee to survey the collec- can Conference on Tax Administra- tion training program and develop a tion in Buenos Aires, Argentina. comprehensive career training plan. OCTOBER23, 1961 A nationwide SEPTEMBER1,1961 The computer IRS conference was called to discuss room of the National Computer the effects of automated data pro- Center was completed in time for cessing on the federal tax system the delivery of the IBM computer and taxpayers. More than 600 busi- equipment on September 5. ness leaders attended.

SEPTEMBER13, 1%1 Congress NOVEMBER6,1961 The National enacted a provision to prohibit travel Computer Center in Martinsburg, or transportation in commerce in aid West Virginia, officially opened with of racketeer enterprises, including a dedication ceremony on this day. busincsses involving liquor on which the federal excise tax has not been NOVEMBER1961 The "ADP paid. Authority over investigations of News" publication made its debut. violations of the act involving liquor was delegated to the IRS. (TIN) and a $10 penalty for failure - to provide the correct number. missioner to the Office of che Assis- 1961 A drive to ferret out corrup- Q tan t Commissioner (Administration). tion in the IRS was initiated by the lnspection function as a result of continuing complaints and rumors that some IRS employees, tax practi- tioners, and others were defrauding the IRS.

1%1 The Northeast Service Cen- 1%1 \Congress passed a law requir- ’ ter processed 1,960 individual ing taxpayers to use their social income tax returns on its new mag- security number as a Taxpayer Iden- netic tape computers and submitted tification Number (TIN) and requir- refund data on magnetic tape to the ing business taxpayers to use a num- Chicago Regional Disbursing Office. ber assigned by the IRS. 1961 The Office of Chief Counsel 1961 The IRS began an experi- reorganized, resulting in the division mental summer employment pro- of operations into two principal func- gram for college students to encour- tions: litigation and technical. age them to seek employment with the Service upon graduation. 1%1 Commissioner Caplin launched the “New Direction” of 1%1 I Deputy Commissioner tax administration with three main Bertrand M. Harding was selected objectives: I) better service to tax- by the National Civil Service payers, 2) vigorous but reasonable , League as one of the top ten federal enforcement, and 3) curbing of abus- employees in the country. He was es. The underlying purpose of this the first IRS employee to receive new program was to reaffirm public this honor. confidence in the tax system.

1961 Group supervisors were pro- 1961 The Administrative Intern hibited from keeping quota system program began. Each year 20-25 data on employees. individuals were selected to partici- pate in this year-long training pro- 1961 President Kennedy pro- gram. posed 20 percent withholding on interest and dividend payments. 1%1 The government’s Organized This proposal passed the House in ’ Crime Drive began, resulting in iden- 1%2 but the Senate substituted tification of many major racketeers as expanded information reporting on subjects for IRS investigation. interest and dividends for with- holding. This led to the use of Tax- payer Identification Numbers

175 JANUARY1,1%2 The Philadelphia the Director, Operations Division; Regional Service Center was estab- Lawrence Doss was the Assistant lished. Hereafter, service centers Director, Operations Division; dealing with automated data process- Monroe H.O. Berg was the Director, ing systems were known as regional Systems Division; and Donald service centers and all others were Elsberry was the Assistant Director, known as area service centers, includ- Systems Division. ing Midwest, Northeast, and Western. FEBRUARY1%2 The first master JANUARY1962 The IRS received file, the Business Master File, was special requests from the govern- established at the National Comput- ments of Peru and Chile for assis- er Center with 505,OOO accounts raqce with their computer systems. from the Atlanta Service Center. In response, the IRS sent a systems analyst to these countries. Also this EARLY1%2 The IRS began reorga- month, three representatives from nizing and expanding the role of its the Brazilian Finance Ministry came public information program to keep to the U.S. to participate in IRS rev- taxpayers informed of their rights and enue agent training. duties and to build respect for the self-assessment system. JANUARY1%2 Automated data pro- cessing was officially put into opera- MARCH1,1%2 A committee was tion in the IRS as the truly revolu- established to study the industrial tionary stage of mechanical process- alcohol and liquor tax laws in an ing was reached with the introduc- effort to encourage simplification in tion of high speed electronic com- revenue control and tax determina- puters capable of handling up to tion. 680,000 characters per second. It was during this month that the APRIL2,1962 The IRS announced processing of business returns in the selection of the Philadelphia Indus- Atlanta Service Center and National trial Park in the northeast section of Computer Center began. Starting Philadelphia as the permanent site with 5,000 Forms 940, "live" data of the service center. was converted to tape by the Atlanta Service Center and forwarded to the MAY1, 1962 The Foreign Tax National Computer Center. The Assistance Staff was established Computer Center posted the data to while the International Tax Rela- the new master file and returned it tions Division was abolished. to Atlanta on February 6. JUNE1, 1962 A building designed FEBRUARY16,1962 The IRS and constructed for the Atlanta announced several personnel deci- j regional service center- at Chamblee, sions for the new Assistant Commis- Georgia, was completed and occu- sioner (Data Processing) organiza- pied. tion: Garrett DeMotts was the Exec- utive Assistant; Clinton Walsh was JUNE 1962 The Chief Counsel 1962 The Patman Committee, 3 established a Summer Student chaired by Congressman Wright z e Assistant program, which included Patman of Texas, investigated the \o second year law students for tempo- activities of tax exempt organiza- wOI rary employment. tions and privately controlled chari- table foundations. &I’oBRK 16, 1962 President Kennedy signed the Congress passed comprehen- 1962. This act was intended to “revise sive legislation dealing with con- and reform” the tax system. It added trolled foreign corporations (50 per- entertainment expense rules and set cent or more owned by U.S. persons forth the first “information reporting” or corporations) designed to bring system to report dividends, interest, “tax-haven” abuses under control. and patronage dividends exceeding This action was based on IRS $10 annually per recipient. research conducted under a directive The law mandated that the IRS from President Kennedy. develop the Income Information Document Matching Program to 1962 The IRS developed a book- determine whether a taxpayer had let, “Careers in Tax Work,” to be reported all income to identify indi- distributed through the “Teaching viduals who had never filed a tax Taxes” course. return. It also included a provision for an investment tax credit. 1962 A Treasury-IRS Committee on Statistics was established to OCTOBER24,1962 Special agents advise tax officials on current necds of the IRS Investigation Section for tax data for the principal users of were given statutory arrest authority Statistics of Income. under IRC 76088, Public Law 87- 863. Prior to this, special agents JANUARY 1,1%3 The Cincinnati relied on US.Marshals to serve Regional Service Center (Covington, arrest warrants. KY) and the Dallas Regional Service Center (Austin, TX) were established. DECEMBER17,1962 The Commit- tee on Resources Utilization submit- JANUAKY 24,1963 In a message to ted a report to the Commissioner Congress, President Kennedy recom- with 72 recommendations relating to mended reducing individual and cor- the organization and procedures of porate income tax rates as well as the IRS. structural revision and reform of the tax system. 1962 The IRS initiated the Tax- payer Compliance Measurement MAY17,1963 Secretary of the Program (TCMP) to measure tax- Treasury Douglas Dillon approved payer compliance with the tax laws. the IRS field office realignment plan, to be effective January 1, 1964.

177 JUNE 30, 1963 The Treasury-IRS 1%3 Major changes were made to Committee on Statistics was termi- the 1040 form, reducing the number nated. of pages from four to two, with all tax computations included on page 1. JUNE 1%3 A committee of four distinguished training consultana ~ 1963 The Civil Servicc Commis- appointed by the Secretary of the sion authorized special salary rates Treasury to review the total training for revenue agents and internal audi- effort of the IRS submitted its report tors (GS-5 through 9) in California. which described the program as ”very commendable.” 1%3 The IRS established the Commissioner’s Award as the Ser- JUCY 1, 1963 The IRS instituted a vice’s first exclusive honor award. year-round Taxpayer Assistance Program and Taxpayer Service was 1963 The Atlanta District Direc- established as a branch in the Col- tor, Aubrey Ross, presented the first lection Division in the National individual income tax refund check Office. processed by the new automated data processing system to a taxpayer JULY 18, 1963 President Kennedy in a special ceremony at the Atlanta announced a series of actions to Service Center. reinforce the administration’s pro- gram to correct the United States 1963 The IRS, in cooperation with balance of payments deficit, includ- the Agency for International Devel- ing a request for an Interest Equal- opment, initiated a program to assist ization Tax. This was a special I foreign governments in modernizing temporary excise tax to remain in I their tax administration systems. effect through 1965. This propos- This program was known as the For- al was enacted into law on Sepcem- eign Tax Assistance Program and ber 2, 1964. was an outgrowth of needs identified in the 1961 Charter of Punta-del- SEPTEMBER13,1963 The Dircc- Este, which established the Alliance tor of Practice was transferred from for Progress. the IRS to the Office of the Secre- tary of the Treasury, under the 1963 Revenue officers delivered immediate supervision of the Gen- over 100,000 “Mr. Businessman’s eral Counsel. Kits” to new businessmen in con- junction with their other duties in an 1963 The Atlanta Regional Ser- effort to acquaint them with their vice Center began processing indi- obligations under the federal tax vidual tax returns on computer laws. tape. The Philadelphia Regional Service Center began processing business master file returns.

-4 \ 7 1%3 Southwest Regional Commis- I City, Missouri; and Ogden, Utah). m sioner B. Frank White received the The boundaries of the Cincinnati E c National Civil Service League’s Region were realigned to include t ;c Career Service Award as one of the Indiana, Kentucky, Michigan, Ohio, < 10 leading government administra- L West Virginia, and jurisdiction was m\o tors. established over Internal Revenue P I districts in Indianapolis, Louisville, 1%3- The Self-Employed Individ- Detroit, Cincinnati, Cleveland, and ual Tax Retirement Act of 1962 Parkersburg. The Cincinnati Region (Public Law 87-792) necessitated became the Central Region. the preparation of the new Form 2950SE to reflect the self-employed JANUARY 8,1964 President Johnson retirement deduction. said in his address, “The most damaging thing 1963 The Alcohol, Tobacco, and you can do to any businessman in Firearms Division staged the first America is to keep him in doubt, phase of Operation Dry-Up in and to keep him guessing, on what South Carolina. our tax policy is.”

1963 The IBM 7070 computer sys- FEBRUARY11,1964 The IRS tem at the National Computer Cen- modified the titles of Internal Rev- ter was converted to a IBM 7074 enue regions. The Atlanta Region system and a second IBM 7074 com- became the Southeast Region; the puter was installed to provide addi- Boston Region became the North- tional processing capacity for new east Region, etc. service centers opening in 1964. Service Centers were redesignat- ed as IRS Center, Austin; IRS Cen- 1963 Construction began on ter, Chamblee, etc. There were a regional service center buildings in total of seven service centers at this Austin and Philadelphia. time. (Austin, Atlanta, Cincinnati, Kansas City, Lawrence, Ogden, and JANUARY 1,1964 The number of Philadelphia). regions was reduced to eight and the number of district offices was FEBRUARY26,1964 President reduced from 62 to 58. Districts in Johnson signed the Revenue Act of Camden, Kansas City, Scranton, and 1964 which reduced taxes with the Syracuse were discontinued. The goal of stimulating consumption and Omaha Region was abolished. The investment. This bill called for a $14 designation ”area service center” billion tax reduction and introduced was replaced by the organizational moving expense deductions. The identification Boston-New York reduction of tax rates in this act Regional Service Center, Chicago required the preparation of new tax Regional Service Center, and the rate tables. San Francisco Regional Service Cen- ter (located respectively in Lawrence, Massachusetts; Kansas

179 d 1964 President Johnson SEPTEMBER8,1964 The first *01 FEBRUARY met with top IRS executives at the Honeywell H-200 computer was * White House. During this meeting 1401 a delivered to replace the IBM 3 the President stated that taxpayers computers in the service centers. a m "have every reason to expect from Ll. the men of the Internal Revenue NOVEMBER5,1964 William E. Service total integrity... but the price Palmer was selected as the first of integrity is eternal vigilance." director of the IRS Data Center in Q Detroit. APRIL1, 1964 The National Office Chief Counsel organization was 1964 Based on the results of a realigned by eliminating the inter- lease-purchase study, the three com- mediate supervisory level between puters at the North-Atlantic, Mid- the Chief Counsel and the directors west, and Western Service Centers of the two technical divisions by and the two large-scale computers abolishing the associate and assistant and support equipment at the chief counsel (technical) positions National Computer Center were and establishing an executive assis- purchased this year. tant position. 1964 Two new service centers MAY15,1964 The Tax Return (Austin and Cincinnati) began pro- Forms Committee was redesignated cessing business master file returns. the Tax Forms Coordinating Com- Service centers began issuing a mittee and placed in the Office of machine generated "follow-up" the Commissioner. Committee notice on individual income tax membership consisted of a chairman accounts. This replaced the notice appointed by the Commissioner and previously issued manually by dis- a representative from each Assistant trict offices. Commissioner and Chief Counsel. This Committee also assumed the 1964 The IRS developed exhibits duties of the discontinued Forms of unserviceable firearms depicting Letter Committee. the six categories subject to registra- tion and control under the Sational JULY 10, 1964 Mortimer M. Caplin Firearms Act and notations as to the resigned as Commissioner. provisions of the act and the role played by the IRS in its administra- SEPTEMBER 2, 1964 Congress tion and enforcement, was manufac- passed the Interest Equalization tured and shipped to each region Tax Act. earlier in the year.

--.7t;. 180 ~~ Cmpumrooms kame stan&nlfrolum of a)r nmIRS sm’actntc~ throughout thc muntty.

ADP, IMF, BMF, FTD, DDES, DIF, IDRS: TAXCOLLECTION BECOMES ALPHABETSO~JP 7y

The application of automated data processing to tax return processing spawned a new language ofcomputerized functions. For the first time, the IRS had access to a “master file” of information on both individual and corporate taxpayers, vastly easing the work of processing returns, auditing returns, and matching other computerized data to returns. By the end of the 1960s, the IRS had seven service centers in operation and all tax processing had moved from district offices to these new facilities. JASGARY1965 Some 300,000 resi- desired “an alert, vigorous group of dents in the Southeast Region officials in the IRS.” received requests for help in correct- ing service center records, which APRIL 1965 The IRS Chief Coun- claimed they had filed in 1%2 but sel function initiated a Professor Tax not in 1963. Law Program.

JANUARY1,1965 The Business MAY1%5 A regional conference Master File became operational on tax administration in Latin Amer- nationwide. ica was held in Miami under the joint sponsorship of the IRS JANL‘ARY1,1965 For the first time, and the Agency for International taxpayers in the Southeast Region Development. coulb file their individual returns directly with the service center if JUNE10, l%5 The service centers they expected a refund. Over four were redesignated as IRS Service million taxpayers used this option Center, Central Region; IRS Service this year. Center, Mid-Atlantic Region, etc.

JANUARY1,1%5 The IRS began JLSE 21,1%5 The Excise Tax using high speed microfilm readers. Reduction Act of 1%5 became law. Taxpayer directories, returns and This law represented a comprehen- document indexes, and settlement sive overhaul of the Federal excise registers were provided on microfilm tax structure. for master file taxpayers in the When the reductions became fully Southeast and Mid-Atlantic Regions. effective on January 1, 1969, excises This became available in all district were limited to three general offices on July 1, 1%5. groups- 1) alcohol and tobacco taxes, 2) highway user and air transportation JANUARY4.1965 The number of taxes, automobile taxes, and fishing regions was reduced to seven with equipment taxes, and 3) regulatory the abolishment of the Northeast taxes on narcotics, phosphorous Region. This region became the matches, and wagering. North-Atlantic Region with head- This act eliminated the IO percent quarters in New York City. on such items as jewelry, furs, cosmetics and rolled back manu- JANUARY25,1965 Sheldon S. facturers’taxes on appliances, sport- Cohen of Maryland became Com- ing goods, business machines, auto missioner. parts, etc.

MARCH31, 1%5 IRS executives JLNE1%5 A Distilled Spirits Stan- met with President Johnson in the dards and Labeling Survey Commit- East Room of the White House. tee was established to reappraise the During the meeting, the President various regulations issued under the praised the IRS for its efforts to Federal Alcohol Administration Act. economize and stated that he 7c JULY r 1,1965 The IRS Data Center 1965 The IRS established a 90. opened in Detroit. nationwide lntelligence career pro- VI gram. JULY1965 The Technical organi- zation in the National Office was 1965 The IRS began validating c realigned by type of tax rather than taxpayer social security numbers by function. against social security information.

AUGUST 25,1965 President Johnson 1965 The Office of International announced the introduction of a new Operations was restructured and the Planning-Programming-Budgeting Research, Tax Treaty, and Techni- (PPB) System throughout the Execu- cal Services Division was established tive Branch. This new system in the National Office. replaied the Long-Range Plan. 1965 The position of Deputy OCTOBER1965 The second phase Chief Counsel was created as part of Alcohol, Tobacco, and Firearms of the National Office reorganization. Operation Dry Up was staged in Also, the Operations and Planning northern Georgia. Branch was created.

DECEMBER31,1965 The IRS 1965 IBM 7070-7074 computers at hosted a reunion of former and pre- the National Computer Center were sent members of the Commissioner’s replaced with IBM 360-65 computers. Advisory Group. Of 73 living alum- nae, 70 attended. 1965 The title of settlcment officer was changed from “’l’echnical Advi- DECEMBER1%5 The Ogden Ser- sor” to “Appellate Conferee.” vice Center moved to its new facility adjacent to the Defense Depot, 1965 The Newark District Ogden. The facility was not officially and Chapter 60 of the National dedicated until March, 1967. Association of lnternal Revenue Employees (NAIRE) negotiated 1965 The IRS instituted the first a collective bargaining agreement centralized toll-free telephone site. covering all employees of the district except management officials, tech- 1965 A magnetic tape reporting nical employees, and investigative pilot was made available to employers personnel. This was the first sub- for Form W-2 and 1099 information stantive union agreement negotiated and a computerized tape library sys- in the IRS. tem was installed nationwide. As a result, an operational tape reporting 1965 The IRS established an program began for 1965 payment Exempt Organization Master File information in the 1966 filing season System to cope with the rise in the with 591 entities. number of organizations and pension trusts seeking .

183 JAKUARY 1, 1966 Individual Mas- caps in recruiting because of higher ter File operations were introduced private sector salaries. This authority in the Southwest, Central, and also permitted the IRS to hire accoun- Western Service Centers. The ting students under work-study agree- Detroit Data Center also began ments and offer careerconditional operations on this date. appointments noncompetitively after a six-month training period. JLVUARY 1,1966 The tax on manu- factured tobacco (smoking and JLLY IS, 1966 Congress enacted a chewing tobacco and snuff) that law providing payment of some legal had been in existence for 103 years costs in favor of the taxpayer. was repealed. JULY1966 The IRS instituted the MARCH16,1966 President Johnson large case audit program to replace approved the Tax Adjustment Act of the “one man, one case” practice 1966, which provided for withholding that had dominated corporation of personal income taxes at graduated audit techniques. rates beginning May 1,1966, and sped up the collection of corporate taxes. AUGKST 8, 1966 The Beatles’ recording of “The Tax Man” was MAY5,1966 President Johnson released in the United States on the stated that “the campaign against album “.” racketeering must not only be contin- ued but it must be accelerated.” In NOVEMBER2,1966 Congress passed response, the Intelligence Division a law which stated that taxpayers established an Organized Crime could be required to file returns Drive as an integral part of regular dis- directly with a service center instead trict operations. of a district office. The IRS intro- duced this change into the Southeast MAY1966 A Seminar for Directors- Region in 1968 and completed the General of Taxation was held in transition nationwide by 1970. This Washington as the first step in pro- act also discontinued the practice of viding a permanent forum for the allowing legal action regarding a exchange of ideas, concepts, and refund to be taken against a collector experiences for the improvement of as a personal action. tax administration among executives of tax administration agencies in the NOVEMBER13, 1966 The President Western hemisphere. This led to the signed the Foreign Investors Tax creation of the Inter-American Cen- Act making comprehensive changes ter of Tax Administrators in 1%7. in the concepts of US. taxation of nonresident aliens and foreign cor- JUNE5,1966 The Civil Service porations. Commission authorized increases in the pay rates for GS5,7, and 9 DECEhlBER 19,1966 The North accountants, auditors, and internal Atlantic Service Center relocated from revenue agents to overcome handi- Lawrence to Andover, Massachusetts. 1966 The piloting of a toll-free lishment of the Presidential Election > z telephone network increased the c Campaign Fund. > IRS effort to handle most taxpayer x inquiries by phone. 1%6 The Revenue Act of 1966 - 5 revised the system of federal tax .. 1966 The IRS tested a single-font liens. optical scanner in the Southeast Ser- vice Center this year. 1966 The IRS opened a second regional training center in the Cen- 1966 The first Data Processing tral Region. Management Training Program was established and the first Data Pro- I 1966 Congress passed the Tax cessing Career Management Regis- i Adjustment Act of 1966 which mod- ter was established. erated some of the revenue reduc- tions of the Excise Tax Reduction 1966 Branch offices of the Alcohol, Act of 1965. Tobacco, and Firearms Division were closed in Buffalo, Charleston, 1966 The IRS instituted the new West Virginia; Omaha, and Milwau- “Planning-Programming-Budgeting kee. System” as a major tool for projecting long-range trends in Service programs 1966 Mary E. Taylor became the and resource requirements. - first woman to enter the Executive Development and Selection Pro- 1966 The IRS inaugurated a pro- gram. She was one of 17 candidates gram to provide magnetic tapes of selected from over 300 nominees. selected data from the master file to state tax authorities after an IRS 1966 This year marked the begin- survey revealed that most states ning of a series of International Tax used computers for tax processing. Training (INTAX) seminars and courses for the officials and man- JANUARY 1, 1967 For the first agers of tax agencies of developing time, the IRS processed returns to countries. the Individual Master File nation- wide. This completed six years of 1966 Special salary rates for revenue intensive effort to establish a national agents and internal auditors were automated federal tax system. expanded nationwide. JANUARY 1,1967 The Taxpayer 1966 Title 1 of the Foreign Inquiry Sampling Program began as Investors Tax Act of 1966 brought the primary device for detecting about a comprehensive revision of the nationwide taxpayer problems. In this federal income, estate, and gift tax program, the top 25 taxpayer inquiries laws applicable to foreign persons. were analyzed to determine areas Title I1 made several significant which required special clarification. amendments to the income tax laws and Title 111 provided for the estab- MARCH 1967 The pilot for a new JULY15,1%7 Congress amended Direct Data Entry System (DDES) the Intcrest Equalization Tax Law, was installed at the Southeast Service aimed at halting evasion of the inter- Center. The initial process involved est equalijlation tax through the 24 keypunch operators and verifiers improper use of certificates of prior using a General ElectricIProcess American ownership of foreign securi- Automatic Computer (GEIPAC). ties for the purpose of tax-free resales.

MARCH1%7 Payment of travel and JULY1%7 The Civil Service Com- transportation expenses to first-post- mission approved a nationwide spe- ofduty was authorized for new rev- cial salary rate for GS-5 through GS- enue agents and internal auditors. 9 special agents.

MAY’1%7 The Inter-American Cen- SEP~EMBER1%7 The first of three ter of Tax Administrators (CIAT) was hearings to consider amendments to founded at a meeting in Panama City, the regulations in title 27, Code of Panama, to provide a forum for the Federal Regulations, Part 5, “Labeling exchange of information, experience, and Advertising of Distilled Spirits,” and technical assistance in tax adrnin- was held. As a result, a new type of istration in the Western hemisphere. domestic whiskey, to be known as Commissioner Cohen was elected “light whiskey,” was authorized in President of the Center’s Executive January 1968. Council. DECEMBER31,1967 Documentary JUNE1967 Public reading rooms I revenue stamps were no longer used opened in the National Office and the after this date. seven regional offices. 1%7 The IRS established a Wage JUNE1%7 A study group report on i, and Information Document Matching revenue officer attitudes, morale, and Program (WAID) to improve the over- motivation was submitted to the all document matching program. This Assistant Commissioner (Compli- , program became fully operational in ance) with the objective of improving I 1%8 and went nationwide in 1%9. the working climate for this key front- line occupation. 1967 The IRS tested the use of expanded hours of service and pub- JUNE1967 The Regional Training lic affairs releases covering the most Center moved from Detroit to common audit problems. Cincinnati. 1967 The IRS established the JULY6, 1967 The Central Service 1’ account referral program. Center was relocated from Cincin- nati to Covington, Kentucky. 1%7 The IRS initiated a long-range study of the automated data process- ing system to determine require- ments of the 1970s and beyond. This

. would later be called the Tax Admin- JANUARY1,1968 The Federal tax % istration System (TAS). deposit system was extended to E r include payment of withholding and 1967 A new Federal Tax Ikposit FICA taxes by employers and with- g (FTD) system was established for holding agents, certain excise taxes, corporate estimated tax payments railroad retirement tax, regular cor- using preaddressed punch cards. poration income tax, and tax on busi- This replaced depository receipt ness income of exempt corporations. procedures that had been in effect for almost 20 years. The Federal JANL‘ARY 18, 1968 The staff of Reserve Board and Office of the the overseas offices of the Office Treasurer sent tapes to the National of International Operations was Computer Center for reconciliation cut by three persons as a result with the taxpayers’ accounts. of a Presidential directive aimed at reducing IJ.S. dollar expendi- 1%7 The position of Deputy turc and personnel strength abroad. Assistant Commissioner (Data Pro- This left a total of 27 personnel in cessing) was established and Garrett nine foreign posts. DeMots was selected as the first incumbant. JANUARY1%8 The phase-in of filing of individual tax returns with the 1%7 The IRS Chief Counsel service centers continued as the Library facilities were consolidated Southeast Region phased in all types on the fourth floor of the National of individual returns. In the six other Office building. regions, taxpayers with refund returns were asked to file directly with the 1%7 Mary E. Taylor, the first service centers. female graduate of the Executive Development Program, became the APRIL1968 The IRS introduced a first female assistant district director. new amended individual income tax return form, the 1040X 1967 Three blind individuals were hired to work as taxpayer assistors in APRIL1968 The first in a series of the Ikle Rock District in a pilot three hearings on the “Labeling and program supported by the Office of Advertising of Distilled Spirits” regu- the Services for the Blind,Vocational lations was held to consider substan- Rehabilitation Administration. tive changes in the regulations.

EARLY1968 Representatives of the APRIL1968 Deputy Commissioner National Tax Administration Agency William H. Smith was named as one of Japan made an in-depth study of of the ten Outstanding Federal the IRS Foreign Tax Assistance Pro- Employees by the National Civil gram and later established a similar Service League. program in Tokyo to provide train- ing and technical assistance to devel- oping countries in Asia.

187 $ MAY1968 The Inter-American I NOVEMBER1, 1%8 Title I1 of the -OI Center for Tax Administrators held Gun Control Act of 1968 became its second annual general assembly effective. This act amended the ‘ in Buenos Aires. This organization ~ National Firearms Act by inclusion of now had members from 20 countrics. the destructive devices category of fircarms and the insertion of more JCNE 6,1968 The Senate ratified stringent penalties for criminal viola- income tax conventions with France, tions of the act. The act required that Brazil, and the Philippines. all firearms,as defined by Title IT, not previously registered had to be regis- JUNE28, 1968 Congress passed the tered within a 30-day amnesty period. Revenue and Expenditure Control Act pf 1968. This act retroactively NOVEMBER15,1968 The IRS increased tax rates by providing a established a Firearms Evaluation 10 percent surcharge on corporate Group to provide advice concerning income tax from January 1, 1968 thc development of standards to and on individual income tax from control the importation of firearms April 1, 1968. and ammunition.

SEPTEMBER1968 The second of DECEMBER 16,1968 Title I of the a series of three hearings on the Gun Control Act of 1%8 became “Labeling and Advertising of Dis- effective, strcngthening firearms tilled Spirits,” was held with the licensing provisions and setting forth issuance of a Treasury Decision comprehensive restrictions on com- which established standards of iden- mercial and private transactions tity for blended applejack and certain involving firearms and ammunition flavored distilled spirits, and amended and on the transportation, shipment, the standards of identity for gin and and receipt of these articlcs in inter- vodka. This Treasury Decision also state and foreign commerce. Under rcquired the alcoholic content and the the provisions of the law, the IRS was net contents to appear on the brand faced with a massive licensing task. label of all distilled spirits. DECEMBER19,1968 The Alcohol OCTOBER22,1968 The Gun Con- and Tobacco ‘Fax Division changed trol Act of 1968 was passed, adding its name to the Alcohol, Tobacco, additional firearms controls to be and Fircarms Division. administered by the Alcohol, Tobacco, and Firearms Division of LATE 1%8 The IRS bcgan to con- the IRS. template changes to the tax process- ing systems in the service centers. ~OBEH1%8 The IRS initiated an This resulted in a plan to deccntralizc Appellatc Conferee Evaluation Study taxpayer account files from the which resulted in a test to grant settle- National Computer Center to the ment authority to appellate conferees. 10 service centers, with Martinsburg The test ended in November 1973 operating primarily as a centralized without settlement authority granted. data facilitator for the centers. - -. I 188 d 1968 The IRS completed a four ernment. The Alcohol and Tobacco G c31 and one-half year renovation pro- Tax Division was given the first ject in the National Office building. direct federal jurisdiction over the The interior of the building was criminal use of explosives and this converted to modern, well-lighted, 1 legislation greatly expanded their air-conditioned office space and tra- activities and responsibility for ditional office layouts were changed. Old furniture was replaced with new, space-saving 1%8 The third phase of Operation furniture. , Dq Up was staged in Alabama.

1968 The IRS redesigned its 1%8 The IRS completed a series official stationery and envelopes. of organizational changes in Alcohol and Tobacco Tax field offices, 1968 The IRS tested a new ques- including the replacement of super- tionnaire-type form, the lONQ,in visor-in-charge positions with chief an effort to provide a simpler income special investigator for enforcement tax return for individuals. Studies and chief inspector for permissive showed that not enough taxpayers functions positions. would use this type of form to justify its adoption. 1%8 The Supreme Court in the Marcheni and Grosso cases upheld 1968 The IRS abolished the posi- ' the right of two taxpayers convicted tion of Deputy Chief Counsel. The of failing to pay occupational and Collection Division was renamed 1 excise taxes on wagering to assert General Litigation, with the their privilege against self-incrimina- increased responsibility of the Free- 1 tion under the Fifth Amendment dom of Information Act given to this because the returns on these taxes new division. were not restricted as to disclosure I and the extensive information con- 1968 The IRS social security num- tained was available to state and ber file was established. Since 1%5, local prosecutors. the IRS had been validating taxpay- ers social security numbers by com- 1%8 The Office of International paring them with those on a Social Operations began processing returns Security Administration-provided on the Individual Master File. master tape. 1968 The last three of seven ser- 1968 The Omnibus Crime Control vice centers (Andover, Covington and Safe Streets Act of 1%8 and the and Ogden) occupied new buildings subsequent Gun Control Act of that had been specially designed to 1968 replaced the FFA and NFA of accommodate the massive paper- the 1930s. Bombs and other destruc- work flow and complex electronic guns and sawed-off shotguns as items strictly controlled by the gov- 2 1%8 After a successful pilot test in FEBRUARY18,1969 The Commit- m - the Southeast Service Center, the tee on Ways and Means began hear- IRS began to install its first opera- ings on tax reform. These hearings tional GE-4020 direct data entry sys- concluded on April 24,1969. & tem (DDES) in the Southwest Service Center, replacing key punch APRIL1, 1%9 Randolph W. machines. Thrower of Georgia became Com- missioner. 1968 The financial management intern program was developed as a APRIL 21, 1969 Tax reform was the means of identifying, recruiting, and subject of President Nixon’s mes- training promising college graduates sage to Congress. for dareers in federal financial man- agement. Three interns were hired APRIL1969 The third and final for the first year of the program. hearing on the “Labeling and Adver- tising of Distilled Spirits,” was held. 1968 As the result of an employee suggestion, a system to microfilm MAY12, 1969 A tax muscum, to be applications for certificate of label known as the Visitor’s Gallery, was approval in the Federal Alcohol dedicated in the National Office and Administration Act was imple- opened to the public. mented. This resulted in improved research ability as well as reductions MAY1969 The third annual Gcn- in storage space. era1 Assembly of the Inter-American Center of Tax Administration was 1968 The IRS established a ten- held in Mexico City. member panel of art experts to help determine whether realistic JULY18, 1969 The IRS established appraisals or fair market value had the Activist OrganizationsCommittee, been placed on works of art donated which was later renamed the Special to charity and claimed as deductions Services Sraff. The mission of this on tax returns. The Association of organization was to coordinate all IRS Art Museum Directors had sug- activities involving ideological, mili- gested creation of the panel. tant, subversive, radical, and similar organizations and individuals. JAN~JARY20, 1969 Sheldon S. Cohen resigned as Commissioner. Au~usr7, 1%9 Congress extended the 10 percent surcharge through JANUARY1%9 More than 30 mil- December 31,1969 and placed the lion taxpayers received federal payment of Federal Unemployment income tax packages printed in two Tax Act (FUTA) taxes on a quarterly colors for the first time. The use of installment basis. color was intended to minimize tax- payer error. NOVEMBER26, 1%9 Congress extended the interest equalization tax through March 31, 1971.

190 - NOVEMBER1%9 Fifteen distin- 1 1969 A group of volunteers from 0 guished Americans were appointed the Cleveland Chapter of the cSI to serve on a new “Commissioner’s American Red Cross were the first Advisory Committee on Exempt recipients of the Commissioner’s Organizations,” which helped the Award outside the IRS. They IRS define such terms as “religious,” received the award for the prepara- “educational,” “propaganda,” and tion of braille materials co train “political activity.” blind IRS employees.

DECEMBER 30,1%9 The Tax 1969 The IRS set out to redesign Reform Act of 1969 became law. the entire tax processing system. Ini- This act dramatically lowered tax tial efforts produced the Tax Admin- rates.1This was the first of the istration System (TAS) which envi- “supermajor” tax acts amending the sioned a totally decentralized system 1954 tax code (followed by acts in under which taxpayer accounts 1976, 1982, 1984, and 1986). would be maintained at service cen- This act applied a minimum tax to ters instead of at one central loca- all taxpayers; established a number tion. of excise taxes to be imposed on pri- vate foundations; increased the amount of the ; and provided that an individual’s wages were not subject to withhold- ing of Federal income tax if the tax- payer certified to his employer that he expected no Federal income tax liability. ‘This act also established the Tax Court as a legislative court under Article 1 of the Constitution and changed its name to the . The term of office of Tax Court judges was increased 1969 The National Tax Founda- from 12 to 15 years and full judicial tion estimated that the average for judges who were not American worked one hour and 48 reappointed after the expiration of their terms were provided.

1%9 Regional laboratories of the Alcohol, Tobacco, and Firearms 1%9 The Commissioner launched Division in Chicago, Dallas, New a comprehensive study of the cntire York, San Francisco, and Seattle IRS organization to determine were consolidated into multi- whether tax administration responsi- regional laboratories in Atlanta, bilities were being discharged in an Cincinnati, and Philadelphia. efficient and effective manner and to ensure that the Service would be

191 $ able to adapt to the changing envi- 1969 For the first time, the IRS 2 ronment of the 1970s. presented evidence of tax evasion before a General Court-Martial in a 1969 Congress approved three new case involving an Army noncommis- ’ service centers to be constructed on sioned officer who failed to report Long Island, Memphis, and Fresno. profits from operations in Vietnam. 1%9 A taxpayer inquiry referral system was formally adopted. This LATE1960s The IKS created the system permitted taxpayers to Coordinated Examination Program obtain complete service at any IRS (CEP) to ensure uniform and consis- office location. tent trcarment of issues and to pro- vide better identification and devel- 1%9 Most individual estimated opment of issues. income tax return filers were placed on a “voucher” system of filing this year. Rather than the IRS sending quarterly notices for estimated tax installments, taxpayers submitted each installment with a payment “voucher” that was furnished with the estimated tax form package. E C ON OM I C sTA B I L I Z AT IO N AND UNIONNEGOTIATIONS: THEIRS ADAPTS TO NEWDEMANDS

Despite the vast numbers of tax returns flowing into the IRS each year, the agency continued to be given additional responsibilities. In the early 1970s the IRS was given the job of informing the public and investigating irregularities in President Nixon’s Economic Stabilization program. Other major activities included establishment of a special staff to oversee the redesign of the automated tax processing system. JANUARY1,1970 Federal Unem- JUNE 1970 Barbara Vatran ployment Act taxes (FUTA) came Thompson was appointed as the under the Federal Tax Deposit first Servicewide coordinator for the (FTD) program for the first time. Federal Women’s Program. This fax was now payable quarterly rather than annually. JULY10,1970 The IRS announced that it could not justify tax exemp- J~~UARY1970 The IRS completed a tions or allow charitable contribu- three-year study of the revenue tions to educational institutions with officer occupation. In addition to pro- racially discriminatory admissions viding information on recruitment policies. A questionnaire requesting and the work environment, this study , information on admissions policies revealed a changing emphasis towards was sent to 5,OOO private educational higher-graded work. A number of institutions. new GS-11 and GS12 revenue officer positions wese created in recognition JULY12, 1970 Directors were of this change. appointed for the three new service centers. FEBRUARY1970 The IRS assigned three technical representatives to con- SEPTEMBER22,1970 A ground- duct examinations and investigations breaking,ceremony was held for the of black market currency activities in Memphis Service Center. Vice Vietnam and other countries in President Agnew participated in Southeast Asia. the ceremonies.

APRIL24, 1970 Congress provided OCTOBER 26,1970 President tax relief to the crew of the U.S.S. Nixon signed the Bank Records and Pueblo during imprisonment by Foreign Transactions Act. This act North Korea. was also known as the Bank Secrecy Act and required individuals, busi- MAY21, 1970 The Airport and nesses, and financial institutions to Airways Act of 1970 increased the report cash transactions exceeding tax rates on the transportation of $lO,OOO to the IRS. This prompted persons by air and imposed new the IRS to develop the Currency taxes on the use of international Transaction Report (Form 4789) and travel facilities, the transportation the Casino Currency Transaction of property by air, and the use of Report (Form 8372). certain civil aircraft. OCTOBER1970 Thirty Internal MAY1970 The Inter-American Security Inspectors assisted the Center of Tax Administrators Secret Service in protecting digni- (CIAT) held its fourth General taries attending ceremonies at the Assembly in Montevideo, Uruguay. celebration of the United Nations’ 25th anniversary. OCTOBER1970 The Commissioner 1 of compliance with water quality announced formation of an Advisory standards prior to manufacturers of Committee on the Horse Industry. 1 distilled spirits, wine, beer, and Composed of 15 citizens, the group explosives receiving operating per- included representatives of the aca- 1 mits or licenses from the IRS. demic community and professional groups concerned with horses, with 1 1970 The IRS issued Form 4683, the purpose of advising the IRS on “U.S. Information Return on For- issues such as the holding period for ’ eign Banks, Securities, and Other livestock for capital gains treatment, Financial Accounts,” to promote the exchange of livestock, and hobby 1 government’s overall efforts to com- losses. 1 bat organized crime and tax evasion.

OCTOBER1970 The Commissioner 1 1970 IRS special agents from the formed an Advisory Committee on Intelligence and Alcohol, Tobacco, the Cattle Industry to advise the IRS I and Firearms Divisions and the in implementing changes in the tax Inspection Service served on special law dealing with cattle and livestock ’ duty as “Sky Marshalls” on U.S. car- 1 rier international and selected 1970 The IRS discontinued Form domestic flights in an effort to com- 1040A, consolidating it with a new I bat “skyjacking” until a permanent Form 1040 to allow more taxpayen force was recruited and trained for the advantage of claiming head of 1 this purpose. household, sick pay exclusion, and other benefits. ’ 1970 The Executive Development 1 Program added an electronic data 1970 The optional tax tables were processing seminar to its program. expanded to include incomes up to 1 $lO,OOO, enabling more taxpayers to 1970 A regional test of sending use these tables instead of comput- I 1969 individual income tax returns ing their tax. l to federal records centers six weeks after receipt began. 1970 The IRS established a special committee on life insurance com- 1970 An Exempt Organizations pany tax problems to study and 1 Examination Branch was established resolve controversial issues raised in in the National Office Audit Division connection with examinations of ’ to develop the nationwide exempt federal income tax returns of life I organization audit program and over- insurance companies. see the activities of all districts. I 1970 The Water Quality Improve- 1970 The IRS awarded a contract ment Act of 1970 required the Alco- 1 to Control Data Corporation for the hol, Tobacco and Firearms Division CDC 3300 system for the IDRS data of the IRS to work with the Environ- processing system. mental Protection Agency to develop guidelines for certification 4 1970 The Excise, Estate, and Gift Center and the Cleveland District 0, - Tax Adjustment Act of 1970 short- Office. ened the time for filing and paying tax on estate tax returns from 15 to JUNE 22,1971 Randolph W. Q 9 months after the decedent’s death Thrower resigned as Commissioner. and postponed the scheduled reduc- tion of the 7 percent excise tax on JUNE 1971 President Nixon called automobiles and the IO percent excise for increased efforts to combat the tax on telephone service until 1973. growing problem of drug abuse. In response, the IRS set up a special 1970 Due to the success of Form I program to conduct tax investiga- lWX,the IRS introduced Form tions of key figures engaged in nar- 1120X for use by corporate taxpayers. cotics traffic.

1970 IRS-sponsored volunteer pro- JULY 1,1971 The Office of the grams began during this filing season 1 Assistant Commissioner (Data Pro- when 7,500 volunteers helped about cessing) was redesignated the Assis- 100,000 taxpayers as part of the new tant Commissioner (Accounts, Col- Volunteer Income Tax Assistance I lection, and ‘Taxpayer Service). (VITA) program. I JULY 9, 1971 The National Associa- 1970 Congress passed the Compre- tion of Internal Revenue Employees hensive Drug Abuse Prevention and (NAIRE) submitted proposals for a Control Act in response to the Presi- nationwide bargaining agreement to dentially-declared “War on Drugs.” the IRS. Negotiations continued for With passage of this act, for the first nine months. time Federal drug control enforce- ment authority was based on the prin- JULY23, 1971 The three new ser- ciple of interstate commerce rather vice centers were officially desig- than taxation. Title 21 of this act dealt nated as the IRS Service Center, with controlled substances and North Atlantic Region (Brookhaven); replaced the previous narcotic and IRS Service Center, Western Region dangerous drug control laws with a (Fresno); and IRS Service Center, single statute. Licensing require- Southeast Region (Memphis). ments were extended to all controlled substances and not just narcotics. AUGUST6, 1971 Johnnie M. Walters of South Carolina became JANUARY1971 Testing began to Commissioner. determine the feasibility of using microfilmed images of individual AUGUST15,1971 President Nixon tax returns and documents in lieu announced a 90-day freeze on most of the original documents. Known prices, wages, and rents. The Presi- as STAR (Storage and Retrieval of dent’s executive order created the Images of Returns and Related Cost of Living Council as a major Documents), this system was I policy making body. The Office of tested by the Cincinnati Service *Emergency Preparedness took over 1%

. - - responsibility to implement, admin- 1971 The Integrated Data \o ister, and enforce the Economic Sta- Retreival System (IDRS) was suc- 2 bilization Program. cessfully implemented at the South- west Service Center (Auscin). & AUGFST 19,1971 The Office of Emergency Preparedness redele- 1971 The gated responsibility to the IRS to included a job development invest- establish local service and compli- ment credit and a new depreciation ance centers to provide information system as well as an increased stan- to the public, investigate complaints, dard deduction and extension of the and monitor compliance with the optional tax tables to more taxpay- Economic Stabilization Program. ers. It also reduced revenues some $26 billion over a three-year period. AUGUS- 1971 The Western Service Center was redesignated the Ogden 1971 The IRS developed the Service Center. Employee Plan Master File System to link employer entities with OC~OBER15,1971 President adopted plans, the trusts or funds Nixon issued an Executive Order through which they financed their providing the legal foundation for plans and the fiduciaries of these Phase I1 of the Economic Stabiliza- trusts or, funds. tion Program. This order continued the Cost of Living Council and cre- 1971 The Taxpayer Service func- ated the Pay Board and Price Com- tion was reorganized and upgraded mission. The role of the IRS was to organizationally as the Taxpayer receive inquiries and complaints, Service Division under the Assistant conduct investigations, and perform Commissioner for Accounts, Collec- other related duties. tion, and 'Taxpayer Service. Tax- payer Service remained part of the NOVEMBER14,1971 The IRS collection function in IRS districc established a position for an Assis- offices. tant Commissioner (Stabilization). The Office of the Chief Counsel 1971 The IRS tested the Cen- also established a Stabilization Divi- tiphone System (Centralized Tax- sion. President Nixon officially payer Information by Telephone) in assigned responsibility for enforce- the Little Rock Distrim This system ment of the program to the IRS. permitted taxpayers to call district Field offices were established at IRS offices at the local call rate. regional and district offices. 1971 The IRS tested an automated NOVEMBER 1971 The building for Remittance Processing System to the Memphis Service Center was modernize the clearing, depositing, completed. and crediting of checks to a cax- payer's account. 1971 A bomb detonated and MARCH1972 The Internal Secu- 2 killed an employee in the Los rity Division assumed jurisdiction Angeles District. over assaults and threats against IRS employees. 1971 The Commissioner ordered ' a study to determine the feasibility APRIL5, 1972 The IRS signed an of reintroducing the 1040A short agreement with the National Associ- form income tax return. This ation of Internal Revenue Employ- resulted in development of a half- ees (NAIRE) which covered all dis- sheet size form for reporting 1972 trict offices and provided NAIRE taxes. with exclusive union recognition. The agreement covered about 1971 Dean J. Barron replaced 28,000 employees and marked the Robert L. Jack as Assistant Com- first time the IRS and a federal missioner (Data-Processing). employee union reached a nation- wide agreement. 1971 The fifth General Assembly of the Inter-American Center of MAY 1972 The Price Commission Tax Administrators met in Rio de delegated authority for exceptions in Janeiro. all rent and price cases involving firms with annual sales or revenues 1971 An Office of Industrial Eco- of $50 million or less to the IRS. nomics was established in the Plan- ning and Research function with JULY1, 1972 The new service cen- responsibility for recommending ter at Brookhavcn began processing changes in definitions of asset tax returns. guideline classes and in the associ- ated depreciation and repair norms JULY1, 1972 The Alcohol, necessary to the new Class Life Tobacco, and Firearms Division was Depreciation Range System. separated from the IRS and estab- I$hed as an independent Bureau in 1971 The Art Advisory Panel was the Treasury Department. The expanded from 10 to 18 members. Alcohol, Tobacco, and Firearms I Division was also removed from the JANUARY1, 1972 The new service Chief Counsel area at this time. centers in Memphis and Fresno 1 With this shift, the IRS lost 4,000 began processing tax returns. staff years and $73.7 million of its appropriation. MARCH1972 The Pay Board dele- I gated authority to the IRS to OCTOBER1972 The Treasury approve or deny exceptions for wage I Building was designated as a and salary adjustments under the National Historic Landmark. This Economic Stabilization Program. building is the third oldest continu- i ally occupied federal office building in Washington (after the White House and the Capitol). 1972 Congress enacted legislation 1972 The sixth General Assembly ;; providing for jurisdictional coordina- of the Inter-American Center for NU tion between the United States and Tax Administrators (CIAT) was held the Territory of Guam on individual in Asuncion, Paraguay. income tax payments. Taxpayers could now file and pay tax to only 1972 The IRS initiated a Federal one of the two jurisdictions, depend- Tax Deposit (FTD) Alert Program ing on their place of residence at the to identify failures of employers to end of the tax year. deposit taxes withheld from employ- ees' wages. 1972 The Integrated Data Retrieval System (IDRS) operated successfully 1972 The Executive Development in the Austin Service Center and the Program was revised to place more six states of the region. The IDRS emphasis on the typical work of a was installed at all service centers and field official, decision-making, and district offices over the next two years. problem-solving at the field levcl.

1972 Revenue Ruling 72-315 1972 The IRS reinstated the allowed all finance charges on 1040A short form. revolving credit charge amounts to be deductible as interest on federal 1972 The IRS completed construc- income tax returns. This applied to tion of a new auditorium on the 7th retail'store revolving charge floor of the National Office. The accounts as well as bank credit facility was named the Boutwell cards. Previously the limit was six Auditorium in honor of the first percent of the average unpaid Commissioner of Internal Revenue. monthly balance. The ruling was made retroactive to returns filed in 1972 The IRS began to provide the last three years. tax information in Spanish. The IRS announced the publication of a new 1972 The Multiple Filer Audit guidebook for Program began late this year by individual taxpayers in joint press using computers to analyze individ- conferences in New York, Miami, ual returns to determine if more and Los Angeles. than one return had been filed under the same social security number. 1972 The Service Center Review Program began with the goal of 1972 The IRS began to send teams resolving issues at the service center of revenue agents and tax auditors to level through correspondence with overseas posts to conduct on-site the taxpayer. audits rather than relying on corre- spondence. 1972 The Federal-State Tax Col- lection Act of 1972 authorized the IRS to enter into agreements with states to collect state individual income taxes if the state conformed its individual income tax law closely female District Director. Buttolph 012 - to federal tax law. moved from being Assistant Director of the Albany District to be Director 1972 During the filing season, the of the Burlington District after grad- 6 IRS launched a nationwide pro- uating from the Executive Develop- gram to identify and prosecute ment program in 1972. unscrupulous tax return preparers known as the Return Preparers APRIL 13, 1973 A second multi- Compliance Program. unit agreement with the National Association of Internal Revenue 1972 The IRS used a separate Employees (NAIRE) was signed, attachment (Form 4875) to allow covering the approximately 26,000 taxpayers to respond to the Presi- employees of the service centers, dential Election Campaign Check- the National Computer Center, and Off option added to the income rax the Data Center. The agreement this year. The separate form was became effective July 1. necessary because taxpayers were required to designate their political APML 30, 1973 Johnnie M. Walters party affiliation. resigned as Commissioner to join the Washington, D.C. law firm of Hunton, Williams, Gay, Powell, and Gibson.

MAY25, 1973 Donald C. Alexander of Ohio became Commissioner.

JUNE 16, 1973 President Nixon ordered a 60-day freeze on most prices. The Cost of Living Council and the IRS were given responsibil- ity for enforcing the freeze regula- tions, answering inquiries, and pro- cessing requests for exceptions and exemptions.

Taxpayer Service Representative at JULY1,1973 The IRS realigned the Arkansas Enterprises for the processing activities by routing some Blind. tax returns from the old to the new service centers. JANUARY31,1973 The Chief I Counsel organi7ation abolished the JULY 1,1973 The Detroit Data Stabilization Division. Center moved into a new facility in downtown Detroit. MARCH12,1973 The IRS announced the appointment of

200 L A~JGUST13, 1973 The IRS abol- 1973 The IRS established a Tax \o ished the Special Services Staff. Systems Redesign Division to 1c undertake a major redesign of IRS AUGUST 13, 1973 Phase IV of the data processing systems. Economic Stabilization Program The master file at the National began. The IRS was given responsi- Computer Center would be decen- bility to receive and process price tralized to the 10 service centers increase requests, review quarterly under the system envisioned as profit margin reports, issue subpoe- part of the Tax Administration Sys- for witnesses and books, and col- tem (TAS). lect and compromise civil penalties for violations. The IRS was also 1973 ’The Commissioner’s Advi- authorized to perform additional sory Group was reinstituted whcn technical and analytical tasks for- the Commissioner appointed 12 merly reserved to the Cost of Living prominent accountants, attorneys Council. and educators to serve on the Advi- sory Group during the year. 1973 Honeywell H2050A comput- ers replaced Honeywell H-200s in 1973 For the first time, women IRS service centers. served as part of the IRS instructor team for overseas military personnel. 1973 The Integrated Data Retrieval System (IDRS) installation 1973 In an effort to reduce over- was completed in all IRS regions. withholding of income tax on wages, the IRS simplified Form W-4 and 1973 Robert H. Terry was selected sent a message to more than 4.5 mil- as Assistant Commissioner lion employers requesting them to (Accounts, Collection, and Taxpayer ask their employees to review their Service), succeeding Dean J. Barron tax situation to reduce excessive who moved to Planning and withholding. Research. 1973 During the filing season, the 1973 The IRS developed a two- IRS tested preparing returns on mini- week course for revenue agents in computers while the taxpayer waited special enforcement techniques at four test sites (Boston, Brooklyn, assigned to the Strike Force or Nar- Philadelphia, and Washington). Over cotics Trafficker Programs. 9,000 1OAreturns were prepared in this manner. The IRS also conducted 1973 The IRS eliminated Sched- a Pre-Filing Returns Review Test in ule B of Form 1040, used to report two district offices to determine tax- dividend and interest income. payer response to the offer to review returns for accuracy before filing. 1973 The IRS began a system of Management by Objectives and 1973 The Federal Energy Office Assessment by Results to supplement (FEO) was created to oversee normal management processes. - energy-related problems as the -t 20 1 2 energy shortage became critical. I 1973 The IRS established a rn - Since the IRS had employees exper- National Forensic Laboratory in ienced in conducting petroleum Chicago to focus investigations on investigations, they were called white collar crime. upon to continue enforcing energy controls until FEO could assume 1973 ‘The National Association of this responsibility. A Memorandum Internal Revenue Employees of Understanding between the FEO 1 (NAIRE) changed its name to the Administrator and the Commissioner National Treasury Employees was established. Union (NTEU) during the group’s national convention in San Fran- 1973 The IRS issued the 1973 edi- cisco. tion of the Tax Guide for Small Business. This revision, completed in cooperation with the Senate Select Committee on Small Rusi- ness, was the first since 1956.

202

\ . 0UT R E AC H AND A u TO M ATI o N : THERISE OF TAXPAYERSERVICE AND THE DEMISEOF TAs

Expansion in the efforts of the IRS to reach out and assist taxpayers with the annual ritual of filing their 1040s was a hallmark of these years. Continued increases in the number of tax returns filed resulted in intensified efforts to upgrade the processing capabilities of the service centers. Unfortunately, budget constraints and increasing concerns about the security and privacy of more and more computerized information prompted Congress to withdraw support for a major proposed upgrade known as the Tax Administration System during this period. 2 JANUARY 1,1974 For the first time, I JULY 1,1974 The taxpayer service 2 limited pretrial discovery was per- I organization was separated from > e mitted before the Tax Court as a enforcement activities at the district < 1 3 result of new Tax Court Rules of 1 office level. 3 Practice and Procedure. I JULY 21, 1974 The Office of the JANUARY 2,1974 A nationwide toll- IRS Chief Counsel was reorganized free telephone service was available ’ and the General Legal Services in 135 locations in the United States, 1 Division was established to handle Alaska, Hawaii, and Puerto Rico for I non-tax legal matters. This new the first time. j office replaced the Operations and 1 Planning Division. FEBRUARY-APRIL1974 The IRS recruited, hired, and trained 860 new I AUGLI~1974 The IRS formalized employees to form a field enforce- 1 its Upward Mobility program to ment staff for the Federal Energy 1 emphasize opportunities for employ- Office. The IRS had direct conuol 1 ees in grades GS 1 through 7. and supervision over them until FEO assumed the responsibility for 1 SEPTEMBER20, 1974 President direction and control of energy activ- 1 Ford signed an Executive Order set- ities on July 1. I ting forth legally binding procedures I whereby the President was required APNL 1,1974 The Chief Counsel I to personally sign all requests for function established the Disclosure I copies or inspection of cax returns Litigation Division to handle Free- 1 and had to designate in writing the dom of Information requests and 1 member of his staff authorized to disclosure issues. These matters 1 see specifically identified returns on were formerly handled by the Gen- I his behalf. eral Litigation Division. I ’ DECEMBER2, 1974 The APRIL 1, 1974 District Conference ’ Employee Retirement and Income staffs were given authority to settle ‘ Security Act of 1974 (ERISA) cases for tax years where the pro- I enacted complex rules governing posed deficiency or claimed refund 1 the form and management of pen- was $2,500 or less. 1 sion funds. This act created the 1 first statutory position below che MAY1, 1974 William E. Williams ’ Commisioner in the position of was appointed Deputy Commis- I Assistant Commissioner (Employee sioner, replacing Edward Fitzgerald 1 Plans and Exempt Organizations). who retired after 37 years of IRS ser- I This new office was responsible vice. 1 for carrying out regulatory responsi- 1 bilities assigned to the IRS with JUNE 30,1974 The Assistant Com- I respect to employee benefit plans missioner (Stabilization) ceased to I as we11 as to tax exempt organiza- exist and personnel were phased I tions. The new office consisted of back into tax administration roles. \ Employee Plans, Exempt Organi- I

204

__ e zations, and Actuarial Divisions, payments on behalf of certain state \o transferred from the Audit and agencies for cases in which a court- e Technical organizations. The law ordered child support obligation was set forth minimum vesting, partici- delinquent and an assignment of pation, and funding standards, and support rights had been executed as limits on contributions. a condition of eligibility for Aid to Families with Dependent Children. DECEMBER31,1974 The IRS was relieved of its responsibility for Eco- 1974 The IRS initiated a Reports nomic Stabilization activities. Curtailment Project to reduce and improve reporting requirements and 1974 Five new international opera- to improve continuing reports. As a tions posts were authorized: Canberra, result, 308 reports were cancelled. Australia; Caracas, Venezuela; Johan- nesburg, South Africa; Kuala Lumpur, 1974 The IRS published a booklet Malaysia, and Teheran, Iran. This titled “The Collection Process,” brought the total number of intema- designed for individual taxpayers tional posts to 14. who had received their second delin- quency notice. 1974 The IRS printed 2.5 million tax forms on recycled paper as an 1974 Changes in tax forms this experiment, including those for year included the shortening and farmers and fishermen. simplification of instructions for forms 1040 and 104OA; the place- 1974 The eighth annual general ment of the designation for the assembly for the Inter-American Presidential Election Campaign Center of Tax Administrators Fund Check-off on the face of (CIAT) met in Kingston, Jamaica. forms 1040 and 1040A (with the change in law eliminating party 1974 A commercial, computerized preference); and dropping the legal research system, known as requirement to list recipients of LEXIS, was tested by the Chief charitable contributions for which Counsel to determine the effec- taxpayers had receipts or canceled tiveness of such a system. checks.

1974 Printing contractors mailed 1974 The Chief Counsel estab- all tax packages directly to taxpayers lished an EEO Advisory Commission. for the first time. 1974 James 1. Owens assumed the 1974 The IRS reinstated Schedule position of Deputy Assistant Com- B of Form 1040 (dividend and inter- missioner (Accounts, Collection, and est income). Taxpayer Service).

1974 The Social Services Amend- 1974 IRS instituted a revised doc- ment of 1974 empowered the IRS to ument matching program, known as collect delinquent child support -the Information Returns Program. I 205 tions and performance evaluations.

ing the contemporaneous examina- MARCH29,1975 Congress enacted tion of all major companies in a the Tax Reduction Act of 1975. It 6 given industry, to make sure that included a provision for an (EITC), avail- able to married individuals filing joint returns who were entitled to a dependency exemption for a child, surviving spouses, and heads of household with children. The act also authorized a rebate of 10 per- cent of an individual's 1974 income 1974 The IRS established a nation- tax liability, with a minimum rebate wide examination program of $100 and a maximum rebate of coordinated by the National Omce. $200. The act also included a Per- sonal Exemption Credit which pro- 1974 The structure of the audit 1 vided an additional $30 personal division in district offices was reorga- exemption tax credit and a house nized to bring tax auditors and rev- purchase or Residence Credit which enue agents together in the same provided for a maximum $2,000 tax

groups and branches. This was the ~ credit on the purchase of a new prin- first restructuring of the audit divi- cipal residence, the construction of sion since 1959. which began before January 1,1976.

1974 Congress enacted the Privacy APWL 1975 Tax Advocates and Act of 1974, which imposed condi- Analysts filed suit in the District tions under which disclosures of per- Court for the District of Columbia sonal information could be made, seeking access to all letter rulings established notice and recordkeeping issued since the effective date of the requirements relating to disclosures, Freedom of Information Act, subject established procedures by which an only to deletions of trade secrets, individual could inspcct and request confidential commercial or trade amendment of personal records, and information, or clearly unwarranted provided civil remedies and criminal invasions of privacy. penalties for violations. JUNE 1975 The Commissioner led FEBRUARY1975 The IRS con- the United States delegation to the cluded a two-year collective bargain- ninth annual Inter-American Center ing agreement with the National of Tax Administrators (CIAT) meet- Treasury Employees Union ing in Ottawa, Canada. (NTEU) covering 2,200 employees in the National Office. It provided JULY1, 1975 The interest rate on for bilateral union-management under or over payment of federal decision-making in personnel poli- income tax was set at nine percent. cies and practices, such as promo- ! 7 206 JULY1975 The IRS concluded Department of the Treasury to reach negotiations for a.three year collec- grade GS-18 as well as the first tive bargaining agreement with the female assistant commissioner. National Treasury Employees Union (NTEU), covering 30,000 1975 The IRS organized a new employees in the Data Center, Small Business Advisory Committee National Computer Center, and the in an effort to recognize and deal IO service centers. with the particular tax problems of small businesses. AUGUST 1975 The IRS developed and sent Notice 403 to taxpayers 1975 The IRS began using the required to furnish their social secu- Discriminant Function System rity numbers for tax administration (DIF) to select partnership returns purposes. for audit.

SEPTEMBER28,1975 The Privacy 1975 The IKS and the Securities ACCbecame effective. This act Exchange Commission jointly investi- affected over 200 major tax forms. gated corporations for illegal political contributions, foreign and domestic. SEFTEMBER1975 The Office of Management and Budget approved 1975 The optional tax tables were the IRS program for designing and expanded to cover adjusted gross acquiring a new data processing sys- income up to $lS,OOO. Other tem to be called the Tax Adminis- changes in the 1975 tax return tration System (TAS). included the addition of a new line for the earned income credit. DECEMBER22,1975 Congress enacted the Revenue Adjustment JANUARY5, 1976 Treasury Decision Act of 1975. Enactment late in the 73% relieved employers from filing year required the IRS to communi- Form CT-1, Employers Quarterly catc the provisions of the act to tax- Railroad Retirement Tax Return, on a payers who had already filed fiscal quarterly basis. The new requirement year returns as well as thosc who reduced the filing of the return to were about to file their calendar year once a year yet preserved the require- returns. ment for periodic depositing of taxes.

1975 The Integrated Data JAVUARY 1976 A case inventory con- Retreival System in the service cen- trol and management information ters was upgraded with CDC 3500 reports system was implemented with computers to provide faster process- computer terminals in all key districts ing capabilities. for the Employee Plans/Exempt Organizationsfunction to assist in 1975 Anita Alpern was appointed controlling applications for approval of Assistant Commissioner (Planning plans and plan amendments. and Research), making her the first career woman in the IRS and the FEBRUARY21,1976 Responsibility 1976 The Department of Health, for administering the civil aspects Education, and Welfare began a Par- of the federal wagering tax laws was ent Locator Service to locate parents returned to the IRS by Treasury who had not made court-ordered Order 221-3. Responsibilityfor payments for child support. The IRS enforcing the criminal aspects of the was directed to provide certain tax Wagering Tax Laws remained with return information and to assess and the Bureau of Alcohol, Tobacco, and collect delinquent payments as Firearms. though they were tax deficiencies.

MAY27, 1976 For the first time, 1976 Before the 1976 filing season, the IRS held public hearings on tax a standard quality review system was forms 1040 and 1040A in the implemented nationwide. The National Office. methods of providing taxpayer assis- tance were systematically monitored MAY1976 The Commissioner and measured. In over 600,000con- completed his term as third coun- tacts randomly sampled during the cilor for the Inter-American Center 1976 period, taxpayer assistors of Tax Administrators and attended achieved an accuracy rate of about the tenth General Assembly held in 90 percent. El Salvador. 1976 The use of tax tables became OCTOBER4,1976 The Tax Reform mandatory, with tax brackets based Act of 1976 became law. This act on the amount of taxable income affected over 700 sections of the and an upper limit of $ZO,OOO. Internal Revenue Code and required changes in virtually every tax form 1976 The IRS created the Tax- and eliminated the optional tax tables. payer Assistance Specialist position I to provide a more highly qualified DECEMBER1976 The IRS con- tax assistor to handle more complex cluded negotiations with the technical inquiries. Initially, just National Treasury Employees over one-fourth of the Taxpayer Ser- Union (NTEU) resulting in a four- vicd Representatives (TSKs) were year collective bargaining agreement converted to Specialists. covering approximately 30,000 employees in district offices. 1976 The IRS created the Service Center Collection Branch function DECEMBER1976 The IRS began to consolidate the processing of col- providing telephone and teletype- lection cases at the service centers. writer service for the deaf on a nationwide, toll-free basis through 1976 The IRS tested an Audit the Indianapolis District, As a result, Information Management System hearing-impaired taxpayers in all (AIMS), a video terminal manage- states except Alaska and Hawaii had ment information and case control acccss to services offered other tax- system which replaced the System payers. for Controlling Returns in Inventory

, - and Production (SCRIP), in the JANUARY 2,1977 The IRS estab 3 Atlanta Service Center. After a suc- lished the position of Assistant Com- U cessful test, the program was imple- missioner (Data Services). Patrick J. mented nationwide. Ruttle was selected for this position in April 1977. Q 1976 The IRS began nationwide use of the Technical Reference FEBRUARY26,1977 Donald C. Information System (TRI), a com- Alexander resigned as Commissioner. puterized legal research system. APRIL 1977 Secretary of the Trea- 1976 The Disclosure Operations sury Michael Blumenthal directed Division was established in the that an organizational study of the National Office to provide program IRS be conducted to determine how guidance to the newly created Dis- to make the organization more effec- closure Officer positions in all IRS tive, efficient, and responsive to tax- field offices. payers. The Commissioner appointed an Organization Review Study Group, 1976 The headed by the Deputy Commis- eliminated many tax shelters and sioner, to undertake the project. required capitalization and amortiza- tion of real property construction MAY5,1977 Jerome Kurtz of Penn- period interest and taxes. This law sylvania became Commissioner. made any person preparing income tax returns for compensation subject MAY1977 Negotiations between to disclosure requirements and the National Treasury Employees penalties for negligently or fraudu- Union (NTEU) and IRS regional lently preparing returns. offices concluded, resulting in a four- The identification number, year agreement covering approxi- address, and signature of the pre- mately 1,700 employees in six of the parer were required as well as an seven regions. annual information report. This act amended section 6103 of the Inter- hIAY 1977 'The Inter-Amencan Cen- nal Revenue Code, restricting the ter of Tax Administrators(CIAT) disclosure of tax return and taxpayer held its eleventh annual General information. Assembly in Caracas, Venezuela.

1976 The fiscal year was changed JUNE15,1977 Jerome Kurtz was from July 1-June 30 to October 1- sworn in as Commissioner. September 30. 1977 Congress passed the Tax JANUARY 1, 1977 Beginning on this Reduction and SimplificationAct. date, the unauthorized disclosure of This act contained a new jobs credit tax returns or return information was with a nonrefundable credit to considered a felony, punishable by a employers meeting certain criteria in fine up to $5,OOO and five years in the hiring of new employees in 1977 prison. &and 1978.

209 1977 The Carter administration 1977 The Andover and Fresno m - approved the Tax Administration Service Centers began processing System, but concerns about tax- exempt organization returns and & payer privacy, due in part to the related documents. The Philadel- Watergate scandals, and uncertain- phia Service Center had processed ties over cost efficiency resulted in all exempt organization returns prior the deferral of further development to this year. by Congress in 1977 and 1978. The IRS had established a price tag of 1977 The IRS Chief Counsel $1.8 billion for the Tax Administra- began to employ Paralegals. tion System. 1977 The IRS created a special 1977 The IRS conducted an alter- Problem Resolution Program aimed native filing period study in which a at helping taxpayers resolve their survey was sent to taxpayers asking concerns and to bring attention to for opinions on dividing the filing persistent taxpayer problems and season into two periods, January- complaints not resolved through nor- December with an April 15 filing mal channels. deadline or July-June with an Octo- ber 15 filing deadline. Three- 1977 The IRS implemented the fourths of respondents indicated Audit Information Management Sys- they would prefer to maintain the tem (AIMS) nationwide. This new status quo. system expanded the Integrated Data Retreival System in service centers 1977 A Service and Design Divi- and allowed personnel to locate any sion was established in the new return in the Audit Division. It also Assistant Commissioner (Data Pro- provided automated control and cessing) area to serve as the principal verification of assessments. contact for data processing support services. Daniel N. Capozzoli was 1977 The IRS simultaneous exam appointed as the first Director. Also, program with tax treaty countries a Systems Analysis Division was began this year with Canada. In this established to evaluate systems, program, the participating govern- hardware, and operational efficiency, ments separately examined the with Don Curtis appointed Director. affairs of selected multinational tax- payers under their respective juris- 1977 The Criminal Tax Division of dictions. the Chief Counsel organization undertook the responsibility to review JANUARY 1, 1978 Special service unauthorized disclosure matters. center zip codes were used nation- wide for the first time, reducing the 1977 In IJnited States v. Paepke, average time of mail transit by one the 7th Circuit Court held that evi- day. dence illegally seized by state police officers was admissible in a subse- quent criminal tax prosecution. - - */ . 210 JANUARY1,1978 The Combined Resources Management to Taxpayer Annual Wage Reporting (CAWR) Service and Returns Processing, the system took effect to satisfy IRS and establishment of a Centralized Ser- Social Security Administration vices activity to provide mass pro- reporting requirements. The IRS cessing support services of technol- redesigned the W-2 form to transmit ogy and administrative operating the Federal Insurance Contributions procedures; establishment of a new Act (FICA) information formerly National Office Resources h-lanage- filed on Schedule A. ment (NORM)Division; the rcnam- I ing of Audit activity to Examination; A~ML1,1978 A new excise tax on the renaming of Intelligence activity coal to finance the payment of black to Criminal Investigation; the merg- lung benefits to miners became ing of the Office of the Assistant effective. Regional Commissioner (Employee Plans and Exempt Organizations) APRIL 1978 Carol Fay became the with the Assistant Regional Com- first female Assistant Regional Com- missioner (Exam); the establishment missioner when she assumed this of the Assistant Regional Commis- position for Resources Management sioner (Collection). in the Southeast Region. JULY1978 The Chief Counsel's MAY1978 The IRS participated in Office created an Employee Plans the Twelfth General Assembly of and Exempt Organizations Division. the Inter-American Center of Tax Administrators' (CIAT) in Port of OCTOBER1,1978 The former two Spain, Trinidad and Tobago. The levels of appeals, one at the district Commissioner made a presentation and one at the regional level, were on "Developing Tax Laws, Admin- consolidated with Appellate to cre- istrative Rules, and Procedures for ate a single administrative appeal Resolving Taxpayers' Disputes." structure at the regional level. The Assistant Regional Commissioner JULY2, 1978 A major reorganiza- (Appellate) was renamed the tion of the National Office took Regional Director of Appeals and effect. Major provisions included the the Director, Appellate Division in redesignation of Administration to the National Office became the Resources Management; the redes- Director, Appeals Division. ignation of Accounts, Collection, and Taxpayer Service to Taxpayer Ser- OCTOBER13,1978 Congress vice and Returns Processing; the approved the President's ERISA transfer of Collection from Taxpayer Reorganization Plan which elimi- Service and Returns Processing to nated overlapping jurisdiction and Compliance; the transfer of Disclo- duplication of effort in the adminis- sure from Compliance to Taxpayer tration of ERISA by separating the Service and Returns Processing; the authoriry of the Treasury and Labor transfer of the Tax Administration Departments. Advisory Services activity from OCTOBER1978 By this time, sepa- 1978 The work of the Refund Liti- rate taxpayer service divisions gation Division in Chief Counsel existed in every IRS district office. was decentralized to the field offices.

NOVEMBER9,1978 The IRS 1978 The IRS installed a Remit- announced the reorganization of its tance Processing System (RPS) and field offices, which involved the an Omnisort mail sorting system in “streamlining” of 12 districts, elimi- all service centers. This system auto- nating intervening levels of manage- mated the sorting and opening of ment between the Director and incoming tax returns and handled front-line supervisors. 22,000 pieces of mail per hour with a The streamlined Districts 98 percent accuracy rate. In contrast, included Aberdeen, Albuquerque, the top speed of the manual sort Augusta, Boise, Burlington, process had been 1,200 pieces per Cheyenne, Fargo, Helena, hour. Portsmouth, Providence, Salt Lake City, and Wilmington. “Prime” Dis- 1978 The tricts were established to provide included changes in employee resource management services for benefit plans; introduced the con- the streamlined districts. cept of simplified employee pension plans; rcpcaled thc alternative capi- DECEMBER31,1978 Service cen- tal gains tax; allowed a one-time ters implemented a Compliance exclusion for the sale of principal Division which brought together the residence for those over age 55. Collection, Criminal Investigation, and Exam activities assigned to scr- 1978 The IRS undertook its first vice centers. Full implementation of examination of the economic, social, this concept was completed by July and behavioral factors that affected 1, 1979. taxpayer compliance.

1978 Due to lack of Congressional 1978 Thc Energy Tax Act of 1978 funding and support, the IRS can- provided tax credits for energy con- celled plans to upgrade its auto- servation and renewable energy mated processing systems, known as expenditures on residences. It also the Tax Administration System included a business energy invest- (TAS). In its place, the IRS ment tax credit. launched the Equipment Rcplace- ment and Enhancement Program 1978 The Service published (EREP) to modernize its data pro- “The Collection Process (Employ- cessing system. This program was ment Tax Accounts),” a booklet eventually pared back to become the explaining the rights and duties of Equipment Replacement Program business taxpayers and the IRS in (ERP), focusing solely on rcplace- the collection of employment taxes. ment of aging equipment. The publication was sent to busi- ness taxpayers with their second delinquency notice or delivered by -. - a Collection representative on ini- AUGUST1979 The IRS released a .5 .l tial contact. i report titled, “Estimates of Income Unreported on Individual Income 1978 The IRS began matching all Tax Returns,” marking the first W-Zs, 1099, and 1087 documents effort to measure unreported indi- c submitted on magnetic media as well vidual income. The report showed as a sampling of 1099s and 1087s that the “legal” tax gap was a far submitted on paper. more serious problem than had pre- viously been thought. 1978 The IRS established the Tax 1 Counseling for the Elderly (TCE) 1 OCTOBER1,1979 The Bankruptcy program to assist taxpayers age 60 or 1 Reform Act of 1978 became effec- over. tive. This law required special hand- ling of tax returns for taxpayers who 1978 Based on a recommendation had declared bankruptcy. from the General Accounting Office, the IRS established a task force to OCTOBER1979 The IRS expanded improve and simpliFj tax forms. The the Problem Resolution Program to Task Force consisted of the Commis- include all 10 service centers. sioner, the Deputy Commissioner, and several assistant commissioners. 1979 The IRS began to receive Form W-2 data on magnetic tape. JANUARY 1979 The IRS established Reporting on magnetic tape a comprehensive program to identify remained voluntary until 1982. illegal schemes and to take appropriate action through 1979 The Equipment Replacc- examination, criminal investigation, ment and Enhancement Program and collection. i (EREP) was scaled down and lim- iwd to replacing aging equipment FEBR~~ARY1979 The IRS estab- and retitled the Equipment lished a study group to recommend a Replacement Program (ERP). ERP compliance program to identify and contained three major programs- 1) correct questionable W-4 forms. The Service Center Replacement System Commissioner approved the study (SCRS), 2) Master File Replacement group’s recommendations in June System (.MFRS); and 3) the 1979. i Microfilm Replacement System (hlRS). MARCH1979 The IRS established I an Automatic Data Processing ! 1979 Thc position of Deputy (ADP) Policy Resource Board. Assistant Commissioner (Data Services) was established with h1.4Y 1979 The IRS participated in Joseph E. Bishop appointed to this I’ the Thirteenth General Assembly of position. the Inter-American Center of Tax Administrators (CIAI) in Quito, Ecuador. I

213 1979 The IRS established the position of Assistant to the Commis- sioner (Equal Opportunity) to give emphasis to equal opportunity and & affirmative action efforts.

1979 The Narional Tax Founda- tion estimated that the average American worked one hour and 48 minutes each work day to pay his or her federal taxes- unchanged from 10 years earlier.

214 -._ TAXREFORM AND PROCESSING NIGHTMARES: THEIRS STRIJGGLES WITH THE INCREASING PACE OF CHANGE

Faced with the limitation of only replacing rather than upgrading its aging computer systems, the IRS implemented a major new program known as the Service Center Replacement System in 1985. Unfortunately, insufficient computer capacity resulted in a system unable to keep pace with processing requirements. The 1985 filing season quickly became known as the “worst filing season in IRS history.” Despite the agony of this troublesome year, the increased attention to IKS computer systems that resulted enabled the agency to move forward with new plans for computer upgrades. JANUARY 4,1980 Commissioner JUNK 26, 1980 Commissioner Kurtz created a Taxpayer Ombuds- Kurtz was elected president of the man in the National Office to Inter-American Center of Tax supervise all Problem Resolution Administrators (CIAT) during its functions and to represent taxpayer 14th General Assembly in Washing- interests. The Ombudsman ton, D.C. reported directly to the Deputy Commissioner and Commissioner. JULY1980 The IRS began an effort to review, revise, and refor- JANUARY14, 1980 Harold M. mat all computer-generated corre- Browning was appointed as the first spondence in response to concern IRS Taxpayer Ombudsman. about its clarity.

FEBKUARY1980 A Request for OCTOBER31, 1980 Jerome Kurtz Proposal for the Service Center resigned as Commissioner. Replacement System (SCRS) was issued. 1980 The IRS initiated a new method to group individual returns MARCH1,1980 The Crude Oil for examination selection purposes. Windfall Profit Tax Act of 1980 Total Positive Income (TPI) became effective. This added a tax replaced the previous Adjusted on crude oil and certain natural gas Gross Income (AGI) while Total liquids produced from domestic oil Gross Receipts (TGR) was the new and gas wells after this date. method employed for business tax returns. MARCH11,1980 The IRS estab- lished a W-4 Program by issuing 1980 The IRS began to convert revised Employment Tax Regula- the 1500 CDC and Honeywell tions requiring employers to submit assembly language computer pro- copies of W-4 forms filed on or after grams in service centers to the high- April 1, 1980 that claimed exemp- level computer language COBOL. tion for withholding when wages were expected to exceed $200 per 1980 The responsibility of the IRS week or for those who claimed more to collect delinquent child support than of nine exemptions. payments was extended to non-Aid to Families with Dependent Chil- JUNE1, 1980 Authority for disclo- dren (AFDC) families. sure of tax returns and return infor- mation to federal agencies for use in 1980 The Data Communications non-tax criminal investigations was Processing System (DPCS), a UNI- delegated to field offices to improve VAC 90140 computer used as a the timeliness of disclosure ser- front-end processor for IDRS, was vices. installed nationwide. 1980 The IRS established the Art ! JUNE 12,1981 The IRS awarded a a- Print Panel, a new advisory group to contract to sperry Univac, Inc., for 11 3” provide advice on the valuation of Univac 1100-82 computer systems for art prints in an effort to cope with the Service Center Replacement Sys- abusive tax shelters that used tem (SCRS) program. inflated appraisals of art print pub- lishing ventures. JUNE 1981 William E. Williams retired as Deputy Commissioner. 1980 The IRS replaced its alco- holism program with a broadly based AuGrlsT 13, 1981 Congress enacted employee assistance program. the Economic Recovery Tax Act of 1981 (ERISA). This act provided a 1980 The 1% established a Tax large , reducing individual Systems Division to create guide- income tax rates. This act provided lines for systems developmenc; tax relief for two-earner married cou- introduce procedures for structured ples and increased the deductible analysis, design, and programming; limits for contributions to Individual and place greater emphasis on the Retirement Accounts. use of high level computer program- ming language. ALIGUW24, 1981 The Houston Dis- trict Office was established and the 1980 The Chief Counsel estab- Austin District Omce was realigned. lished a special trial attorney program. DECEMBER1981 The Commis- 1980 The Installment Sales Revi- sioner announced a reorganization of sion Act of 1980 was passed and pro- the National Office in which the vided major changes in the law Office of the Assistant Commis- regarding the installment method of sioner (Technical) was abolished accounting. and the Individual Tax and Corpora- tion Tax Divisions were moved from J.WUARY 26, 1981 A research project the Technical area to the Office of began at the Fresno Service Center to the Chief Counsel. The Appeals determine the feasibility of imaging Division was moved from the Com- tax returns on optical laser disks. The pliance area to the Office of the initial delivery of hardware occurred Chief Counsel. in December 1985. The IRS also issued a feasibility study recommend- DECEMBER1981 James Owens was ing a pilot test of optical character appointed Deputy Commissioner. recognition equipment to process fed- eral tax deposits. 1981 The IRS developed the first editions of the IRS strategic plan MARCH14,1981 Roscoe L. Egger, and the research plan. Jr. became Commissioner. 1981 The tax tables were expanded to include $50 intervals for all taxable incomes between $Z,OOO and $49,999.

21 7 ; 1981 The Omnibus Reconcilia- Counsel (Technical); and Deputy 0, - tion Act of 1981 required the IRS Chief Counsel (Litination)- were to collect delinquent child and abolished. A new management level spousal support payments on an was created in the National Office expanded basis by offsetting in the positions of Associate Com- income tax refunds. missioner (Operations) and Associ- ate Commissioner (Policy and Man- 1981 The IRS began to use a new agement) and the Associate Com- system- total positive income missioner (Data Processing). (TPI) and total gross receipts This reorganization abolished the (TGR)- to group individual positions of Assistant and Deputy returns for examination. This Assistant Commissioner (Compli- replaced thc use of adjusted gross ance); Director and Assistant Direc- income (AGI). tor, Examination Division; Director and Assistant Director, Collection JANUARY 8,1982 The Treasury Division; Director and Assistant Department announced that it was Director. Criminal Investigation unable to support the legal author- Division. The reorganization estab- ity of IRS enforcement of public lished the positions of Assistant and policy in denying tax exemption to Deputy Assistant Commissioner racially discriminatory private (Examination); Assistant and schools. Subsequently, the U.S. Deputy Assistant Commissioner Court of Appeals for the District of (Collection); Assistant and Deputy Columbia enjoined the IRS from Assistant Commissioner (Criminal granting or restoring exempt status Investigation). The Officc of the to any racially discriminatory pri- Assistant Commissioner (Planning vate school, thus precluding the and Research) was abolished. execution of this policy change. MARCH21, 1982 The Office of JANUARY 11,1982 IRS underwent International Operations was redes- a major reorganization in which ignated the Foreign Operations Treasury Department Order 150-95 District and placed under the juris- authorized changes announced in diction of the Mid-Atlantic Region. December 1981. This reorganiza- tion also provided the Commissioner MARCH1982 The IRS began with line supervisory authority over installingnew computer systems to the Chief Counsel, creating a situa- replace aging equipment in the ser- tion in which the Commissioner and vice centers and the National Com- the Treasury Department General puter Center. The first Univac 1100- Counsel shared supervision of the 82 wa. installed in the Memphis Ser- Chief Counsel. The Chief Counsel vice Center for pilot testing and was was delegated line supervisory operational by October. The contract authority over the Appeals function was awarded for the Microfilm by the Commissioner. Replacement System. The positions of Deputy Chicf Counsel (General): Deputy Chief

218 JUNE28, 1982 The Director of ' 1982 Project Offices were estab- Practice was transferred from the lished for the Automated Collection Department of the Treasury's Office System (ACS), the Automated Exam of General Counsel to the IRS Assis- System (AES),the Distributed tant Commissioner (Human Input System (DIS), and Taxpayer Resources). Processing System Redesign (TPSR). The latter was the prede- JUNE 1982 The IRS awarded a cessor of the Assistant Commis- contract for a NAS 9060 (Hitachi) sioner (Tax System Redesign). computer under the Master File Replacement System to replace six 1982 The Assistant Commissioner IBM 360165s and an IBM 370 at the (Data Services) was abolished and the National Computer Center. Assistant Commissioner (Computer Services) was established. The Asso- AUGUST 1982 The IRS initiated a ciate Commissioner (Data Processing) pilot test of optical character recog- position was established and hl. nition (OCR) equipment in the Eddie Heironimus was selected for Cincinnati Service Center to mea- this position in January 1983. sure and project its performance in processing FTDs. 1982 Joseph E. Bishop succeeded Donald J. Porter as Assistant Com- AUGUST1982 A Request for Pro- missioner (Data Services). posal was issued for a Distributed Input System (DIS) to replace the 1982 Congress authorized the Sec- Direct Data Entry System (DDES). retary of the Treasury to mandate magnetic media reporting. This was SEPTEMBER3,1982 Congress a major step in developing a match- enacted the Tax Equity and Fiscal ing program in which virtually all Responsibility Act of 1982 (TEFRA) documents could be processed. with the intention of raising rev- enues, closing statutory loopholes, 1982 The IRS began to offset indi- and ensuring compliance with the vidual tax refunds to satisfy delin- tax laws. This act added procedural quent child and spousal support aspects to some of the civil penalty obligations as required by the provisions and expanded informa- Omnibus Reconciliation Act of 1981. tion reporting and penalty provi- sions. 1982 The IRS established the position of Assistant to the Commis- DECEMBER7,1982 Authority to sioner for Legislative Liaison to manage the Information Returns focus on the relationship between program was given to the Assistant IRS and Congress. Commissioner (Examination) by the Planning Council. JAAXARY 23, 1983 All Assistant Regional Commissioner (Taxpayer Service and Returns Processing) positions were reassigned to the -. \ position of Assistant Regional Com- NOVEMBER1983 The first IRS missioner (Data Processing). Research Conference was held with the theme, “Tax Administration MARCH15,1983 The Foreign Research Strategies.” Operations District was established in the Mid-Atlantic Region. 1983 Congress passed the Interest and Compliance Act APRIL18,1983 The IRS and the of 1983. Department of Labor signed a revised coordinated compliance 1983 For the first time, the 1040 agreement to improve coordination tax form included a space for taxpay- benveen the two agencies. ers to make voluntary contributions to reduce the public debt. MAY24, 1983 The Supreme Court issued its decision in the consoli- 1983 Seven older master file com- dated cases of puters at the National Computer v. U.S. and Goldsboro Christian Center were replaced with one state Schools Inc. v. U.S. in which it ruled of the art computer. that educational institutions practic- ing racial discrimination based on 1983 The Tax Processing System religious beliefs were not charitable Redesign Staff was established to organizations in the common-law begin work on acquisition of a new sense and, therefore, were not enti- tax processing system to satisfy the tled to federal income tax exemp- needs of the IRS into che next cen- tion. tury.

MAY1983 A successful pilot test of 1983 The IRS tested a pilot Auto- optical character recognition (OCR) mated Collection System and placed processing of federal tax deposits it in operation in four district offices (FTDs) in the Cincinnati Service (St. Louis, Chicago, Indianapolis, Center resulted in acquiring this sys- and Nashville) and two service cen- tem for other service centers. ters (Kansas City and Mcmphis).

JUNE 1983 The IRS awarded a 1983 The Microfilm Replacemcnt contract to Motorola Four Phase Sys- System (MRS) and Service Center tems, Inc., for the Distributed Input Replacement System (SCRS) System. The equipment was equipment was installed at all ser- installed in the service centers by vice centers as Phase 1 of the August. Equipment Replacement Program was completed. OCTOBER1,1983 The Sacramento, San Jose, and Laguna Niguel District 1 1983 The IRS went nationwide Offices were established while the with a new telephone assistance ser- Los Angeles and San Francisco Dis- vice, Tele-Tax, which offered tapes trict Offices were realigned. on 140 topics for taxpayers with push-button phones. A similar sys- - tem for taxpayers with rotary dial MAY 1984 The IRS published its P phones, Tax-Dial, was also tested first Strategic Business Plan. P this year. OCTOBER1,1984 The IRS Q 1983 Thomas J. Laycock became realigned the boundaries of its the Assistant Commissioner (Com- regional offices as follows: thc puter Services), succeeding Joseph Helena District was transferred from Bishop who was selected as Deputy the Western to the Midwest Region; Assistant Secretary of the Treasury the Salt Lake City and Phoenix Dis- (Programs and Resources Manage- tricts were transferred from the ment). Western Region to the Southwest Region; the Little Rock and New 1983 The IRS participated in the Orleans Districts were transferred Seventeenth General Assembly of from the Southwest Region to the the Inter-American Center for Tax Southeast Region; and the Ogden Administrators’ (CIAT) in Curacao, Service Center was transferred from Antilles. the Western Region to the South- west Region. JAVUARY 1,1984 Brokers and barter exchanges were required to NOVEhlBER 27, 1984 Secretary of use magnetic media in reporting the Treasury Don Regan presented transactions to the IRS, as enacted in the administration with a report the Interest and Dividend Compli- titled “Tax Reform for Fairness, ance Act of 1983. Simplicity, and Economic Growth,” otherwise known as ‘Treasury 1.” JANUARY 1984 President Reagan This report recommended a three- stated in his State of the Union tiered tax rate schedule of 15.25, address, “Let us go forward with an and 35 percent, increased personal

more fairly.” 1984 The Tax Processing System MAY31, 1984 The IRS awarded a Redesign Staff changed their name contract for $3.7 million to Integrated to Tax Syscem Redesign to encom- Automation of Berkeley, California, pass a wider range of accivities, f ment approach and devote full-time I 1984 The Dctroit Data Center was m - resources for quality improvement 1 given responsibility to process cur- 6 projects. rency transaction reports. 1984 Service centers assumed 1984 The IRS established the responsibility for most collection Strategic Management System, cases up to and including issuance of incorporating the existing long-range final notices of intent to levy and and information systems plan. A key receipt and posting of payments component of the Strategic Manage- received in response to the notices ment System was the Strategic Plan. as the Automated Collection System (ACS) became fully operational 1984 The IRS participated in the nationwide at 21 call sites and all eighteenth General Assembly of the service centers. Inter-American Center for Tax Administrators’ (CIA’T) in Carte- 1984 Congress passed the Deficit gena, Colombia. Reduction Act of 1984. This act was 1 intended to reduce tax shelter activ- 1984 IRS processed Federal Tax ity; to reform taxation of interna- 1 Deposits and five million 1983 tional income; and improve the Forms 1040EZ using Optical Char- administration and efficiency of tax 1 acter Recognition technology. Multi- administration. This act required font scanners were installed at three certain tax shelters to register with I service centers to process informa- the IRS and enacted new provisions tion documents. on the deductibility of employer contributions to welfare benefit 1 1984 Phases I and I1 of the Service funds for employees and new Center Replacement System requirements for nondiscriminatory (SCRS) were completed. benefits to retain exempt status. It 1 also marked the beginning of the JANUARY 1985 The IRS sponsored Form 8300 program, which dealt I its second research conference with with cash payments received in any the theme, “Tax Administration trade or business over $lO,OOO. I Research.” 1984 A Form 990 advisory commit- MARCH3, 1985 The IRS District tee was established with membership I in Nevada moved from Reno to Las consisting of assistant state attorneys Vegas. general, private sector representa- i AUGIJS 12, 1985 tives, and IRS officials. I The IRS awarded a limited competition con- 1984 The Tax Reform Act of 1984 tract to Sperry Corporation for 18 was intended to raise about $50 bil- additional CPUs and associated lion in revenue; it revamped taxation peripherals. of life insurance companies and alimony payments; and made “perks” taxable at their fair market value.

222

. -_____ OCTOBER1985 The Richmond 1985 The IRS established a User 7 Centralized Inventory Distribution Assistance and Computer Capacity T Site (CIDS) became operational. Management Office (UACCMO). \Lr

0 OCTOBER1985 An outside man- 1985 The Tax System Redesign agement consulting firm was Office was elevated from project sta- retained to assist in a review of IRS’ tus to the Assistant Commissioner organizational structure and pro- level under’the Associate Commis- grams for international tax adminis- sioner (Data Processing). tration. JANIJARY 17, 1986 The National NOVEMBER14,1985 Representative Office Command Center began George W. Gekas of Pennsylvania operations. introduced a bill to stagger deadlines for filing federal income tax returns so JANUARY24,1986 l‘he first suc- that millions of documents would not cessful transmission of tax return flood the IRS at one time during the data from a preparer to the IRS year. through the new electronic filing system was completed. NOVEMBER1985 The IRS spon- sored its third research conference JANUARY 1986 The Commissioner’s with the theme “Trends Impacting Quality Council was established. on Tax Administration.” This was the first research conference to include FEBRUARY1986 The Department of participants from the private sector. the Treasury did not approve an IRS request for additional computer 1985 Phase IV programs of the Ser- equipment for the tax processing sys- vice Center Replacement System tem asserting that it would be an (SCRS) were implemented. Start-up expensive equipment acquisition that problems contributed to a “night- was not tied to any well thought-out mare” filing season for the IRS. The solution to IRS’ systems problems. IRS paid out $15.5 million in addi- tional interest payments for late FEBRUARY27,1986 The Office of refunds and incurred additional costs the Assistant Commissioner (Interna- of over $64 million. . tional) was established and the For- eign Operations District of the Mid- 1985 The IRS participated in the Atlantic Region was abolished. This nineteenth General Assembly of combined the international activities the Inter-American Center for Tax of the IRS into one functional area, Administrators in Port-au-Prince, under the authority of the Associate Haiti. Commissioner (Operations).

1985 The Distributed Input System APRIL21,1986 The IRS submitted (DIS) and the IDRS Replacement, a new plan for three-phase develop- Phase I, were completed. ment of Tax System Redesign to Treasury, which required the Assis-

223 tant Commissioner (Tax Systems OCTOBER22,1986 President Rea- Redesign) to assume responsibility for gan signed the Tax Reform Act of planning of all tax processing and tax 1986 (TRA-86). This act was the cul- information initiatives. mination of over 30 months of effort by both the executive and legislative APRIL30, 1986 Roscoe L Egger, Jr. branches to reform the existing tax resigned as Commissioner. code and redesignated the Internal Revenue Code of 1954 the Internal MAY16,1986 The Office of the Revenue Code of 1986. Assistant Commissioner (Interna- This marked the most significant tional) became operational. piece of tax legislation enacted in over 30 years with over 300 provisions and MAY30,1986 The Treasury would take three years to implement. Department announced its support The number of tax brackets was of Tax System Redesign. reduced to five with rates ranging from 11 percent to 38.5 percent, MAY1986 The IRS issued a long- In 1988, the number of brackets was range plan as a forerunner to a strate- again reduced to two- 15 percent gic business plan. and 28 percent; personal and depen- dent exemptions were increased; the JUNE 6,1986 The Ft. Lauderdale long term net capital gain deduction District was established. was excluded; and corporate tax brackets were reduced from 5 to 3. JULY30,1986 The Office of the Assistant Commissioner (Support and OCTOBER 1986 The Bloomington Services) was abolished. The Office Centralized Information Distribu- of the Assistant Commissioner tion Site (CIDS) became opera- (Human Resources Management and tional. Support) was created. OCTOBER1986 The IRS estab- AUGUST 4,1986 Lawrence B. Gibbs lished an artificial intelligence labo- of Texas became Commissioner. ratory as parr of an initiative to explore potential applications of new AKJGUS 1986 The IRS began test- technologies to tax processing. ing the use of optical disk equip- ment to store and retrieve tax return OCTOBER1986 The IRS put forth documents using laster technology, its goals for an evolutionary approach known as the Files Archival and to tax systems redesign, stating that Image Storage Retrieval (FAISR) improvements would be made in test, at the Fresno Service Center. incremental steps rather than a sin- gle sweeping change. OCTOBER21,1986 Congress passed the Omnibus Reconciliation NOVEMBER19-21 1986 The IRS Act of 1986. sponsored its fourth Research Con- ference.

\ 1986 The Office of the Associate ’ 1986 In support of the Automated 2 Chief Counsel (International) was 1 Exam System (AES), the IRS con- 0 established. uacted for up to 18,000 portable I computers, designed to put more 1986 The compliance functions of than 40 IRS-designed applications at the Austin Service Center were bro- 1 the fingertips of revenue agents. ken off into a new “Compliance Center” as a test. 1986 The name of the Softwarc 1 Division in the Assistant Commis- 1986 The IRS sponsored the first sioner (Computer Services) was case of leave sharing in the Federal changed to the Tax Processing Sys- government involving two revenue tems Division and the name of the agents from the IRS Ft Lauderdale Management Systems Division was District. Special legislation in 1986 changed to the Compliance Process- (P.L. 99-500)enabled the IRS cou- ing Systems Division. Daniel N. ple to receive nearly six months of Capozzoli succeeded Thomas J. donated leave from co-workers. Laycock as Assistant Commissioner (Computer Services). 1986 The IRS awarded a contract for the Communications Replace- ment System (CRS) to Sysorex Information Systems, Inc.

1986 The Office of Disaster Recovery was created in the Assis- tant Commissioner (Computer Ser- vices) area. In I992 the IRS wc/comrd Shirlq Pemon as thektfmak commissionerin the history of uxadministration in the United Statts.

FOCUS ON QUALITYAND TAXPAYERSERVICE: PUTTING THE “SERVICE” BACKINTO ’THE IRS

The IRS headed towards the 21st century with a new focus on quality service and a philosophy embodied in the “Compliance 2OOO” initiative. Efforts to improve IRS communications, both intcrnally and externally, received increased attention in these years as the agency moved in a new direction aimed at increasing taxpayer compliance through awareness of the tax laws coupled with enforcement when necessary. FEBRUARY1987 ‘The first pilot JULY2, 1987 Commissioner Gibbs child care center for IRS employees announced the reorganization of the was opened in Andover, Massachu- National Office. The major part of setts. this reorganization created the posi- tion of Senior Deputy Commissioner MARCH12,1987 The Office of and two Deputy Commissioners, Management and Budget approved replacing the previous system of one a new, alternate W-4A withholding Deputy Commissioner and three certificate. Associate Commissioners. An Assis- tant Commissioner for Taxpayer APRIL6, 1987 Anthony V. Langone Service was also created. Michacl J. became the new Assistant Commis- Murphy was appointed as Senior sioner for Criminal Investigation. i Deputy Commissioner. I APRIL-AUGUST1987 The GAO and JULY15, 1987 Commissioner Gibbs the IRS conducted a joint manage- 1 announced the selection of Charles ment review of IRS operations. The H. Brennan as Deputy Commissioner final report was issued in October for Operations and John I,. Wedick 1988. as Deputy Commissioner for Plan- ning and Resources. MAY18,1987 The first advance I draft copies of 1987 tax forms were JULY28, 1987 Commissioner Gibbs released for implementation of I announced that the IRS had been aspects of the selected by the Ad Council for a in the 1987 tax year. I nationwide public service advertis- ing campaign. MAY21, 1987 The Office of Chief Counsel was reorganized with posi- i ALGUST30, 1987 The Assistant tions for a Deputy Chief Counsel, Commissioner (Information Systems Management and Operations; Development) was established, Deputy Chief Counsel, Policy and replacing the Assistant Commissioner Legal Programs; and an Associate (Tax Systems Redesign). Chief Counsel, Technical and Inter- 1 national. Aucusr 1987 The reorganization of the National Office took effect JUNE1987 IRS announced the and created three new’ executive establishment of a Commissioner’s ! level positions- the Senior Deputy Exempt Organizations Advisory Commissioner, the Deputy Com- Group to advise on issues and prob- 1 missioner (Operations), and the lems relating to exempt organiza- Deputy Commissioner (Planning tions. I and Research). The former structure was abolished, along with the posi- JULY1,1987 The Bureau of Alco- 1 tions of Deputy Commissioner and hol, Tobacco, and Firearms assumed the three Associate Commissioners. I responsibility for filing alcohol, The reorganization also shifted tobacco, and firearms returns. i oversight responsibility for the NCC to the Assistant Commissioner DECEMBER6,1987 Damon 0. I me (Computer Services) and a new Holmes assumed the position of U Assistant Commissioner (Taxpayer Taxpayer Ombusman, serving as the Service and Returns Processing) was taxpayer’s advocate in examining established. All Regional Commis- IRS policies and suggesting changes sioners and Assistant Commissioners to policies and procedures that cre- now reported to the Deputy Com- ated problems for taxpayers or missioners. resulted in inequitable taxpayer treatment. SEPTEMBER10,1987 IRS held its first “IRS Taxpayer Service Tele- DECEMBER9, 1987 John D. John- conference,” a two-hour program son became the new Assistant Com- taped at the U.S. Chamber of Com- missioner (Planning, Finance, and merce headquarters in Washington, Research). D.C., and beamed to more than 60 locations across the United States. DECEMBER22,1987 Congress The panel was composed of Com- passed the Omnibus Budget Recon- missioner Gibbs, the Assistant Com- ciliation Act of 1987. missioner for Taxpayer Service and Returns Processing, and the Director DECEMBER1987 The first meeting of the Taxpayer Service Division. of the National Quality Council was held. SEPTEMBER16,1987 The IRS sponsored the first meeting of the 1987 Thc Revenue Act of 1987 Commissioner’s Exempt Organiza- was designed to raise $9 billion in tions Advisory Group. The 18 mem- new taxes and contained approxi- ber group was chaired by former mately 200 amendments to the Commissioner Donald Alexander. Internal Revenue Code with a focus on hsiness tax rules. OCTOBER27,1987 The National Treasury Employees Union and IRS 1987 The Commissioner’s Advi- officials joined hands at a press con- sory Group charter was revised to ference to announce the creation of include language about the IRS’ a joint quality improvement process commitment to the CAG members. within the IRS. This accord was a first in federal labor-management 1987 The IRS added a Strategic relations. Business Plan to its Strategic Man- agement System to help strengthen NOVEMBER9, 1987 David G. the link between planning and bud- Blattner became the new Assistant gcting. The IRS also initiated an Commissioner for Examination. annual two-phased strategic business planning process under the direction NOVEMBER1987 The Commis- of the Assistant Commissioner sioner established a task force to (Planning, Finance, and Research). study the penalty system and make recommendations. -. \ 229 JANUARY6,1988 The IRS ’ OCTOBER1,1988 The Chief Coun- announced a new public service sel reorganized into five “functionally advertising campaign using the slo- 1 integrated organizations,” including gan “Make Your Taxes Less Tax- 1) Financial Institutions and Products, ing.” The campaign was designed I 2) Corporate, 3) Passthroughs and by the New York advertising firm of Special Industries, 4) Income Tax McCann-Erickson with assistance and Accounting, and 5) Employee from the Ad Council. I Benefits and Exempt Organizations.

MARCH2,1988 The IRS 1 NOVEMBER 1, 1988 The IRS pub- announced the results of a nation- lished a four-page guide for taxpay- wide collection program aimed at ers titled, “Your Rights As A Tax- identifying employers who mis- ’ payer,” also known as Publication 1. classified employees as ”indepen- dent contractors.” I NOVEMBER10, 1988 Congress enacted the Technical and Miscella- MARCH16,1988 Teddy R. Kern I.news Revenue Act of 1988 which became the new Assistant Commis- included a “Taxpayer’s Bill of sioner for Inspection. 1 Rights,” requiring the IRS to inform taxpayers fully of their rights.

MARCH24,1988 Donald E. I Bergherm became the new Assiscant ’ 1988 During this filing season, tax- Commissioner for International. payers were required to provide the I ’ social security number for all depen- APRIL1, 1988 Alvin H. Kolak , dents age 5 and over. became the new Assistant Commis- sioner for Collection. I 1988 The IRS introduced a revised “Understanding Taxes” program for I MAY19, 1988 Bruce V. Milburn 1 high school students using computer became the new Assistant Commis- software and video programs in the sioner for Criminal Investigation. 1 instructional materials.

JUNE 30, 1988 Legislative author- 1 1988 A Telecommunications Strat- ity for the offset of non-child sup- egy Task Force was created under port funds expired on this date. 1 the Assistant Commissioner (Infor- However, the program was later mation Systems Development). reauthorized and extended through January 1994 by the Family Support ’ JANVARY 23,1989 The IRS pub- Act of 1988. lished a new strategic initiative 1 under the title, “Improving Aware- SEPTEMBER1988 An Oregon man ness of Ethical, Integrity, and Con- became the first person convicted of duct Issues.” filing fictitious claims for tax refunds through the new electronic filing 1 FEBRUARY17,1989 The National system. Office opened a Child Development I Center. The IRS was the first fed- 230 - .~ ~ era1 agency to implement a child JIJLY 25-27,1989 The House Sub- g care program throughout its entire committee on Commerce, Con- c: organization. sumer, and Monetary Affairs of the Committee on Government Opera- 2F z tions, chaired by Representative e MARCH4,1989 Lawrence Gibbs < resigned as Commissioner to return Doug Barnard. Jr., of Georgia, con- 5 to private law practice with the firm ducted hearings into misconduct by Johnson and Gibbs. senior IRS officials.

APRIL 10, 1989 Alvin H. Kolak JULY 31, 1989 Charles J. Peoples became the first Assistant to the became the new Assistant Commis- Commissioner for Quality. sioner (Returns Processing).

JUNE 7,1989 Robert T. Johnson JULY 1989 An interagency agree- became Assistant Commissioner for ment between the Department of Human Resources Management and Labor, the Office of Management Support. and Budget, and the IRS resulted in significant changes in the processing JUNE 20, 1989 Robert A. LeBaube of cmployee plan returns. The assumed the newly created position agreement coincided with the cen- of Assistant Commissioner for Tax- tralized processing of returns in the payer Service. Raymond P. Keenan Memphis, Andover, Atlanta, and became the new Assistant Commis- Brookhaven Service Centers. sioner for Collection. AUGUSI‘1989 The IRS established JULY 1, 1989 Several provisions of an Inspection hotline for employees the Taxpayer’s Bill of Rights took to report suspected cases of fraud, effect, including the extension of waste, and abuse. the time period between the IRS’ notice of intent to levy and issuance OCTOBER11,1989 Regina M: of the levy from 10 to 30 days and Deanehan became the new Assistant the institution of a 21 day holding Commissioner (Planning, Finance, period for banks prior to the issuing and Resources). of a levy. OCTOBER17,1989 Commissioner JULY 5,1989 Fred T. Goldberg, Jr. Goldberg announced the reorganiza- was sworn in as Commissioner. The tion of the National Office to focus Senate approved Goldberg’s nomi- efforts on tax systems modernization nation on June 23, 1989. and provide greater accountability for financial management. JULY 7,1989 As of this date, tax- payers had the right to appeal the DECEMBER7, 1989 Inar Morics filing of a notice of tax lien if they became the new Assistant Commis- believed it was erroneously filed by sioner (Criminal Investigation). the IRS, under provisions of the Taxpayer’s Bill of Rights. -. \ 23 DECEMBER18,1989 The IRS efforts to improve its record on established a position for a Chief integrity in recent months. The Information Officer. The Assistant Panel was chaired by James P. Commissioner for Computer Ser- Holden and became known as the vices was redesignated as the Assis- “Holdcn Committee.” The Panel tant Chief Information Officer-Infor- issued its final report in October mation Systems Management and 1990. the Assistant Commissioner for Information Systems Development JANUARY 30,1990 Abraham N.M. was redesignated as the Assistant Shashy, Jr. was confirmed as Chief Chief Information Officer-Infoma- Counsel. tion Systems Development. JANUARY 1990 Commissioner DECEMBER20,1989 John D. John- Goldberg released an interim report son became the Deputy Commis- on “Integrity Within the IW.” sioner for Planning and Finance/Chief Financial Officer. JANUARY 1990 Prior to this date the Internal Security Division of the DECEMBER1989 The IRS began Assistant Commissioner (Inspection) prototyping the Automated IJnderre- served as the sole investigator of all porter Program at the Ogden Service misconduct allegations within the Center in an effort to replace the Service. During this month, the manual process of screening cases ini- Treasury Inspector General began tially identified from matching investigating instances of alleged income and deduction documents misconduct among executives and received from third party payers managers of the IRS. against tax returns. FEBRUARY22,19YO Mark D. Cox 1989 By this year, taxpayers in 36 became the Assistant Chief Informa- states could file their taxes electroni- tion Officer for Information Systems cally. Development.

1989 The National Tax Founda- APRIL 12,1990 The IRS announced tion estimated that the average the selection of Henry H. Philcox as American worked one hour and 47 the organization’s first Chief Informa- minutes each day to pay his or her tion Officer. tax bill- one minute less than 10 years earlier. APRIL 12,1990 The IRS announced the signing of a contract with the JANUARY 10,1990 Commissioner National Academy of Science for a Goldberg appointed a group of two-year independent review of the seven experts, including tax practi- information systems management tioners, government officials, and effort to upgrade the Service’s auto- academicians, to serve on the “Com- mated capabilities. missioner’s Review Panel on Integrity Controls,” to evaluate IRS- - -1 . 232

’.. -. APRIL23,1990 C. Morgan King- SEPTEMBER4,1990 The IRS z horn became the first individual to announced creation of a new posi- z hold the newly created position of tion for an Executive Director of the Assistant Commissioner for Coordinated Examination Program. zE FinancelController. John J. was appointed to - 9 this position. 0 25, APRIL 1990 The title of the I position of Assistant Commissioner SEPI'EMBER9,1990 Robert F. for Inspection was changed to Chief I Hilgen became Assistant Commis- c Inspector. sioner for Planning and Research.

APRIL30,1990 The Supreme SEPI'EMBER19, 1990 The IRS cel- Court declined to review an appel- ebrated the 20th anniversary of its late court's determination that abor- volunteer tax assistance programs. tion rights activists had no legal standing to challenge the federal tax 1 OCTOBER4,1990 The House of exemption of the Roman Catholic Representatives Committee on Gov- Church. This concluded litigation ernment Operations released its final that had extended nearly 10 years. report on the investigations of the IRS over the past two years, titled JUNE 1,1990 The Office of Man- "Misconduct by Senior Managers in agement and Budget selected the the Internal Rcvenue Service." Cincinnari Service Center as one of three Federal organizations to :1 OCTOBER25,1990 The IRS cre- receive the 1990 Quality Improve- ated the new position of Assistant ment Prototype Awards. Commissioner for Procurement Ser- vices to set policy and perform con- JULY 2, 1990 Philip G. Brand tract administration, information sys- became the new Assistant Commis- tems acquisitions, quality assurance, sioner for Taxpayer Service with the and program review. This function retirement of Robert A. LeBaube. 1 was soon renamed the Assistant I Commissioner for Procurement. AUGU~15,1990 The IRS began accepting contributions for a volun- OCTOBER1990 The IRS began a tary leave bank program for all two-year conversion to a new per- employees. sonnel/payroll system known as the 'Treasurj Integrated Management AUG~S20,1990 Walter A Hut- ton, Jr. became the new Assistant ated by the Department of Agricul- Chief Information Officer for Infor- II ture's National Finance Center in mation Systems Management. New Orleans. I AUGUST1990 Regina M. Deane- NOVEMBER15-16, 1990 The IRS han replaced Donald E. Bergherm as 1 sponsored its annual Research Con- Assistant Commissioner for Interna- ference with the theme "How Do tional. 1 We Affect Taxpayer Behavior? The Case for Positive Incentives, Assis- cally as long as they expected a tance or Enforcement.” refund.

NOVEMBER1990 The IRS estab- 1990 The position of Assistant lished an Information Returns Pro- Commissioner for Human Resources grams Bulletin Board System which Management and Support was allowed payors to file 1099 forms redesignated the Assistant Commis- electronically and provided employ- sioner for Human Resources and ers with the latest IRS information. Support.

DECEMBER19, 1990 ‘Treasury 1990 Late in the year Congress Department Order 150-02 officially repealed the supplemental Medicare redesignated senior management catastrophic premium. Because the positions in the IRS: the Senior tax forms had already been printed, Deputy Commissioner became the IKS advised taxpayers to ignore the Deputy Commissioner; the Deputy lines referring to this surtax. Commissioner for Operations became the Chief Operations 1990 The Family Support Act of Officer; the Deputy Commissioner 1988 required dependent and child for Planning and Resources/Chief care providers to provide their Tax- Financial Officer became the Chief payer Identification Number (TIN) Financial Officer; the Assistant to any client who planned to take a Chief Information Officer for Infor- credit, beginning with tax year 1989 mation Systems Development with tax forms filed in 1990. became the Assistant Commissioner for Information Systems Develop- 1990 Agricultural employers were ment; and the Assistant Chief Infor- required to withhold income tax mation Officer for Information Sys- from cash wages paid to farm work- tems Management became the ers under requirements of the Assistant Commissioner for Informa- Omnibus Budget Reconciliation Act tion Systems Management. of 1989.

DECEMBER30,1990 John E. Burke 1990 After exrensive review, major was selected to replace Robert changes were made in the Coordi- Brauer as Assistant Commissioner nated Examination Program, includ- for Employee Plans and Exempt ing creating an executive-level posi- Organizations. tion to provide overall program direction. DECEMBER31,1990 Charles H. Brennan was selected as the new 1990 The 1040 form for this filing Regional Commissioner for the Mid- season included space to report Atlantic Region. retirement income and estimated tax payments. 1990 This was the first year that taxpayers throughout the country 1990 The IRS began implement- could file their tax returns electroni- ing the On-Line Entity System -. 234 (OLE) as the first phase of the Cor- I which would allow taxpayers in a 5 porate Files On-Line (CFOL) pro- test area in Texas to file a four-ques- 2 \o ject, allowing immediate access to tion income tax form and have the c0 more than 350 million files of tax IRS compute their taxes for 1990. account data. MARCH25.1991 Deputy Commis- 1990 The Automated Underre- sioner Michael Murphy received a porter (AUR) Control System came National Public Service Award from on line during this year, relieving the the National Academy of Public problems of cracking approximately Administration and the American 9 million underreporter cases annu- Society for Public Administration in ally. recognition of his efforts to promote the tax modernization and quality 1990 A contract for the mainframe initiatives in the IRS. computer system for the Integrated Collection System (ICs)was I MARCH27,1991 The Office of awarded and prototype operations Chief Counsel announced a reorga- were established in the Birmingham I nization in an effort to provide bet- and Dallas Districts. ter coordination between the I National Office and field staff. 1990 The IRS issued a new and Changes included redesignation of simplified federal unemployment I the Tax Litigation Division to the tax return, the WEZ, which would Field Services Division; elevation of be used by small businesses with i and Exempt uncomplicated tax situations and Organizations to Associate Chief most household employers. I Counsel status; and creation of a position for a Sptcial Chief Counsel, JANUARY 2,1991 David G.Blattner 1 Large Case. was selected as the new Chief Oper- I ations Officer for the IRS. MARCH1991 The IRS held its first i National Information Reporting JANUARY 14,1991 In Cheek v. Forum to listen to concerns about U.S., the Supreme Court held that a I information reporting requirements criminal tax defendant's sincerely from tax practitioners. held beliefs about the federal tax I system do not have to be "objec- APRIL12,1991 Joesph F. Kump tively reasonable" in order to negate I assumed the new position of the element of "willfulness" neces- Accounts Receivable Executive sary for a conviction. I Officer in the National Office.

JANUARY 15,1991 George OHanlon I MAY13-17,1991 The 25th annual was selected as the new Assistant I meeting of the Inter-American Cen- Commissioner for Examination. ter of Tax Administrators (CIAT) I was held in Washington, D.C., and JANUARY 15,1991 The IRS intro- hosted by the IRS. duced the new 1040EZ-1 form I I JUNE 3, 1991 After three years of tions on proposed policies and pro- effort, the IRS released its new 10- cedures. year, !$8 billion tax systems modern- ization plan to update the Service's DECEMBER5,1991 The IRS information systems. announced the selection of Michael P. Dolan as the new Deputy Com- JUNE17,1991 Judy K. Van Alfen missioner and of Philip Brand as the was named Assistant Commissioner new Chief Financial Officer. for Returns Processing, succeeding Charles Peoples, who moved to DECEMBER11,1991 The IRS become Director of the Austin Ser- awarded a contract to provide inte- vice Center. gration support services for the tax systems modernization program to JUNE18,1991 Gregory D. Rothwell TRW. Jnc. was named as the first person to hold the new position of Assistant Com- 1991 The 1040A form was revised missioner for Procurement. to allow wider use. Changes included the addition of lines to NOVEMBER1415,1991 The IRS report pension and annuity income, hosted its annual Research Confer- taxable social security benefits, esti- ence. The theme was "Closing the mated tax payments, and the credit Tax Gap: Alternatives to Enforce- for the elderly. ment." 1991 The IRS created a new posi- NOVEMBER18,1991 The Assistant tion for a Tax System Modernization Commissioner (Human Resources Manager. Larry G. Westfall, former and Support) renamed several of its Director of the Austin Service Cen- divisions. The new titles included: ter, accepted this position. Support and Services Division, the Labor Cost Analysis Division, and 1991 A $1.4 billion contract for the the Training and Development Treasury Multi-Users Aquisition Division. Contact (TMAC) was awarded to AT& T. IJnder this contract, the DECEMBER1,1991 David Mader IRS would receive up to 50,000 com- replaced Robert Johnson as Assistant puter workstations as part of the Commissioner (Human Resources overall 'fax Systems Modernization and Support). effort, with a total cost estimate of $8 billion. DECEMBER45,1991 The first meeting of the newly created Infor- JAN~JAKY6, 1992 The IRS created mation Reporting Program Advisory a new Diagnostic Services Center in Committee was held in Washington, Beckley, West Virginia, headed by D.C. This 16-member group of aca- Raymond Keenan, to test system demicians, accountants, attorneys, modernization and Compliance 2000 business executives was formed to programs. offer the IRS constructive observa- - . ,. JANUARY13,1992 The IRS Execu- Bush announced his support for IRS 2 tive Committee announced its deci- efforts to simplie tax processing for 5 m- sion to retain the Criminal Investiga- small businesses by endorsing 4 tion Division’s current structure and efforts to streamline payroll tax - .s to continue its focus on illegal deposit rules beginning in 1993. N.s income investigations despite alter- native recommendations from a task ’ M.4Y 20,1992 The IRS announced force that had studied the Criminal the creation of a new position for a Q Investigation function over the past “Compliance ZOO0 Executive”. year. Named to this position was Marshall I V. Washburn whose primary respon- FEBRUARY2, 1992 Fred Goldberg sibility would be to implement the left his position as Commissioner to Compliance ZOO0 strategy aimed at become the Assistant Secretary of 1 reducing the burden on taxpayers the Treasury for Tax Policy. and increasing voluntary compliance by simplifying the tax system. February 3, 1992 Shirley D. Peter- son, former Assistant Attorney Gen- MAY28,1992 The Ogden Service eral at the Justice Department’s Tax Center received the Presidential Division, became the first female Award for Quality for its “service to Commissioner of the Internal Rev- customers and commitment to enue Service. excellence.”

MARCH 1992 Michael J. Murphy JUNE 1992 A federal arbitration retired as Deputy Commissioner and board approved a proposed IRS pol- became Executive Director of the icy to allow revenue officers to use Tax Executives Institute. Michael registered pseudonyms to protect P. Dolan replaced Murphy as their identity against potentially vio- Deputy Commissioner. lent taxpayers.

MARCH 1992 Phil Brand replaced JULY 1992 Budgetary restrictions John D. Johnson as Chief Financial compelled the IRS to decide not to Officer of the IRS, as Johnson participate in a new Public Trans- moved to become the Southeast portation Incentive Program aimed Regional Commissioner. at encouraging federal employees to use mass transportation to get to and MARCH1992 Robert Wenzel from work. Because agencies were replaced Raymond Keenan as Assis- required to subsidize this program tant Commissioner (Collection). with existing financial resources, the 1 IRS decided it could not afford to APRIL 27, 1992 The IRS published participate. a penalty policy statement putting forth the philosophy that penalties 1 ALJGUSI-1992 Hurricane Andrew support the IRS mission only if they struck the lower coast of Florida enhance voluntary compliance. inflicting greater property damage MAY 12. 1992 President George than any other natural disaster in American history. The IRS partici- ’ 1992 The IRS began a study of its paced in relief efforts by staffing sites organizational structure with the throughout the disaster relief area to possible goal of realigning the Ser- assist taxpayers in applying for vice along functional lines. The refunds, amending prior year returns, overall effort was known as Core and determining casualty losses. Business Systems.

O~-~‘OBER23-24,1992 The Associa- 1992 The IRS began testing joint tion of Former IRS Executives held electronic filing of state and federal its first meeting1992 Various con- individual tax returns. gressional proposals explored the fea- sibility of using the IRS to enforce 1992 For the first time, taxpayers child support obligations of non-cus- in the test state of Ohio could file todial parents. the 1040EZ tax return over the tele- phone, under the name of TeleFile. November 19-20,1992 The IRS hosted its annual Research Confer- 1992 The IRS tested a new, sim- ence. The theme was “The Indirect ple tax return, the 1040EZ-1, in Effect of IRS Actions on Taxpayer Washington, Texas, and Rhode Compliance.” Island which allowed taxpayers to answer three basic questions and 1992 The IRS launched a major have the IRS figure their taxes for program to identify non-filers and them. Also for the first time, the IRS return them to the tax system. accepted computer-generated Careful to avoid the label of answer sheets from taxpayers and amnesty, the IRS set up stations tax practitioners in place of tradi- throughout the country to assist tax- tional tax returns under the payers who had not filed returns in “104OPC program. bringing their accounts up-to-date. 1992 For the first time, taxpayers 1992 The Odgen Service Center who owed money could file their began receiving equipment from the returns electronically. TMAC contract for its pilot of the Automated Underreporter (AUR) 1992 The IRS established the program. Office of Internal Communications.

1992 ‘The National Office received a new telephone system, known as FTS (Federal Telephone System) 2OOO.

238

‘.- __ .

Q

George S. Boutwell Walter Evans Ju/~17, 1862-i.U~rch4, 1863 hfay 2131883-Manh 19, 1885 Massachwem Kmnlcby

Joseph J. Lewis Joseph S. Miller March I8, 1863-Junc30, I865 March 20, I885-Mad 20, I889 Pennsyhania West Virginia

William Orton John W. Mason July I, 1865-O~t0bc~3I,I86.5 .UQRh 21, 1889-Apd 18, 1893 A4’mg Yorb West Virginia

Edward A. Rollins Joseph S. Miller NOV~~TI, I865-M~d IO, I869 tlprilI9, I893-Smmhr 26, I896 ,Vew Hampshin West Virgnia

Columbus Delano W.Sr. John Forman Mad I I, I869-October 31, I870 Nwmber27,I896-Decmber3Z,I897 Ohio Illinois

Alfred Pleasonton Nathan B. Scott Januaty 3,1871-August 8, I871 January I. 1898-Febmaty 18,1899 iVm Yorb UJatVirg’nia

John W.Douglass George W. Wilson August 9, 1871-1Uqt 14, I875 .UOrrh I 1899-il’membCr 2 7, I900 Pennsyhania Ohio

Daniel D. Pratt John W. Yerkes May 15, 1875July31, I876 D~~nnberZ03 Z9lw-Apd 303I907 Indiana Kmtuc&

Green 8. Raum John G. Capers AUPC 2, I876-APri130.1883 June 5, 1907-August31, I909 Illinois South Camlina - Royal E. Cabell John B. Dunlap September 1, 1909-April27,1913 August 1, 1951-Noeember IS, 1952 2 Texas w Virginia a a William H. Osborn T. Coleman Andrews April 28,1913-September 25, 191 7 February 4,1953-October31,1955 6 Nod Carolina Virginia

Daniel C. Roper Russell C. Harrington September 26, I91 7-Mad31, I920 December 5, 1955-September30, I958 South Carolina Mode Island

Williaq M. Williams Dana Latham April 1, I92O-April 11,1921 November 5,1958-Janaury 20, 1961 Alabama California

David H. Blair Mortimer M. Caplin May 27,1921-May 31,1929 February 7, 1961-July 10,1964 Noflh Carolina Virginia

Robert H. Lucas Sheldon S. Cohen June I, 1929-August 15, I930 January 25, 1965-January 20,1969 KentucRy Maryland

David Burnet Randolph W. Thrower Augusr 20,1930-May 15,1933 April I, 1969-June 22,1971 Ohio Georgia

Guy 'r. Helvering Johnnie h4. Walters June 6,1933-October 8, 1943 August 6,1971-Apri130, 1973 Kansas South Carolina

Robert E. Hannegan Donald C. Alexander October 9, 1943-January 22, I944 May 25,1973-Fehary 26, I977 Missouri Ohio

Joseph D. Nunan, Jr. Jerome Kurtz March 1, 1944-June30, 1947 May 5, 1977-October31, 1980 New York Pennsyhania

George J. Schoeneman Roscoe L. Egger, Jr JU~1, 1947-J~ly 31,1951 March 14,1981-Apri130,1986 Rhode Island Indiana Lawrence B. Gibbs Augusr 4,1986-Mad 4,1989 TaraS

Fred T. Goldberg, Jr. Ju/y 5,1989-Febmaty 2,1992 Mksoun'

Shirley D. Peterson Fhay3,1992- Colorado

241 N x c) a5 a. 4 Q

Walter H. Smith Fletcher Maddox Mad 1869-1871 1908-I923 Ohio Montana

William McMichael Ellis C. Johnson 1871 1913-1917 Pennsyfvania Missouri

Charles Chesley A. A. Ballantine OC~O~W1872-J~/y 1, 1888 January l-Decmeber31,1918 New Hampshire Ohio

Thomas J. Smith D. M. Kelleher 1888-1890 February 27-July 1, 1919 New Hampshire unknown

Alphonso Hart Robert Miller 1890-1893 July 28,1919-Fehary 29, 1920 Ohio KentucRy

Robert T. Hough Wayne Johnson 1893-1897 March I-September 15,1920 unknown Montana

George M. Thomas Carl A. Mapes 1897-1901 December 11,1920-December21,1922 Kentucky Michigan

Albert W. Wishard 1901-1903 Nelson T. Hartson Indiana January 1, 1923-March 31, 192.5 Washington A. B. Hays 1903-1908 Ohio

242 Alexander W. Greg Arch M. Cantrall v%- April I, 1925-0ctober 10, I927 January 29,1958-August31,1959 rn Kentucky z TeXar E X Clarence M. Charest Hart H. Spiegel N October I 1, I92 7-June 12, 1933 September 21,1959-January20, 1961 Calyomia Arizona 6 E. Barrett Prettyman Crane C. Hauser June 13,1933-Mad 4,1934 August 17,1961-A~~~t31,1963 Virginia NmJersey

Robert H. Jackson Sheldon S. Cohen March 9, 1934-Maxh 1, 1936 January 6,1964-January 24, 1965 Pennsylvania Maryland

Morrison Shaforth Mitchell Rogovin December I, 1936-September 18, 1937 January 25,1965-Mach 30,1966 Colorado NmYo*

John P. Wenchel Lester R. Uretz Stptember 20,1937-June30,1947 April 12,1966-January20, I969 Maryland Illinois

Charles Oliphant K. Martin Worthy August 4,1947- Decemht-5, 1951 June 25,1969-January 15, 1972 Indiana Georga

Charles W. Davis Lee H. Henkel May 16,1952-June IO, 1953 June 12, 1972-April16,1973 Illinois West Vitginia

Daniel A. Taylor Meade Whitaker December 9, 1953-Demeht-30, I954 October 19,1973-January20,1977 Kentucky District of Columbia

John Pons Barnes Stuart E. Seigel June 9,1955-January IS, I957 June 24,1977-May31,1979 Alabama ‘V€W York

Nelson P. Rose N. Jerold Cohen Mach 14,1957-January27, I958 November 13,1979-January20,1981 Ohio Arkansas

243 Kenneth W. Gideon William F. Nelson Aupst3, 1981-1984 July 29,1986-iV~?v~bcrI, 1988 5 Tncas :Uississippi z 1. a Fred T. Goldberg, Jr Abraham N.h.1. Shashy 1984-1 986 February 7, 1990- 6 Mbsouri Tms

Note: From 1869-1926, the Chief Counsel was known as the Solicitor of Internal Revenue. From 1926- 1934, the position was known as the General Counsel for the Bureau of Internal Revenue. Since 1934, the position has been designated Chief Counsel of Internal Revenue.

244 X [r

Year Revenue Coktecl Year Revenue Co/lccred

1792 $208,943 1868 $ 190,374,926 1793 337,706 1869 159,124,127 1794 274,090 1870 184,302,828 1795 337,753 1871 143,198,322 17% 475,290 1872 130,890,097 1797 575,491 1873 113,504,013 1798 644,358 1874 102,lY1,016 1799 779,136 1875 1 10,071,515 1800 1,543,621 1876 116,768,096 1801 1,582,377 1877 118,549,230 1802-1813 no internal taxes 1878 110,654,163 1814 3,882,482 1879 113,449,62 1 1815 6,840,732 1880 123,981,916 1816 9,378,343 1881 135,229,Y12 1817 4,512,288 1882 146,523,273 1818 1,2 19,604 1883 144,553,345 1819-1862 no internal taxes 1884 121,590,040 1863 41,OO3,192 188.5 112,421,12 1 1864 117,145,748 1886 116,902,869 1865 211,129,529 1887 1 18,837,301 1866 310,120,448 1888 124,326,475 1867 265,064,938 1889 130,894,434

245 * Year Rrumue Coikmd Year Revenue Coikctcd 5 C z Lr: 2 1890 $142,594,697 1919 $3,850,150,079 4 1891 146,035,416 1920 5,407,580,252 1892 153,857,544 1921 4,595,357,062 1893 16 1,004,990 1922 3,197,451,083 1894 147,168,450 1923 2,621,745,228 1895 143,246,008 1924 2,7%,179,257 18% 146,830,616 1925 2,584,140,268 1897 146,619,593 1926 2,835,999,892 1898 170,866,819 1927 2,865,683,130 1899 273,484,573 1928 2,790,535,538 1900 295,316,108 1929 2,939,054,375 1901 306,871,669 1930 3,040,145,733 1902 271,867,990 1931 2,428,228,754 1903 230,740,925 1932 1,557,729,043 1904 232,932,781 1933 1,619,839,224 1905 234,187,976 1934 2,300,816,309 1906 249,102,738 1935 2,773,213,214 1907 269,664,022 1936 3,448,571,174 1908 251,665,950 1937 4,653,195,315 1909 246,212,719 1938 5,658,765,314 1910 289,957,220 1939 5,18 1,573,953 1911 322,526,300 1940 5,340,452,347 1912 321,615,895 1941 7,370,108,378 1913 344,424,453 1942 13,047,868,517 1914 380,008,894 1943 22,371,386,496 1915 415,681,024 1944 40,121,760,232 1916 5 12,723,288 1945 43,800,387,575 1917 809,393,640 1946 40,672,096,998 1918 3,698,955,82 1 1947 39,108,385,742

246 -- --

Year Revenue Coffecred Year Revenue Cofkcted % V m 2 3 1948 $41,864,542,295 1970 $195,722,096,497 2 w 1949 40,463,125,019 1971 191,647,198,138 1950 38,957,131,768 1972 209,855,736,878 1951 50,445,686,315 1973 237,787,204,058 1952 65,009,585,560 1974 268,952,253,663 1953 69,686,535,389 1975 293,822,725,772 1954 69,919,990,79 1 1976 302,s 19,791,922 1955 66,288,692,000 1977 358,139,416,730 1956 75,112,649,000 1978 399,776,389,362 1957 80,171,917,000 1979 460,412,18S,013 1958 79,978,476,484 1980 519,375,273,361 1959 79,797,972,806 1981 606,799,120,630 1960 91,774,802,823 1982 632,240,505,595 1961 94,401,086,398 1983 627,246,792,581 1962 99,440,839,245 1984 680,475,229,000 1963 105,925,395,281 1985 742,87 1,541,000 1964 112,260,257,115 1986 782,251,812,000 1965 1 14,434,633,72 1 1987 886,290,590,000 1966 128,879,961,342 1988 935,106,594,000 1967 148,374,8 14,552 1989 1,013,322,133,OOO 1968 153,363,837,665 1990 1,056,365,652,000 1%9 187,9 19,559,668 1991 1,086,851,401,000 d x 1 5 4.' a

1866 4,461 1888 3,295 1867 4,808 1889 3,437 1868 5,393 1890 3,741 1869 6,258 1891 3,850 1870 6,266 1892 3,938 1871 6,321 1893 3,744 1872 6,141 ,1894 4,339 1873 5,136 1895 4,204 1874 4.784 18% 3,991 1875 4,657 1897 3,858 1876 5,184 1898 3,832 1877 3,983 1899 3,667 1878 3,729 1900 4,003 1879 3,609 1901 3,836 1880 3,405 1902 4.111 1881 3,405 1903 3,960 1882 4,002 1904 3,834 1883 4,341 1905 3854 1884 4,126 1906 3,703 1885 3,581 1907 3,788 1886 3,292 1908 3,872 1887 3,389 1909 3,795

*Figunsinclude both pemanmt and temporary employees

248 Date Number of Employees Date Number of Employees E E E 191 1 3,992 1940 22,423 J 1912 3,838 1941 27,230 1913 4,000 1942 29,065 1914 3,972 1943 36,338 1915 4,730 1944 46,171 1916 4,718 1945 49,814 1917 5,053 1946 59,693 1918 9,597 1947 52,830 1919 14,055 1948 52,143 1920 15,848 1949 52,266 1921 17,470 1950 55,551 1922 17,710 1951 57,805 1923 17,613 1952 56,309 1924 15,884 1953 53,463 1925 15,568 1954 51,411 1926 14,333 1955 50,890 1927 13,211 1956 50,682 1928 12,914 1957 51,364 1929 12,273 1956 50,816 1930 11,979 1959 51,226 1931 1 1,833 1960 5 1,047 1932 11,716 1961 53,206 1933 11,524 1962 56,481 1934 11,216 1963 59,711 1935 16,523 1964 61,059 1936 17,054 1965 62,098 1937 21,148 1966 63,508 1938 22,045 1967 65,946 1939 22,623 1968 67.574

249 Date Number of Employees Date Number of Employees ax 5 1969 66,064 1981 86,860 a 1970 68,683 I982 83,756 5 1971 68,972 1983 84,1% 1972 68,549 1984 88,208 1973 74,170 1985 92,792 1974 78,921 1986 %,395 1975 82,616 1987 102,774 1976 85,455 1988 115,494 1977 85,727 1989 115,360 1978 86,258 1990 1 12,987 1979 86,540 1991 11 7,017 1980 88,010

250

\ T-m-bk Income Rwcketr kr Hi&t EXemphOtU Amount Amount Year Singk Joint Depmdl?llr Ram(%) U& owr

1861 3 $800 1862 3-5 600 $10,000 1863 3-5 600 10,000 1864 5-10 600 10,000 1865 5-10 500 5,000 1866 5-10 500 5,000 1867 5 1,000 1868 5 1,000 1869 5 1,000 1870 2.5 2,000 1871 2.5 2,000 1872 all Civil War era income taxes expired 1873-1912 no income tax imposed 1913 $3,000 $4,000 None 1-7 $2O,OOO $500,000 1914 3,000 4,000 None 1-7 20,000 500,000 1915 3,000 4,000 None 1-7 20,000 500,000 1916 3,000 4,000 None 2-15 20,000 2,000,000 1917 1,000 2,000 $200 2-67 2,000 2,000,000 1918 1,Ooo 2,000 200 6-77 4,000 1,000,000 1919 1,OoO 2.000 200 4-73 4,000 1,000,000 1920 1,000 2,Ooo 200 4-73 4,000 1,000,000 1921 1,000 2,500 400 473 4,000 1,OOO,ooo

25 1 v1 Tuxabh Income Bmcbm x kt Hi&f zCI w Exrpriom Amount Amount c Year Sing& Jan! Dcprmienlr Ram I%) Unh oorr

1925 1,500 3,500 400 1* 125-25 4,000 100,000 1926 1,500 3,500 400 1.125-25 4,000 100,Mx) 1927 1,500 3,500 400 1.125-25 4,000 100,000 1928 1,500 3,500 400 1.125-25 4,000 100,000 1929 1,500 3,500 400 .375-24 4,000 100,000 1930 1,500 3,500 400 1.125-25 4,000 100,OOO 1931 1,500 3,500 400 1.125-25 4,000 100,OOO

1932 1,000 2.500 400 4-63 4,000 1,000,Ooo 1933 1,000 2,500 400 4-63 4,000 1,O00,000 1934 1,OOO 2,500 400 4-63 4,000 1,000,000 1935 1,000 2,500 400 4-63 4,000 1,000,000 1936 1,ooo 2,500 400 4-79 4,000 5,000,000 1937 1,000 2,500 400 4-79 4,000 5,000,000 1938 1,000 2,500 400 4-79 4,000 5,000,000 1939 LO00 2,500 400 4-79 4,000 5,000,000 1940 800 2,000 400 4.4-8 1.1 4,000 5,000,000 1941 750 1,500 400 10-81 2,000 5,000,000 1942 500 1,200 350 19-88 2,000 200,Ooo 1943 500 1,200 350 19-88 2,000 200,000 1944 500 1,000 500 23-94 2,000 200,000 1945 500 1,000 500 23-94 2,000 200,000 1946 500 1,000 500 19-86.45 2,000 200,000 1947 500 1,000 500 19-86.45 2,000 200,000 1948 600 1,200 600 16.6-82.13 2,000 200,000 1949 600 1,200 600 16.6-82.13 2,Ooo 200,000

252 TwbkIncome Rrocbk LowCrr H&kr Exempiions Amount Amount Year Singk Joint Dqendenk R&J (%) Under ovcr

1950 $600 $1,200 600 17.4-84.36 $2,000 $200,000 1951 600 1,200 600 17.4-84.36 2,000 200,000 1952 600 1,200 600 20.4-91 2.000 200,Ooo 1953 600 1,200 600 20.4-91 2,OOO 2oo,oO0 1954 600 1,200 600 20-91 2,OOo 200,000 1955 600 1,200 600 20-91 2,000 200,000 1956 600 1,200 600 20-91 2,000 200,Ooo 1957 600 1,200 600 20-91 2,000 200,OOO 1958 600 1,200 600 20-91 2,OOo 200,000 1959 600 1,200 600 20-91 2,OOO 200,000 1960 600 1,200 600 20-91 2,000 200,000 1%1 600 1,200 600 20-91 2,000 200,Ooo 1962 600 1,200 600 20-91 2.OOo 200,OOO 1963 600 1,200 600 20-91 2,OOo 200,000 1964 600 1,200 600 16-77 500 100,000 1965 600 1,200 600 14-70 500 100,OOO 1966 600 1,200 600 14-70 500 100,000 1967 600 1,200 600 14-70 500 100,OOO 1968 600 1,200 600 1475.25 500 100,Ooo 1969 600 1,200 600 14-77 500 100,000 1970 625 1,250 625 14-71.75 500 100,000 1971 675 1,350 675 14-70 500 100,OOO 1972 750 1,500 750 1470 500 100,OOO 1973 750 1,500 750 14-70 500 100,000 1974 750 1,500 750 14-70 500 100,000 1975 750 1,500 750 14-70 500 100,000 1976 750 1,500 750 1470 500 100,000 1977 750 1,500 750 0-70 3,200 203,200 VI E Tambk Income Brah 0 LOW& Hidest 5 Emptiom Amount Aiomt a Year Singk Joint DEpmdma Rates(%) U& ovcr a 4

1978 $750 $1,500 750 0-70 $3,200 $203,200 1979 1,000 2,000 1,000 0-70 3,400 215,400 1980 1,000 2,000 1,000 0-70 3,400 2 15,400 1981 1,Oo0 2,Oo0 1,000 0-70 3,400 2 15,400 1982 1,000 2,000 1,000 0-50 3,400 85,600 1983 1,000 2,o 1,000 0-50 3,400 109,400 1984 1 ,Oo0 2,000 1,000 0-50 3,400 162,400 1985 1,040 2,080 1,040 0-50 3,540 169,020 1986 1,080 2,160 1,080 0-50 3,670 175,250 1987 1,900 3,800 1,900 11-38.5 3,000 90,000 1988 1,950 3,900 1,950 15-33 29,750 71,900" 1989 2,000 4,000 2,000 15-33 30,950 74,850 " 1990 2,050 4,100 2,050 15-33 32,450 78,400 1991 2,150 4,300 2,150 15-31 34,000 82,150*

*Based on Ma&d Filing Jointly Idx

By Subject Appeals, of tax cases, 37,42,43, 101, 102, 104, 107, 108, 183, 188,211 Accounting Systems, 97, 100,217 Appeals Division, %, 114, 154, 156, Accounts Receivable, 235 211,217,218 Ad Council, 228,230 Arizona, 62, 85, 117, 165, 221 Adams, John, 20,25 Arkansas, 37,41,43, 54, 85, 101, 187, Administrative Intern Program, 174 197,200,221 Admissions, taxes on, 91, 92,97 Arrest Authority, 177 Adulterated Foods, 67, 70 Art Advisory Panel, 190, 198,217 Advisory Tax Board, %, 97,98 Articles of Confederation, 14, 15 Agency for International Artificial Intelligence, 224 Development, 173,178,182 Assessors, 33,34,37,40,49 Agricultural Adjustment Act, 119, Assistant Commissioners, 145 120, 123, 126, 128 Accounts, Collection, and Aid to Families With Dependent Taxpayer Service, 1%, 197,201, Children, 216 205 Air Transportation, taxes on, 194 Administration, 104, 108, 157,163, Alabama, 27,41,57, 62, 80, 82, 85, 171, 174 189,235 Audit, 21 1 Alaska, 49,63, 78, 172 Collection, 172, 218, 230,231, 237 Alcohol, taxes on, 12. 15, 16,23,33, Compliance, 174, 186, 21 1,218 34, 35, 36,37,40,41,43,44,45, Computer Services, 221,225,229, 47, 48, 50, 53, 57,58,59, 63, 71, 232 74, 75, 79, 80, 88,91, 92, 100, 116, Criminal Investigation, 21 1,218, 120, 123, 126, 128, 136, 138, 143, 228,230,23 1,236 160, 166,174,176, 182. 186, 187, Data Processing, 174, 176, 187, 188, 190, 195 196, 198,210 Alcohol Tax Unit, 121, 134, 139, 151, Data Services, 209,213 152, 153 Employee Plans and Exempt Alcohol, Tobacco, and Firearms Organizations, 204,234 Division, 179, 185, 188, 189, 191 Examination, 21 1,218,229, 235 Alcohol and Tobacco Tax Division, Finance, 233 123, 131,153,157,161, 171, 188 Human Resources, 219 Aldrich, Nelson, 81 Human Resources, Management, Alexander, Donald C., 200,209,229 and Support, 224,23 1,234 Alliance for Progress, 172 Human Resources and Support, Alpern, Anita, 207 234,236 Amortization Allowances, % Information Systems Andrews, T. Coleman, 157, 161 Development, 228,230,232, 234

255 X 2 Information Systems Automated Underreporter System, h Management, 232,233,234 232,235,238 Inspection, 155, 156, 157, 175, Automobiles, taxes on, 115, 119 230,232,233 Awards, 141, 175, 179, 187, 191, 233, International, 223,224,230,233 235,237 Operations, 145, 156, 157, 161, 166, 174 Badges, 160 Planning, 157,163 Bailey, Joseph W., 7581 Planning, Finance, and Research, Bank Secrecy Act, 194 229,231 Bankhead Cotton Act, 122,128,131 Planning and Research, 164, 170, Bankruptcy Reform Act, 213 198,201,207,218,233 Banks, taxes on, 33,35,36,37,38, Procurement, 233, 236 40,41,48,63, 75,88 Resources Management, 21 1 Barnard, Doug Jr., 231 Returns Processing, 231,236 Barron, Dean J., 198, 201 Stabilization, 197, 204 Bergherm, Donald E., 230,233 Support and Services, 224 Billiard Parlors, taxes on, 75 Tax Systems Redesign, 224,228 Bishop, Joseph E., 213,221 Taxpayer Service, 231,233 Blair, David H., 102, 116 Taxpayer Service and Returns Blattner, David G., 229,235 Processing, 21 1, 229 Block, H & R, 161 Technical, 145, 156, 157, 170,183, Blue Ribbon Program, 162 217 Board of Tax Appeals, 105, 107, 108, Associate Commissioners, 218,223, 113,114,116, 120, 136, 137 228 Board of Tax Commissioners, 32 Attacks on Revenue Employees, Boats, taxes on, 48,97 seeThreats against... Bolich, Daniel A., 151, 153 Auction Sales, taxes on, 18, 22,23 Bombs, 198 Audit, 93,94,%, 103, 104, 108, 112, Bonds, 93 113, 114, 115, 117, 120, 121, 124, Boston Tea Party, 14 129,131,140,142,144,146,149, Boutwell, George, 24, 33,35,45,47, 153,155,166, 170,184,191,195, 49 199,206 Bowling Alleys, taxes on, 75 Audit Information Management Bradford, William, 18 System, 208,210 Brand, Philip G., 233, 236, 237 Austin Compliance Center, 225 Brauer, Robert, 234 Automated Collection System, 220, Brennan, Charles H., 228, 234 222 Bribery, 150 Automated Data Processing, 137, Brown, Norris, 81 142,143,145,148, 153, 164, 167, Browning, Harold M., 216 170, 171, 173, 174, 176, 178, 185, Brushaber v. Union Pacific 186, 210, 212,213,217,220,223, Railroad Co., 91 231,232,235,236 Buchanan, James, 30 Automated Examination System, Budget, 20,22,23,60,67, 71,72, 225 149, 150,172

256 ,,\ ._. Bureau of Alcohol, Tobacco, and Chemistry, Division of, 66, 69, 71, z- Firearms, 198, 208, 228 72,99 Bureau of the Census, 161 Chewing Gum, taxes on. 75,88 X Bureau of Engraving and Printing, Chief Counsel, 25,40,46, 100, 101, 57, 58, 63 108, 112, 116, 120, 122, 123, 126, (& Burke, John E., 234 153,154, 166,171, 172, 175, 177, Burnet, David, 118,121 180,182, 183,189,197,198,200, Bush, George, 237 210, 211, 212, 217, 218, 225, 228, Business Master File, 176, 178, 180 230,232,235 Butter, taxes on, 106 Disclosure Litigation, 204 Buttolph, Carolyn K., 200 General Legal Services, 204 Operations and Planning, 204 Cabell, Royal E., 82, 86 Chief Financial Officer, 232, 234, Calhoun, John C., 26 236 California, 33,44,47,52, 54, 62, 63, Chief Information Officer, 232,234 67, 69,81, 85, 117, 150, 151, 153, Chief Inspector, 233 198,220 Chief Operations Officer, 234, 235 California Debris Control Act, 69 Child Care, deductions for, 160 Capers, John G., 80,82 Child Care Centers, 228, 230 Capital Gains, 103, 130, 148 Child Labor, taxes on, 93, %, 97, Capital Stock’rax, 113,115,121, 103 122, 126 Child Support, collection of, 205, Caplin, Mortirner M.,172, 174, 175, 216,218,219,230,238 180 Chinese, registration of, 60, 69, 70, Capozzoli, Daniel N., 210,225 71, 78,79 Carriages, taxes on, 18, 19,22,23,40 CIAT (Inter-American Center of Carriers Taxing Act, 129, 131 Tax Administrators), 174, 184, Carter, Jimmy, 210 186, 188, 190, 194,198,199,205, Cary v. Curtis, 27 206,208,209,211, 213,216,221, Cash Transaction Reports, 222 222,223,235 Cashier of Internal Revenues, 35 Circuses, taxes on, 75 Cattle, taxes on, 33, 195 Civil Service System, 75,79, &I, 87, CDC Computers, 195,207,216 89,99, 100, 133, 150,152, 153, Centralized Inventory Distribution 178, 184, 185,186,194 System, 223,224 Clay, Henry, 26 Centralized Services, 21 1 Cleveland, Grover, 67,70, 71 Charitable Contributions, 92, 99, 194 Clothing, taxes on, 42 Charitable Organizations, Coal, taxes on, 127, 128, 129, 130, see Exempt Organizations 21 1 Chase, Salmon P., 36 Coffee, taxes on, 30 Checks, for payment of taxes, 84 Cohen, George M.,118 Checks, taxes on, 59,61,63,75, 119, Cohen, Sheldon S., 182, 190 126 Collection Districts, 33 Cheek v. United States. 235 Colonial Stamp Act Congress. 13 Cheese, taxes on, 74,84 Colorado, 62, k, 117 Colwell, Stephen, 37 Cost of Living Council, 1%, 197, 0 Command Center, 223 200,201 ‘ Cornmissioner of Internal Revenue, Cotton, taxes on, 40,43,88 Office of the, 33 Court of Claims, 66 &I Commissioner of the Revenue, 16, Couzens, James, 112 17,20, 22, 23, 24, 25,31 Cox, Mark D., 232 Commissioner of Taxes, 31 Coxe, Tench, 16,17,19 Commissioner’s Advisory Group, Credit Cards, 165, 199 183,201 Criminal Activities, taxes on, 113, Committee on Appeals and Review, 153 160 Currency Act, 13 Commissioner’s Advisory Group, Currency Transaction Reports, 194 183,201,229 Current Tax Payment Act, 137 Commissioner’s Award, 191 Customs Service, 16 Commissions, 53, 59 Committee For Tax Appeals, 104, Dallas, Alexander, 23.24 106 Day v. Buffington, 46 Committee On Appeals and Review, Deanchan, Regina M., 231,233 98,103, 105,107 Deaths of IRS employees, Communications Replacement see Threats... System, 225 Decentralization (of IRS), 93,94,99, Compliance 2000,236,237 105, 106, 108, 128, 130, 131, 132, Compromise, authority, 25,35 144,153,158 Conferences (IRS), see also Joint Declaration of Independence, 14 Conference, 100, 118, 121, 128, 129, Declaratory Act, 13 140,174 Delancy, Dennis W., 150 Connecticut, 12,33,52,62,67, 103 Delano, Columbus, 45,46,47 Continental Congress, 14, 15, 16 Delaware, 31,57,67,85,97,155,212 Contract Employees, 48,49,52,53 Department of Agriculture, 79 Controller, 233 Department of Commerce, 78 Coolidge, Calvin, 106, 113 Department of Justice, 46, 118, 120, Coordinated Evaluation Program, 121 167 Department of Labor, 78,220,231 Coordinated Examination Program, Department of the Treasury, 16 233,234 Deputy Commissioner, 35,40,44, Core Business Systems, 238 57, 77, 92, 96, 157, 175, 187, 204, Corporate Files On-Line (CFOL), 216, 217, 228,229,232,234,235, 234 236,237 Corporations, taxes on, 27,44,70, Detroit Computer Center (also 81,82,84,85,86,90,91,%, 102, Detroit Data Center), 180, 183, 112,115, 119, 130, 133, 148,162, 200,222 164, 165,167,188 Diagnostic Services Center, 236 Corporation Tax Division, 82 Dickinson, John, 13 Cosmetics, taxes on, 33 Dingley Tariff Bill, 74, 75 Direct Data Entry System, 186

258 ‘. Direct Tax, 20, 22, 23, 20. 31, 32,33, Energy Tax Act, 212 - 35,38,41,43,44,45,50,60,61, Engineering Division/Section, 114, v 66, 67, 68 126 > Director of Practice, 156, 165, 178, Enrolled Agents, 166 219 Environmental Protection Agency, 4 Disaster Recovery, 225 195 Disclosure, of tax information, 24, Equal Employment Opportunity, 42,46, 71, 76, 77, 81, 82, 84,86, 214 107,112, 122, 126,156,209,210. Equipment Replacement and 216 Enhancement Program, 212,213 Discriminant Function (DIF), 191, Equipment Replacement Program, 207 212,213,220 Distributed Input System, 220,223 Erskine v. Van Arsdale, 50 District Conference Staff, 204 Estate Taxes, 33,90,91,99, 103, District Offices, streamlined, 212 112, 114, 119, 142, 1% District of Columbia, 67, 70, 72 Estee, C.F., 35 Dividends, taxes on, 36.40, 119, 120 Ethics, 230, 232, 233 Dolan, Michael P., 236, 237 Evans, Walter, 61, 63 Douglas, John W., 48,53 Excess Profits Tax Council, 93,%, Drugs, taxes on, (see also opium), 140, 143 87,89, I%, 201 Excess Profits Taxes, 91,93, %, 102, Due Date, taxes, 31,32,36,43,48, 103, 119, 121, 122, 133, 138, 139, 72,84,87,90,%,97, 136, 160, 149, 158 210,223 Exchange of tax information with Dues, taxes on, 91,92,97 states, see States... Dunlap. John B., 151,152, 155 Excise Taxes, 12, 22,31,44, 75, 81, 88,124, 152, 160,164,171, 182, Earned Income Tax Credit, 119, 185, 196, 199,211 138,206,207 Executive Development Program, EconomicWage Stabilization 185, 195 Programs, 136,138,140,1%, 14*1, Excmpt Organizations, 87, %, 148, 198,200,201,205 177, 194,195,204,207,218,220, d Egger, Roscoe L, Jr., 217, 224 233 Einstein, Albert, 156 Exempt Organization Advisory Eisenhower, Dwight, 160 Group, 190,228,229 Eisner v. Macomber, 90 Exempt Organization Master File, Electronic Filing, 223,230,232,234, 183 238 Extension of time to file, 126 Elliott v. Swartout, 26 Embargo Act, 22 Facilities Management, 173 Employee Assistance Program, 217 Faculty Tax, 12, 15 Employee Plan Master File, 197 Farmer’s Tax Guide, 162 Employee Plans, 115, 165,178,204, Fay, Carol, 21 1 207,212,231 Federal Alcohol Administration, 127, Employee Relations, 165 128, 133

/

259 X w Federal Energy Office, 201,204 Form 2050,160 Federal Firearms Act, 131, 148 Form 2688, 168 z Federal Insurance Contributions Form 2950SE, 179 Act, 132, 148, 160, 162,164, 187, Form 4683,195 211 Form 4789, 194 Q Federal Records Centers, 195 Form 4875,200 Federal Tax Deposits, 187, 194, 199, Form 8300,222 220,222 Form 8372, 194 Federal Unemployment Tax Act, Form CT-1, 207 132, 190, 194 Form W-2, 143, 183,213 Federal Wonlen’s Program, 194 Form W-4,201,213,216,228 Fifth Auditor’s Office, 25 Form letters, 104, 115 Finance Offices, 149 Forms, color in, 190 Finnegan, James P., 150 Forms, distribution of, 154, 156, 164, Firearms, regulation of, 122, 123, 166, 190,205 128, 131, 134, 139, 141, 148, 180, Forms, general, 87.97.99, 180,205, 188, 189 213,228,234 Fiscal Year, 27,68, 209 Forman, W. St. John, 74,75 Fingerald, Edward, 204 Foster, David, 84 Flint v. Stone Tracy Co., 84 Franklin, Benjamin, 16 Florida, 27,69, 162, 165,224,225 Fraud Agents, 50 Flour, tax on, 75 Fraud, of cmployees, 35,43,44 Ford, Gerald, 204 Fraud, of taxpayers, 35,41,42,43, Foreign Operations District, 161 45, 58, 76, 98, 153, 154 Form 720,158 Freedman’s Bureau, 41 Form 940, 153 Freedom of Information Act, 189, Form WEZ, 235 204,206 Form 990,222 Fries, John, 20 Form 1040,87, 106, 134, 145, 156, Furniture, taxes on, 23 162, 178,205,208,220,234 Form 1040A, 106, 144,145, 156,161, Garfield, James, 42 162, 166,195, 198, 199,205,236 Gasoline, taxes on, 119, 120, 166 Form 1040ES. 145 Gaugers, 56, 60, 71, 100 Form 1040EZ, 222 Gauging of Distilled Spirits, 42,69, Form 1040EZ-1,235,238 85 Form 104OPC, 238 General Accounting Office, 228 Form 1040Q, 189 General Counsel, see Chief Counsel Form 1040W, 168 Georgia, 38,41,57,62, 85; 212 Form 1040X, 187,1% Gibbs, Lawrence B.. 224,228,229, Form 1087,213 23 1 Form 1099, 183,213,233 Gift Taxes, 112, 119 Form 1120,162 Goldberg, Fred T., Jr., 231,232,237 Form 112OS, 167 Gore, ’Thomas P.,81 Form 1 lZOX, 1% Grant, Ulysses, 45,54 Form 2034,160 Greenbacks, 32

260 Gross Income, 216,218 Income Tax Laws, passed, 31,33, 2 Guam, 199 36,37,40,42,46, 50, 71, 86, 90, 0 Gun Control Act, 188,189 91,96, 102, 106, 112, 115, 116, E 118, 122, 128, 129, 130, 132, 133. Hamilton, Alexander, 15, 16, 17, 19 134, 136, 137, 138,139, 142, 148, Handicapped Employees, 187 152, 163. 166, 171,177, 179,184, 8 Hannegan, Robert E., 137,138 185,188.191,197,204,206.208, Harding, Bertrand, 170, 174, 175 209,212,217,218,222,224,229 Harding, Warren, 102 Income Tax Laws, proposed, 20,23, Harland, Thomas, 44 24, 30, 31,32, 37,42,47, 52, 63, Harrington, Russell C., 161, 164 69, 70, 74, 79, 80, 81,82, 86, 102, Harrison Anti-Narcotics Act, 89, 100 105,106,126,177,221 Hat Act, 12 Independent Contractors, 143,230 Hawaii, 77 Indiana, 34, 54, 56,61,62, 85, 97, Hayes, Samuel, 37 208 Health Programs, 167 Indians, 47, 60, 72 Helvering, Guy T., 121, 137 Individual Master File, 184, 185, Highway Use Tax, 162 189,201,213 Hilgen, Robert F., 233 Individual Retirement Accounts, Holden, James P., 232 217 Holmes, Damon O., 229 Informants, 48,157 Home, sale of, 212 Information Document Matching, Honeywell Computers, 180,201,216 177,205 Hooper, Samuel, 47 Information Reporting Program Hoover, Herbert, 116,117 119 Advisory Committee, 236 Horses, taxes on, 195 Information Returns, 175, 183, 186, Hull, Cordell, 81, 86 195,205,2 13,233,235 Hutton, Walter A, Jr., 233 Inheritance Taxes, 24,25,27,32,35, Hyde v. Continental Trust, 71,72 53, 74, 79,80, 81, 93 Hylton v. United States, 19 Inspection Service, 150,151, 154, 155, 158, 161,231 IBM Computers, 161, 165, 168, 171, Inspector General, 232 172,179,180,183,219 Installment Payments, %, 107 Idaho, 62,85,97,212 Insurance Companies, taxes on, 33, Illegal Activities, taxes on, 90 91, %, 166, 195,222 Illinois, 34,54, 55,56, 59,61, 62, 85, Integrated Collection System (ICs), 97 235 Income Tax Amendment, Integrated Data Retrieval System see 16th Amendment (IDRS), 191, 195, 197, 199,201, Income Tax, constitutionality of, 45, 207,216,223 60,71,72,91 Intelligence Unit, 98, 140, 168, 183 Income Tax Division/Unit, 72, 87, Inter-American Center of Tax %, 99,108 Administrators, see CIAT Interest, rate for refunds/taxes, 50, 206

261 Interest, taxes on or exemptions for, Laboratories, 66, 67.69, 92,99, 191, 0 27,199 202 Internal Revenue Manual, 59,155 Langone, Anthony, 228 Internal Revenue Service, Latham, Dana, 164,172 6 designation of, 158 Laycock, Thomas J., 221 Internal Security, 194, 198 Leave sharing, 225,233 International Offices, 129, 131, 144, LeBaube, Robert A., 231,233 183 Lee, Lighthorse Harry, 19 International Operations, 161, 162, Legacy Taxes, 77, 78 164,171, 176, 177,184, 185, 187, Legal Expenses, 184 188,199,201,205,218,220 Legislative Affairs, 116, 124 Intolerable Acts, 14 Legislative Liaison, 219 Iowa, 33, 56,62, 85, 86 Lewellyn v. Frick, 109 hey, Elmer, 140 Lewis, Joseph J., 3.538 Iron Acts, 12 LEXIS, 205 Library, 92,187 Jack, Robert L., 170, 172,174,198 Licenses, on businesses or Jackson, Andrew, 25,26 professions, 33.40 Jackson, Robert H., 122 Lindbergh Kidnapping, 124 Jefferson, Thomas, 22 Lincoln, Abraham, 31,33 Johnson, Andrew, 37,43,44 Liquor Tax Administration Act, 128 Johnson, James W.,150 Loopholes, 90 Johnson, John D., 229,232,237 Louisiana, 38,41, 57, 67, 69, 85, 221 Johnson, Lyndon, 180, 182, 183 Lucas, Robert H., 116, 118 Johnson, Robert T., 231,236 Lynch v. Tilden Produce Co., 106 Joint Committee on Internal Revenue Taxation, 112,143,144, Mader, David, 236 149,150 Madison, James, 22 Joint Returns, 142 Magoon v. Illinois Trust and Savings Bank, 76 Kansas, 60,64,69,84,85 Maine, 34, 54, 56, 57,67, 85, 97 Keenan, Raymond P., 231,236 Major Violator Program, 163, 168, Kennedy, John F., 172,173,175, 173 177,178 Mallory, Robert, 37 Kentucky, 26,37,40,52,55,57,62, Management Initiatives, 140, 141, 85,97 142,143, 144, 145, 151, 153, 177, Kern, Teddy R., 230 201,205 Kerr-Smith Tobacco Control Act, Margarine, taxes on, 66,68, 76,78, 123,128,131 79,90,148 Kinghorn, C. Morgan, 233 Marihuana, taxes on, 130, 139 Kolak, Alvin H., 230. 231 Marrs, Aubrey R., 132 Kump, Joseph F., 235 Marshals, US., 20,58, 59,64 Kurtz, Jerome, 209, 216 Martinsburg Computer Center, see National Computer Center

262 Maryland, 25,27,34,48,54,56,61, Narcotic Drugs Import and Export z- 67, 85,161, 166 Act, 87, 104 '3 Mason, John W., 67,69 National Academy of Science, 42, : Massachusetts, 12, 15,24,33,34,35, 43,232 53,56,57,61, 150, 151 National Association of Internal & Matches, taxes on, 37,61,85,86 Revenue Employees (NAIRE), McCray v. United States, 79 see also National Treasury McCulloch v. Maryland, 25 Employees Union, 130, 183, 1%, McFarlane, James, 18 198,200,202 McKinley Tariff Act, 68,69,87 National Banking Association Act, McKinley, William, 74.75 35 Medical Expenses, deduction of, National Bankruptcy Act, 124 137 National Computer Center, 170, Medicare Catastrophic Premium, 171, 173, 174, 176, 179, 183, 188, 234 200,218,219,220,228 Medicine, taxes on, 33 National Firearms Act, 123, 128, 188 Mellon, Andrew, 102, 105 National Industrial Recovery Act, Mellon v. United States, 117 119, 120,121 Michigan, 34,56, 57,62,85, 112, National Office, construction of, 110, 113,151,158 113, 114, 116,117 Microfilm Operations, 142, 182, 213, National Office, designation of, 158 220 National Office, renovation of, 189, Milburn, Bruce V., 230 199 Miller, Joseph S., 64,67,69, 74 National , 132, 145, Miller, William Jr., 20 168,191,214,232 Mining, taxes on, 69 National Treasury Employees Minnesota, 62,85, 142 Union (NTEU), see also National Mississippi, 38,41,53,57, 67, 80. 85, Association of Internal Revenue 97 Employees, 202,206,207,208, Missouri, 37,56, 61, 62, 85, 150, 179 209,229 Molasses Act, 12 National Wage Stabilization Board, Monaco John J., 233 140,141 Monroe, James, 24 Navigation Act, 12 Montana, 62, 63, 67, 85, 212,221 Nebraska, 62,69, 77,85 Morics, Inar, 23 1 Ness, Elliott, 113 Morrill, Justin, 30,31,37,42 Net Worth, 137, 160 hiorrill Tariff Act, 30 Nevada, 62,63,67,85,97,101,222 Moving expenses, deduction for, 179 Neville, John, 18 Multiple Filers, 199 New Hampshire, 33,54,67,85, 212 Murphy, B.D., 150 New Jersey, 12, 33,54,55, 85, 114, Murphy, Michael J., 235, 237 152, 165, 179,183 Museum, tax, 75, 190 New Mexico, 62,85,97 New Plymouth Colony, 12 X New York, 34,38,47,48,52,54,55, Pennsylvania, 12, 14, 16, 18, 20, 25, z 57,58,61,62,64,69, 105, 115, 27,33,35,47,48,53,54,55,56, 2 124, 126, 137, 149, 150, 151, 152, 62,85,97, 165, 173, 179 154, 162,170, 179 Peoples, Charles J., 231, 236 New York Bank Note Company, 58 Perfume, taxes on, 33 Nixon, Richard, 190, 194, 196, 197, Personnel Policies, 143, 144, 173 200 Peterson, Shirley D., 237 North Carolina, 14,27,40,41,55,57, Philcox, Henry H., 232 61,85,86, 97 Philippine Islands, 78,82, 123, 129 North Dakota, 62, 77,85,97, 212 Pitt, William, 20 Norton, Lord Frederick, 13 Planning, long-range, 139, 144, 162, “Nothing in life is certain but...”, 16 165, 167, 183, 185, 217, 221, 222, Nunan, Joseph D., Jr., 138,141, 143 224,229 Playing Cards, taxes on, 33, 71, 92 Offers in Compromise, 122, 131, Pleasanton, Alfred, 47,48 132, 158 Pollock v. Farmers’ Loan and Trust O’Hanlon, George, 235 Co., 71, 72 Ohio, 34,47, 55, 56, 61, 85, 143, 170, Practitioners, 108, 156, 161, 200 196 Pratt, Daniel D., 53, 55 Oil, taxes on, 40, 77,92 Presidential Election Campaign Oklahoma, 64,84,85, 101 Check Off, 200,205 Olson, James B.E., 151 Privacy Act, 206, 207 Ombudsman, 216,229 Private Letter Rulings, 156. 158, On-Line Entity (OLE), 234 160,206 Operation Dry Up, 179, 183, 189 Problem Resolution Program, 210, Opium, taxes on, 66,68, 71, 74, 76, 213,216 79,80,85,87,89, 104,136 Processing of tax returns, 106 Optical Character Readers, 217,220, Prohibition, 53,57,80,82,91,93,97, 221,222,224 98,100, 103,105, 106,107,108, Oregon, 49,62,78,85 117,118,119, 120,121 Organizational Studies, 140 Prohibition Party, 46 Organized Crime Drive, 175, 184 Prohibition Unit, 98, 100, 101, 102, Orton, William, 38 104,105,113, 116 Osborn, William H., 86.91 Public Debt Act, 136, 138 Otis, James, 12 Public Debt, contributions to Owens, James I., 205,217 reduce, 220 Public Salary ‘I’ax Act, 132 Pacific Insurance Co. v. Soule, 44 Public Utilities, taxes on, 33, 91 Patton v. Brady , 78 Publication 1, 230 Payne-Aldrich Tariff Act, 81,82,86 Puerto Rico. 91 Payne, Serano E., 77,80,82 Payroll, 164, 172,233 Penalties, 42,46, 105, 115, 128, 146, 229.237

264 - Quality Programs, 166, 208, 221, 223, Revenue Stamps, 34,37,43,44,45, z U 229,231,233,237 56, 57,58, 59.60.66.69, 70, 75, Ir: Quarterly Payments, 76, 77, 79,87, 88, 89,90, 157, 166. X sce Installments 186 e Quotas, 143, 153, 166, 175 Rhode Island, 12, 14, 31,33, 52,67, 97,212 Railroads, taxes on, 33 Rollins, Edward, 38,41,43,44,45 Railroad Unemployment Insurance Roosevelt, Franklin, 119, 126, 128, Act, 131 130, 133, 138 Railroad Retirement Tax Act, 130 Roosevelt, Theodore, 79,80,82 Raum, Green B., 56,57,58,61 Roper, Daniel C., 91,98, 100 Reading Room, 186 Rothwell, Gregory D., 236 Reagan, Ronald, 221 Rulings, Revenue, 99, 101 Reciprocal Trade Agreement Act, Ruttle, Patrick J., 209 122 Refunds, 36,42,45,66, 78, 117, 131, Safety Programs, 166 145,178,218,219 Salary, Commissioner, 20, 22, 23 Regional Offices, 154, 155, 156, 157, Salary, employees, 34,53,59,63 179,182, 184,221,229 Salary, federal officers, taxes on, 40, Atlanta, 166, 174 71 Central, 157, 179 Salary, Judges, taxes on, 46,87,90, Mid-Atlantic, 155, 182, 218, 220 132 Midwest, 155 Salary, President, taxes on, 87, 90, North Atlantic, 182 119 Northeast, 155 Salary, State Officials, taxes on, 87, Southeast, 155, 173, 182, 184, 187, 90 21 1 Salary, Storekeepers, 45 Southwest, 155, 178, 191 Salary Stabilization Act, 136 Western, 157 Sales Taxes, 23,24,46, %, 101, 119 Regulatory Taxes, 66 Salt, taxes on, 22 Relatives, employment of, 58 Schenck, Robert, 46 Remittance Processing System, 212 Scholey v. Rew, 53 Reorganization Plan No. 1. 154, 155, Schoeneman, George J., 142, 150, 163 151 Research Conferences, 220,222, Scott, Nathan B., 7576 223,224,233,236,238 Securities, U.S., taxes on, 31 Returns, copies of, 115 Seizures, 36.40 Revenue Agents, 36,37,48,53,57, Senior Deputy Commissioner, 228, 59,63,92 234 Revenue Agents-In-Charge, 101, Service Center Replacement 105, 113,114, 121, 124, 128, 129 System, 213, 216, 218, 220,222, Revenue Commission, US., 37,38, 223 40 Revenue Marine Service, 16 Revenue Officers, 41,194,238 X Service Centers, 161,166, 176,179, Solicitor of Internal Revenue, 180,182,184, 194,200,201,207, see Chief Counsel z 208,212,220,222 Solicitor of the Treasury, 25,26,46 Andover, 184,189,210,228 Songs, 184 Atlanta, 172, 174, 176, 178, 185, South Carolina, 25, 26, 32,35, 38.41, 190,209 46, 55, 57,67, 85, 86, 102, 165, 179 Austin, 177, 179, 180, 190, 197, South Dakota, 62,77,85 199,206 Spanish, tax information in, 199 Brookhaven, 192,196,198 Special Advisory Commission, 118, Cincinnati, 177, 180, 186,189, 120 196,220,233 Special Commissioner of the Fresno, 192, 196, 198,210,217, Revenue, 46 221 Special Services Staff, 190, 191, 201 Kansas City, 161,168 Sperry-Univac Computers,, 222 Lawrence, 161,184 Springer v. United States, 60 Memphis, 192,194,1%, 197,198, Stamp Act, 13 218 Stamp Taxes, 19, 22, 23, 33,34,37, Midwest, 162 40,41,42,48,49,52,60,66,68, Northeast, 162,165,172,175 75, 77,88, 123, 145, 148 Ogden, 162, 164, 168,183,189, Standard Deduction, 134, 138, 197 197,221,232,237 Stanton v. Baltic Mining Co., 91 Philadelphia, 173, 176, 178,179, STAR (Storage and Retrieval of 210 Images of Returns), 1% Western, 162,172 StatelFederal Cooperation, 127, 130, Shashy, Abraham N.M., Jr., 232 148, 163, 185,199,238 Shay’s Rebellion, 15 State income taxes, 27,82 Silver Purchase Act, 123, 124 State inheritance taxes, 74,76,103 Simmons, James F., 31 Statistics of Income, 90,93, 103, 112, Simplification, calls for, 119, 138 161,164,178 Slaves, taxes on, 20,23,27,35 Statute of Limitations, 48, 124 Small Businesses, taxes on, 78,202, Strategic Business Plan, 229 207,237 Strategic Management System, 222, Smietanka v. Indiana Steel 229 Company, 103 Stevens, Thaddeus, 35 Smith, Walter H., 40 Stocks, taxes on, 90 Smith, William S., 170 187 Storekeepers, 45,56,60, 71, 100, 148 Srnyth, James F., 151 153 Subchapter S, 165, 167 Snuff, tax on, 18, 19,22,48,59 Subversive Organizations, 148 Snyder, John W., 151 Sugar Act, 13 Social Security, 127,129, 130, 131, Sugar, bounty on, 46,68,69,71, 72, 132,137, 139,148,160, 162,164, 74 171,173,211 Sugar, taxes on, 18,22,30,129,134, Social Security Division, 127 138, 141 Social Security Numbers, 175, 183, Suggestions, 141, 190 189,207,230 Superintendent of Stamps, 22

266 i Surtax,86,90,91,96,102,105,119, Telephones, taxes on, 88,92,%, z ti 127,128,132, 136,190 119, 171 m Telephones, toll-free, 183, 185, 197, X Taft, William Howard, 81, 82 204,208 Taney, Roger, 26 Tele-Tax, 220 Tariff Commission, U.S., 90 Tennessee, 40,43, 55, 56, 58,62, 80, Tariffs, protectionist, 24,25,26,68, 85,103,152 86, 102 Tennessee v. Davis, 59 Tax Administration System, 186, Terry, Robert H., 171,201 191,201,207,210,212 Texas, 38,42,53,69, 85, 101, 102, Tax Code, predecessor to, 59 103,114, 154,217,235 Tax Counseling for the Elderly, 213 Threats Against Revenue Agents, Tax Court, 104,107,136,191,204 45,57,58,60,63,64, 67,68,69, Tax Freedom Day, 117,132,145, 70, 71, 72, 74, 75, 76, 77, 79,82, 167, 191,214,232 84,85,86,87,89,198 Tax Gap, 104,213 Thrower, Randolph W., 190, 1% Tax Model, 172 Tobacco, taxes on, 23,33,36,37,40, Tax Practitioners, 63,90,153,209 42,43,44,47,48,50,52,53,59, Tax Processing System Redesign 60,61, 68,74, 75, 77, 78,88, 123, Staff, 220,221 139, 153,162,184 Tax Protestors, 213,235 Townshend Acts, 13 Tax Simplification Board, 102, 104 Training Programs, 92, 126,158, Tax System Modernization 163,164, 165,170,171, 174,175, Manager, 236 178,183,185,186 Tax System Redesign, 201,221,223, Treasurer, IJnited States, 14 224 Treasury Department Building, 23, TaxTables, 195,197,207,208,217 26,27,37,45, 198 TaxTreaties, 161, 163,188,210 Treasury Multi-Users Acquisition “Taxation Without Contract (TMAC), 236,238 Representation...”, 12, 13 Truman, Harry S., 141,150, 152,154 Taxpayer’s Bill of Rights, 213,230, TRW, Inc., 236 23 1 Tucker Act, 66 Taxpayer Compliance Measurement Twain, Mark, 37 Program, 177 Taxpayer Identification Number, Understanding Taxes, 175,234 see “Teaching Taxes” Taxpayer Service, 87,92,99,133, IJnderwood, Oscar W., 86 138,139,144, 165, 167,168,172, Underwood-Simmons Tariff Bill, 86 175,176,179,185,186,197,200, Undistributed Income, taxes on, 204,208,211,212,229,230 128,132 Taylor, Mary E., 185 United States v. Butler, 128 Tea Act, 14 United States v. Johnson, 137 Tea, taxes, 30 United States v. Joseph Adams, 122 “Teaching Taxes”, 156, 177,230 United States v. Paepke, 210 Telegraphs, taxes on, 88,92, %, 119 United States v. Perkins, 74 X United States v. Ranier Brewing Wilson, George W., 76, 77 E co., 94 Wilson Tariff Bill, 70, 71 Univac Computers, 216,218 Wilson, William L., 70 Unjust Enrichment Tax, 128,132 Wilson, Woodrow, 85,86,88,91,93, 6 “Untouchables, The”, 168 98 Upward Mobility, 204 Windfall Profits Tax, 128, 130, 132, Utah, 62,63,67,69,97, 162,212, 221 216 Wisconsin, 34,48,63,85,97, 130, Valuation Division, 117, 118, 126 151,155 VanAlfen, Judy K., 236 Withholding, 18,33,36, 71,87,90, Veazie Bank v. Fenno, 45 92, 113, 119, 130, 137, 148 184, Vermont, 30,33,52, 54, 67,69,85, 201 97, 200, 212 Withholding, interest and dividends, Veto, of tax bills, 138, 141, 171 71,149 Victory Tax, 136, 137,138 Withholding, payroll taxes, 127, 130 Vinegar, 59 Women, in IRS workforce, 34,99, Virginia, 27,40,43,53, 56, 57,62,67, 106, 185, 187,200,201,207,211, 100 231,233,236 Volstead Act, 98 Woodbury, Levi, 26 Volunteer Income Tax Assistance Wool Act, 12 (VITA), 1%. 233 Works Progress Administration, 127 Voorhees, Daniel W., 71 Wyoming, 62,85,97,2 12

Wagering Tax, 152,158,208 Yerkes, John W., 77,80 Walters, Johnnie M., 1%, 200 Washburn, Marshall V., 237 16th Amendment, 23,72,75,80,81 Washington, 62, 78,85 82, 85, 90 Washington, George, 14, 15, 18, 19 Ways and Means Committee, 16, 17, 24,30, 341,32,36,42,46,47,69, 70, 75, 77, 105, 119, 126, 130, 138, 149,163,190 Weddick, John L., 228 Wells, David A., 37,45 Wenzel, Robert, 237 West Virginia, 40, 56, 62, 85, 171, 173,236 Westfall, Larry G., 236 Whiskey Rebellion, 17, 18, 19 Whiskey Ring, 54 Williams, John J, 150. Williams, William E., 204, 217 Williams, William M., 100, 102 Willis-Campbell Act, 103 Wilmoc, David, 27

268 By Date February 1: 52,55,70,102,113,117 5 3 February 2: 24,35237 m January 1: 33,52,53,54,57,63,75, February 3: 43,85,%, 237 X 99, 102, 106,113, 121, 126, 127, February 4 80.157 130, 139, 148, 160,170,176,177, February 5: 44, 150 179,182, 184, 185.187, 194, February 6 84, 148 198,204,209,210,211,221 February 7: 47, 148, 161, 172 January 2: 47,48,70,112, 149,163, Fe bruary 8 30,53 209,235 February 9 37,57,80, 118 January 3: 47.55, 149 February 10 60,79,89,118,128, 131 January 4 16,182,216 February 11: 118,163,170,179 January 5: 55,87,207 February 12: 118,154 January 6: 128,172,230,236 February 13: 42,52,69, %, 115,118 January 7: 55,87,100 February 14 78 January 8: 32,55,70.154, 170,179, February 15: 218 February 16: 121,176 January 9 16,23,55,85,156 February 17: 230 January 10: 154,232 February 18: 190 January 11: 71,77, 121, 170,200,218 February 19: January 12: February 20 22, 142, 150 January 13: 236 February 21: 15,72, 148,208 January 14 130,141,154,216,235 February 22: 138,232 January 15: I 12, 149,235 February 23: 66 January 16: 19, 100,117,121 February 24: 96,108,138 January 17: 87,121,223 February 25: 35,42,67,85, 138 January 18: 23, 121, 172, 187 February 26 27, 112,126, 170,179, January 19 47,71, 104 209 January 20: 47,55, 128,172,190 February 27: 24,40,121,150,223 January 21: 24,27,32 February 28: 42,76, 121, 150 January 22: 16, 126, 138, 172 February 29 January 23: 219,230 Feburary: 15,32,40,42, %, 97, 100, January 24 136,177,223 104, 176, 180,194,206,213,216, January 25: 40, 72,182 223,228 January 26: 100,217 January 27: March 1: 15,42,47,48, 53, 57,59, January 28: 24,67,72 69, 72, 76, 84.89, 97, 100, 112, January 29 52,70, 144 126, 130, 138,176,216 January 30: 70,74,93, 154,200,232 March 2: 25,30,42, 67, 68, 72, 77, January 31: 19,77,80,115,200 79, 84, 91, 230 January: 13, 15,20,35,60,69,77, 96, March 3: 17, 19, 22, 24, 25, 26, 32, 108, 130, 138, 149, 156. 160, 182, 35,37, 53, 57, 59,61,66, 68.91, 187,190,194, 196,207,213,221, 128,222 222,223,232 March 4: 15, 22, 35, 45, 74, 85, 102, 23 1 March 5: 13,43, 116

269 March 6 48, 100 April 12: 78, 86, 115, 132, 150, 232, 0 March 7: 37, 72, 126, 133, 136, 141 235 7- March 8: 72,78, 139 April 13: 84, 89, 200 March 9 74 April 14 36,45, 170 6 March 10 45,104, 120 April 1.5: 72.81, 160 March 11: 45,72, 100, 141,216 April 16: 37, 77, 105 March 12: 4572, 115,200,228 April 17: 76, 84 March 13: 60, 72,84,97, 118, 154, April 18: 23,69,220 172 April 19 69 March 14: 40,106,116,217 April 20 25, 173 March 15: 72, 154, 165, 220 April 21: 76, 122, 190,223 March 16 117,148, 165,184,230 April 22: 142 March 17: 80,84, 154 April 23: 22, 133, 233 March 18: 13,3584, 108 April 24 33,40,76,108, 194 March 19k0,63, 161 April 25: 72, 7.597, 233 March 20 64,67,69, 150 April 26 43,46, 129, 130 March 21: 67,77,218 April 27: 24,37,86, 136, 237 March 22: 119 April 28: 69, 81,86, 136 March 23: 142 April 29 March 24 23,66,230 April 30 15, 22,43,61, 77, 80, 112, March 25: 81,139, 141, 235 200,224,233 March 26 17,43 April: 14, 35,45,58,64, 100, 105, March 27: 112,121,128,235 143, 144,154,157,170,182,187, March 28: 58, 136 190.206,209,211 March 29 81,170 206 March 30 64, 172 May 1: 48,61, 69,97, 100, 115, 126, March 31: 43, 100, 160, 173, 182 161, 176,204 March: 20,43,57,60, 93, 105, 131, May 2: 108, 173 154, 166, 186,192,213,218,235, May 3: 71 23 7 May 4 May 5: 16,60,69,74, 184,209 April 1: 36,47,52, 53, 97, 100, 105, May 6 72,74,108 106,113,116, 126, 129,130,138, May 7: 72.81, 150 140,144,148,180,190,204,211, May 8: 17,72,86 230 ,May 9 40,78,87 April 2: 25, 71, 142, 176 May 10 14, 113, 122 April 3: 43, 173 May 11: 109 April 4 93, 150 May 12: 119,129,190,237 April 5: 46, 173, 198 May 13: 235 April 6 22, 74, 228 May 1453,77,89 April 7: May 15: 25,53, 104, 121,154,180 April 8: 72,86 May 16: 106,224 April 9: 77, 85 May 17: 38,63, 177 April 10 32,67, 115, 128, 157, 231 May 18: 53, 122,128,228 April 11: 24, 102 May 19 40,164,230

270 May 20 52,76,115, 155,237 June 25: 61,84,131,132,161, 166 5 May 21: 61,67,194,228 June 26: 123, 128,216 E May 22: June 27: 75,78,97,150 x May 23: 104,106,113 June 28 81,123,171,188,219 May 24 113, 129,220 June 29 13,85,116, 129, 132 May 25: 140,200 June 30 32,36,37,46,66,67,89, May 26: 104,106,113 107, 123, 126, 131, 133, 138, 141, May 27: 80,93,102,208 143,150, 160,164,166, 171,173, May 28 19,60, 130,237 176, 178, 182,204,206,230 May 29 25,85, 105, 115, 130, 141 June: 26,30, 38, 80,93, %, 119, 141, May 30 38,224 157, 161, 178, 186, 194, 196, 217, May31: 18,79, 114,116,221 219, 220,228,237 May: 22,26,46,81,86,100, 102,105. 109, 118, 149, 150, 157, 166, 171, July 1: 33,38,48, 52,57,60,61,67, 173,182,184,186,188,190,194, 69, 77, 78, 79,81,88, 98, 100, 101, 198,208,209,211,213,220,221, 102, 109, 113,114, 116,117,129, 224 131, 132, 133, 137, 142, 150, 155, 157,158,161,171, 178, 183, 1%, June 1: 19,48,52,55,57,80,93, 117, 198,200,204,206,228,231 129, 173,176,216,233 July2: 107, 118, 143, 150,211,228, June 2: 38,106,113,160 233 June 3: 74,235 July 3: 33, 71 June 4 35,122 July 4 14, 15,30,36, 79 June 5: 18,38,80,93, 118,184 July 5: 76, 81, 90, 120, 231 June 6: 30,48, 74, 118, 121, 141, 188, July 6 19, 186 224 July 7 63,158, 164, 173,231 June 7: 32,76,79,97,231 July 8: 82 June 8: 43,49 July 9 20,30, 120, 158, 1% June 9 14,18,137,138 July 10 90, 180, 194 June 10 26,114,119,182 July 11: 155 June 11: 141 July 12: 82, 194 June 12: 122,131,157,217 July 13: 41, 74 June 13: 75 July 14: 20,26,33,46, 173 June 14 143 July 15: 18, 107, 186, 228 June 15: 61,209 July 16 18,20,30,41,60,88, 107, June 16: 81,105,107,117, 118, 119, 140,150 124,200 July 17: 18, 30, 33, 140 June 17: 81,117, 166,236 July 18: 178, 184. 190 June 18 52,57, 123,236 July 19 13,30, 116, 118, 150 June 19: 57,58,105, 123, 126 July 20 15,43,60, 171 June 20 138,231 July 21: 59,61, 80,204 June 21: 16,116,182 July 22: 22,123 June 22: 38,46,52,128,1% July 23: 30,44, 77, 1% June 23: 119 July 24 16,22,30,74 June 24: 166 July 25: 31,61, 140,231

271 2 July 26 113,231 August 33,41,58,76,127, 142,145, 0 July 27: 75, 231 151, 171, 174, 197,204,207,213, ' July 28: 41, 114,228 219,224,228,231,233,237 July 29 31,33 6 July 30 33,44,160,224 September 1: 33,37,41,43,62, 78, July31: 16,55,63,82, 126, 139, 151, 82,86, 107, 120, 127,129,140, 23 1 148, 160, 171, 174 July: 26,69,98, 114, 123, 162, 173, September 2: 16,82,164,180 174,183, 184,186,207,211,216, September 3: 15, 131,219 231,237 September 4: 88,233 September 5: 14,62 August 1: 33,41,54,61, 86, 101, 113, September 6 17,45,90, 132 114, 151, 162,171 September 7: August 2: 23, 56, 66 September 8 56,80,90, 171, 180 August 3: 41,45 September 9 76,86,90,233 August 4 102,134,151,155,224 September 10: 14, 151,229 August 5: 31,44,82 September 11: 16 August 6: 33, 1% September 12: 123 August 7: 18,60,62, 74, 190 September 13: 171, 174,178 August 8: 33,48,60,71,151,184 September 14 89,132, 151 August 9 48,58, 102,134 September 15: 174 August 10 62,82,132 September 16 35,56,93,229 August 11: 33,155 September 17: 33 August 12: 33,222 September 18: August 13: 49,201,217 September 19 15,174,233 August 1467,127 142 September 20 56, 134,204 August 15: 33,56,62, 118,1%, 233 September 21: 166 August 16 160 September 22: 164, 166,194 August 17: 58,85, 151 September 23: 148 August 18 88,105 September 24 18 August 19 33,129,197 September 25: 67,91,124 August 20 62, 118,233 September 26 79,91 August 21: September 27: 14, 151, 174 August 22: 33 September 28: 118,207 August 23: 145 September 29 August 24 23,217 September 30 19,41, 143,158, 164 August 25: 14,33, 183 September: 23, 124, 127, 139, 143, August 26: 27,33,113, 129 151, 158, 162, 171, 174, 186, 188, August 27: 33,76 230 August 28 71, 148,164 August 29 134, 151 October 1: 33,46,49,54,62,66,68, August 30 127,228 85,88,98, 124, 127, 130, 151,211, August 31: 44,54,82 213,220,221,230 October 2: 26,56, 74, 136 October 3: 86,89,91, 151

272

\ October 4 58,151,161,208,233 November 11: z- October 5: 151 November 12: 98, 113,155,166 : October 6: 71,118,155 November 13: 16, 19,184 X October 7: 140 November 14: 145, 153,197,223, October 8 116,133,136,137,140 236 October 9 137,140 November 15: 14,52, 120, 140, 172, October 10 91,120, 151,171 188,233,236 October 11: 56, 152,231 November 16 120,121,134,233 October 12: 67 November 17: October 13: 63,211 November 18: 155,236 October 14 November 19 153, 155,224,238 October 15: 59, 101, 152, 197 November 20 224,238 October 16: 177 November 21: 93, 114,224 October 17: 118, 133,231 November 22: 23,79 October 18: November 23: 44,102,103,109 October 19 101, 109, 152 November 24 167 October 20 152 November 25: 80 October 21: 136, 152, 155,224 November 26 74, 190 October 22: 87,88, 143, 188, 224 November 27: 74,77,221 October 23: 88, 152, 155, 174,237 November 28: October 24: 152, 177,237 November 29 77,153 October 25: 233 November 30: 75, 109 October 26: 14,194 November: 41,63,66,108, 149, 158, October 27 98,229 174, 191,197,220,223,229,234 October 28: 98 October 29 December 1: 41,48,53,54,57,88, October 30 149 92,98, 108, 109, 156, 164,236 October 31: 38,46, 140, 152, 161, December 2: 31,204 216 December 3: October: 35,69,79,109,114,140, December 4 74,236 152, 164, 171, 174,183,188, 194, December 5: 153, 161,236 195,198,212,213,223,224,233 December 6 24, 120, 160,229 December 7: 153,219,231 November 1: 13,38,52,54,57,85, December 8: 92 87, 88, 92, 109, 124, 130, 137, 142, December 9: 70,229 152, 188,230 December 104554 November 2: 44,60,152,184 December 11: 136,153,236 November 3: 70 December 12: 77, 140 November 4: December 13: 88, 101,149 November 5: 89, 164, 180 December 14: 101 November 6 14,72,153, 174 December 15: 19,23,41,54, 101, November 7 153 161 November 8: 98,139 December 16 14,101,105, 116, 139, November 9 140,212,229 140, 145, 188 November 1045, 105,230 December 17 89, 105, 177 December 18: 113,231 0 December 19 53,68,70,84, 172, f 184, 188,234 December 20 45,77,175,232 December 2 1 : 23 6 December 22: 37,71,82,98, 137, 138,207,229 December 23: 24 December 24 49,82 December 25: 33 December 26: 134 December 27: 49,149 December 2869,149 December 29 60, 108, 172 December 30 191,234 December 31: 41,75, 119, 120, 158, 183,186,205,212,234 December: 16, 24,30,41, 70, 101, 103,129,164, 175, 183,208,217, 229,232

2 74 9U.S. Government Printing Office : 1993 -339-204/30360

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