REVENUE ACT OF 1951

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP57-00384R001200010013-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 13
• Document Creation Date: December 20, 2016
• Sequence Number: 13
• Publication Date: January 1, 1951
• Content Type: REGULATION

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97
Amendment No. 227: This amendment adds section 509 to the bill,
for which there is no corresponding provision in the bill as passed by
the House. Section 509 adds a new subsection (h) to section 442
(relating to abnormalities during the base period) which in general
permits a taxpayer in certain cases, after selecting the 36 months in the
base period which result in the highest excess profits net income or low-
est deficit in excess profits net income, to eliminate from such 36
months the 12 months having the lowest excess profits net income, or
highest deficit, and to use a substitute excess profits net income com-
puted under section 442 (e) for such 12 months. As passed by the
Senate, the provision was applicable only to a taxpayer which com-
menced business before the beginning of its base period and only if
the aggregate of the excess profits net income for each of the 12 months
for which a substitute excess profits net income is to be computed is
less than 35 percent of one-half of the aggregate of the excess profits
net income for each of the 24 months remaining after selecting the
12 months to be so adjusted.
The House recedes with technical amendments, and also adds other
amendments which further limit the application of this new subsection.
The first of these additional limitations requires that in order to be
entitled to the benefits of subsection (h), the taxpayer's normal pro-
duction, output, or operation must be interrupted or diminished be-
cause of the occurrence (in the 12 months prior to the period for which
a substitute excess profits net income is computed) of events unusual
or peculiar in the experience of the taxpayer. Under this limitation
there is no requirement that a causal connection be shown between
the event and a decline in excess profits net income in the period for
which a substitute excess profits net income is to be used.
The second limitation added by the conference agreement appears
as a new sentence added to paragraph (1) and prevents a taxpayer
from using new subsection (h) in cases where the aggregate excess
profits net income for the 24 months, which remain after selecting the
12 months for which a substitute excess profits net income is to be
computed, is an amount less than zero.
Amendment No. 228: This amendment provides that in determining
total assets under section 442 (f), to which factor the industry rates
i..~ of return are applied in computing average base period net income
under various excess profits tax reief formulas, the sum of the cash
and other property included shall be reduced by the amount of the
indebtedness (other than that included in the definition of borrowed
capital) to a member of a controlled group which includes the tax-
payer. The House recedes with an amendment changing the effective
date from taxable years ending after the date of enactment of the bill
to taxable years ending after June 30, 1950.
Amendment No. 229: This amendment changes section 443, which
section provides for the case of a change in products or services
occurring during the last 36 months of the base period, so as to include
certain base period commitments. The House recedes.
Amendment No. 230: This amendment provides that in determining
total assets under section 445 (c), which factor is used by a new cor-
poration in computing its average base period net income for any of
its first three years (if that year is an excess profits tax taxable year),
the net capital addition or reduction shall be computed without regard
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98 REVENUE ACT OF 1951
to the 75 percent limitation as to borrowed capital and loans to
members of a controlled group. The House recedes.
Amendment No. 231: This amendment provides that a corporation
engaged as a common carrier in the furnishing or sale of transportation
of oil or other petroleum products (including shale oil) by pipeline
shall be eligible to qualify under section 448 for the alternative excess
profits credit provided for regulated public utilities if such corporation
is subject to the jurisdiction of a public service or public utility com-
mission or other similar body of the District of Columbia or of any
State. The House recedes with an amendment requiring that the rates
for such furnishing or sale be subject to the jurisdiction of the public
service or public utilities commission..
Amendment No. 232: This amendment provides that for the
purpose of filing a consolidated return with its railroad lessee cor-
poration (using the alternative credit provided by section 448 for
regulated public utilities), a railroad lessor corporation meeting
certain requirements shall be considered a corporation subject to
section 448. The House recedes.
Amendment No. 233: This amendment adds section 515 to the
bill, for which there is no corresponding section in the bill as passed
by the House. Section 515 allows to producers of potash, sulfur, and
metallurgical grade and chemical grade limestone the alternative
method for computing nontaxable income from exempt excess output
provided in section 453 (b) (2) of the code where the properties were
in operation during the normal period. Where these mineral prop-
erties were not in operation during the normal period, the net income
from such properties is accorded the benefits of section 453 (b) (4)
now available in the case of metal and coal mines, timber blocks, and
natural-gas properties. The House recedes.
Amendment No. 234: This amendment, for which there is no corre-
sponding provision in the House bill, adds section 459 (a) to the code
to provide a special credit for certain corporations under specified
circumstances relating to a transition from wartime to peacetime
production and to an increase in peacetime capacity. The House
recedes with clarifying amendments.
Amendment No. 235: This amendment adds section 517 to the
bill. There is no corresponding section in the House bill. Section
517 amends section 459, as added to the code by section 516 of the
Senate amendment No. 234, by adding a new subsection (b). This
new subsection grants to a taxpayer which suffered a catastrophe dur-
ing the last 36 months of its base period, if certain conditions are met,
two alternativ methods of computing its average base period net in-
come. The i xpayer may use whichever r,,stilts in the lesser excess-
profits ta.N for ,lie R~axable year. The first alt er,iative allows such a tax-
payer to ab~.i tute for the excess profits net income for each month of
the taxable ve:Lr in which the catastrophe occcurred, the average of the
excess profit,- let income for the months in tl e base period preceding
the taxable y.e>ar in which the catastrophe recurred. If the taxpayer
computes its.o cerage base period net income under the first alternative,
it will not be denied the benefits of its ba::e period capital addition.
The second alternative allows the taxpayer o compute its average
base period iiet income under the growth alternative of section 435 (e)
(2) (G) (i) and (ii) of the code.
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REVENUE ACT OF 1951 99
The House recedes with technical amendments which separate now
subsection (b) into two paragraphs. The first paragraph sets forth
eligibility requirements, and the second paragraph sets forth the
computation of average base period net income under this subsection.
Amendment No. 236: This amendment, for which there is no cor-
responding provision in the House bill, adds a new subsection (c) to
section 459 of the code, and is applicable in the case of a taxpayer en-
gaged primarily in the newspaper-publishing business which, after
the first half of its base period and before July 1, 1950, consolidated
its mechanical, circulation, advertising, and accounting operations
with such operations of another newspaper-publishing corporation in
the same area. In order to be eligible for the benefits-of this subsection
the taxpayer must meet certain specified requirements.
In the case of a taxpayer eligible for the benefits of this subsection,
the average base period net income under the Senate amendment shall
be an amount computed under section 435 (d) plus an amount equal
to the excess of the average of the amounts paid or incurred as ex-
penses in the conduct of the mechanical, circulation, etc., operations
during the two taxable years of the taxpayer next preceding the
taxable year in which such consolidation began over such amounts
paid or incurred during the first taxable year of the taxpayer beginning
after such consolidation. The expenses referred to are those which
are taken into account in computing net income. This section is
inapplicable to any taxable year of the taxpayer unless the consolida-
tion was continued throughout such taxable year.
The House recedes with, amendments, one of which provides that
the eligibility requirements in paragraphs (3) and (4) section 459 (c)
shall be in the alternative. Another amendment provides that in
determining the excess amount of expenses proper adjustment shall be
made for increases in the unit cost of labor and newsprint (due to wage
and price increases) following such consolidation. It is contemplated
that such adjustment shall be made in accordance with regulations
prescribed by the Secretary. The House also adds an amendment to
provide for appropriate adjustments for any case in which a taxable
year referred to in this new subsection is a period of less than 12
months.
Amendment No. 237: This amendment, for which there is no corre-
sponding provision in the House bill, provides a special credit for
corporations beginning the television broadcasting business before
January 1, 1951. It provides for a computation of an individual
rate of return in the case of corporations engaged in the radio and
television broadcasting business and for an application of such rate
of return (or of the industry rate of return for the industry which in-
cludes radio broadcasting) to the assets of the taxpayer employed in the
radio and television broadcasting business, or in the case of an acquisi-
tion of the television broadcasting business after the base period, to
its assets employed only in the television business. In the case of a
corporation engaged solely in radio and television broadcasting, this
.rate of return is applied to its total assets. In the case of a corporation
engaged in another business or businesses, the credit includes an aver-
age base period net income computed with respect to such. other busi-
ness or businesses. The House recedes with an amendment providing
in all cases that the industry rate of return or the individual rate of
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100 REVENUE ACT OF 1951
return, as the case may be, shall be applicable only to the assets ofr the
corporation used in the television broadcasting: business. The amend-
ment also provides that the average base period net income computed
in connection with the taxpayer's nontelevision business shall be only
the average base period net income computed under section 435 (d)
(relating to the general average of earnings during the base period) ;
that the base period capital addition shall be allowable with regard to
the taxpayer's nontelevision business; and that, in the case of corpo-
rations which first engaged in the television broadcasting business after
the close of the base period and before January 1, 1951, the television
assets against which the industry rate of return or the individual
rate of return are to be applied shall be those held on the last day
of the calendar month in which the corporation first engaged in the
television broadcasting bRsincss.
The House amendment changes the provision in the Senate amend-
ment for the elimination of duplication in the computation of a credit A
under this section by providing specifically the method to be used in
eliminating such duplication. It is provided that if any portion of
the television assets used in computing the television portion of the
credit was acquired, directly or indirectly, by the use of assets at-
tributable at any time during the base period to a business of the
taxpayer other than television broadcasting, the excess profits net
income with respect to such other business shall be properly adjusted
by eliminating the portion thereof attributable to the assets used in
the acquisition of the television properties for months prior to such
acquisition. The excess profits net income attributable to such
assets is determined by reference to the ratio of such assets to the
total assets of the taxpayer other than properties used in television
broadcasting.
Amendment No. 238: This amendment adds a base period commit-
ment rule under section 444, which section provides for the computa-
tion of the average base period net income by applying a base period
industry rate of return to the total assets of the taxpayer in case of an
increase in capacity for production or operation occurring during the
last 36 months of the base period. The House recedes with an amend-
ment revising the Senate provision. As amended, the commitment A
rule provides that if, during the first taxable year ending after June
30, 1950, the taxpayer completed construction of a fac 1 ry building
or other manufacturing establishment (for example, an d refinery),
including the installation of the machinery or equipiur for use in
such factory building or such other establishment, -, ch factory
building or such other establishment and such macliic?: r or equip-
ment shall, for the purpose of determining whether there , - au increase
in capacity under the provisions of section 444 (b), bl : net for the
purpose of computing the average base period net ins ome under
section 444 (c), be 'considered to have been added t,o its I al facilities
on the last day of its base period. The provision is a;,i icuublo only
if (A) the taxpayer, prior to the end of its base period, i , ~ completed
construction work representing more than 40 percent f the total
cost of construction of such factory building or such of r establish-
ment, and (B) the completion of such factory building such other
establishment was in pursuance of a plan to which the xpayer was
committed prior to the end of its base period.
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REVENUE ACT OF 1951 101
Amendment No. 239: This amendment, for which there is no cor-
responding provision in the House bill, provides for the addition of a
new part IV to subchapter D of the Internal Revenue Code dealing
with the excess profits credit based on income in connection with
certain taxable acquisitions before December 1, 1950. Under this
amendment a "purchasing corporation" as defined in the part, would,
in certain cases, obtain the use of the income experience of a "selling
corporation" for the purpose of computing its excess profits credit.
The douse recedes with an amendment making changes for purposes
of clarification and in order further to define the scope of application
of the part.
The Senate amendment includes in the definition of a purchasing
corporation any corporation which acquired substantially all of the
assets of another corporation or of a partnership in a transaction
other than a part II transaction. The amendment made by the
House includes in this definition. a corporation which has acquired
,w substantially all of the properties of a business owned by a sole
proprietorship. The definition in the Senate amendment also includes
a corporation which acquired only part of the assets of another corpo-
ration in a transaction other than a part II transaction provided the
properties acquired were substantially all the properties of a separate
business of the other corporation and that such acquisition was in
furtherance of a plan of complete liquidation by such other corpora-
tion. The purchase, under the same circumstances, of a separate
business which constituted part of the assets of a partnership is
added to the definition by the House amendment. The House
amendment also deletes a provision which included in the definition
of "purchasing corporation" a corporation which receives assets as
paid-in surplus or as a contribution to capital from another corpo-
ration which had acquired those assets as it purchasing corporation.
This provision under the conference agreement will in general cover
those cases in which assets constituting the whole of a separate busi-
ness of "a selling corporation" were acquired from a corporation, sole
proprietorship, or partnership. It does not cover an acquisition in a
tax-free transaction, for example, a case in which a corporation is
liquidated to its stockholders and they in turn place all or part of the
assets in a new corporation in a tax-free transaction.
The House amendment makes clear that the part provides for the
use by the purchasing corporation of an average base period net income
computed only under section 435 (d) (the general average of earnings
method), that, under the part, the deficits as well as the excess profits
net income of the selling corporation for any month shall be reflected
in the computation, and that the excess profits not income to which
reference is made is that of the corporation in the case of an acquisition
of substantially all of the assets of a selling corporation and is the
portion thereof properly allocable to the business or businesses ac-
quired in the case of an acquisition of only part of the assets, repre-
senting one or more separate businesses of a selling corporation.
The Senate amendment provides that, for part IV to apply, the
selling corporation must, immediately after the transaction, discon-
tinue all business activities and be completely liquidated in a trans-
action other than a part II transaction. The House amendment
changes this requirement to provide that the selling corporation must
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REVENUE ACT OF 1951
not have engaged in any business activities after the part IV trans.
action other than those incident to its complete liquidation and
must, within a reasonable time after such cessation of business activi-
ties, have been completely liquidated (whether before or after the
part IV transaction) in a transaction other than a part II transaction.
Such liquidation must terminate the selling corporation's existence.
The Senate amendment further provides that the properties ac-
quired in the part IV transaction must be substantially all of the
properties which were used by the selling corporation (or by a com-
ponent corporation of such selling corporation) in the operation of the
business whose assets were acquired by the purchasing corporation.
The House amendment provides that such properties must be those
used by the selling corporation in the production of the excess profits
net income or deficit therein which is used in the computation of the
credit provided by this part.
The Senate amendment further provides that the business acquired
in the part IV transaction must have been operated by the purchas-
ing corporation from the date-of su!'h transaction to the end of the
taxable year. The House amendment provides that such business
must be operated by the purchasing corporation until the end of the
taxable year unless transferred by it, during the taxable year, in a
part II transaction to which the provisions of the new section 462
(b) (4) of the code are applicable.
The House amendment adds three special rules. The first provides
that, for the purpose of the definition of a purchasing corporation,
properties shall be deemed acquired from the selling corporation if
they are purchased directly from the selling corporation or if they are
purchased from its stockholders, provided such stockholders did not
transfer them to the purchasing corporation in a part II transaction.
This provision is applicable only in a case in which the selling cor-
poration was first liquidated to its stockholders and the properties
were forthwith sold by them to the purchasing corporation. The
second special rule provides for the determination under regulations
prescribed by the Secretary of all of the computations required by
this part as if the business or businesses which were purchased from
a partnership or sole proprietorship had been operated by a corpora-
tion. The third special rule is that in the case of the purchase of
less than all of several businesses operated by a corporation or part-
nership, the amount of excess profits net income allocable to all or a a3.y
number of the purchasing corporations or other persons receiving such
properties upon the liquidation of the selling corporation shall not ex-
ceed 100 percent of the excess profits net income of the selling corpora-
tion. Thus, in a case in which a selling corporation has an excess profits
net income for any month of $100 existing by reason. of one of its bie i.-
nesses having an income of $300 and another having a loss of $200, t ho
amount of the excess profits net income available to either or both of
the parties receiving the two businesses shall not exceed $100 for such
month.
The [louse amendment adds a new subsection (e) dealing wii;h
successive transactions and providing that if one part IVtransaction
succeeds another part IV transaction, the excess profits net income
of the first selling corporation is not made available to the second
purchasing corporation. The excess profits net income, however, of
the first purchasing corporation is available to the second purchasing
Aft
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REVENUE ACT OF 1951 103
corporation but, for that purpose, it must be computed without regard
to the excess profits net income of the first selling corporation. It
also provides that the excess profits net income of a selling corporation
under this part. includes the amount previously available to it under
part II with respect to a previous part II transaction. Thus, where
corporation A had previously merged with corporation Bin a trans-
action described in section 461 (a), the purchase by corporation C of
the assets of corporation B under the circumstances outlined in this
part will make available to corporation C the excess profits net income
(or deficit) of both corporations A and B, as determined under part II
for corporation B for the period prior to the merger, as well as the
excess profits not income of corporation B for the period after the
merger.
The Senate amendment provided for the promulgation of rules by
the Secretary, consistent with the principles of part II, for the appli-
cation of this part. For the purpose of clarification, the conference
agreement specifically provides for the promulgation of such rules
with respect to (1) base period capital addition, (2) net capital addi-
tion or reduction, (3) excess profits net income, (4) duplication, and
(5) the excess profits credit of the purchasing corporation for the
taxable year in which the transaction occurs if such taxable year is a
year which ended after June 30, 1950. It is also provided that the
Secretary shall not apply the principles of certain specified provisions
of part II.
It is not intended by this specific enumeration of principles to be
followed by the Secretary that the general authority to prescribe rules
for the application of this part shall be restricted except as specifically,
provided. Such regulations may include other principles appropriate
to the determination of the computations provided by this part.
The Senate amendment contains technical amendments to the
code, which technical amendments are revised by the House amend-
ments. Included in these technical amendments as revised are provi-
sions for the application of part II in cases where a corporation
acquired in a part II transaction properties of a corporation which
was a purchasing corporation in a previous part IV transaction. In
general, the amendments provide that the income experience of the
original selling corporation shall be used by the acquiring corporation
in determining its average base period net income under section 435 (d)
with reference to part II. For these provisions to be applicable,.
however, substantially all of the properties acquired in the part IV
transaction (or replacements thereof in the ordinary course of business)
must have been transferred in the part II transaction, or, if the part.
II transaction involved. a component corporation which acquired the
properties in a previous part II transaction, substantially all of the
properties of such component corporation must have been acquired
by the acquiring corporation. The business operated by the selling
corporation must have been continuously operated by the acquiring
corporation to the end of the taxable year, unless the business is
transferred by the acquiring corporation during the taxable year in a
part II transaction to which the provisions of section 462 (b) (4) are
applicable. If the acquiring corporation obtained the properties in a
part II transaction of the type described in section 461 (a) (1) (E)
("split-up"), the provisions of the following amendment to section
462 (i) (6) must be satisfied: Section 462 (i) (6) is amended to provide
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104
REVENUE ACT OF 1051
that if the component corporation in the part II transaction was a
purchasing corporation in a previous part IV transaction, and if
section 462 (b) (4) is applicable, the allocation of the excess profits net
income of the component corporation to the acquiring corporation
must be baked upon the earnings experience of the assets transferred
rather than upon the fair market value rule of allocation provided in
section 462 (i), this provision being applicable whether or not the
other parties to the part II transaction agree to such an allocation.
The technical amendments as revised further provide that section 463
and section 464, relating to capital changes of the acquiring corpora-
tion, shall be applied under regulations promulgated by the Secretary
with respect to cases in which the part II transaction follows a part
IV transaction.
Amendment No. 240: This amendment adds section 522 to the bill,
for which there is no corresponding section in the bill as passed by
the House. Section 522 adds bauxite to the list of minerals deemed
strategic under section 450 (b) (1) of the code for the purpose of
exempting from the excess-profits tax the portion of the adjusted excess
profits net income attributable to the mining of such mineral. The
House recedes with a clerical amendment.
Amendment No. 241: This amendment provides that, except as
otherwise provided in section 510 of the bill, the amendments made
by title V of the bill, as passed by the Senate, shall be applicable
with respect to taxable years ending after June 30, 1950. The House
recedes with amendments conforming to the conference agreement
with respect to amendments Nos. 224 and 228. Accordingly, the
amendments made by title V are applicable with respect to taxable
years ending after June 30, 1950, except .as otherwise provided in
section 506 (d) of the bill (relating to base period capital additions
of banks).
Amendments Nos. 242, 243, and 244: These amendments are
clerical. The House recedes.
Amendment No. 245: This amendment deals with possible tax
liability for taxable years beginning prior to January 1, 1951, in
the case of certain organizations carrying on trades or businesses the
profits of which were dedicated exclusively to exempt purposes.
Specifically, this amendment adds to the list of feeder organizations
covered by the House bill, those organizations all of the profits of
which inure to the benefit of a hospital or to an institution for the
rehabilitation of physically handicapped persons which maintains or
is"building for proper maintenance si ch a hospital or institution
staffed or to be staffed by qualified profcessional persons for the treat-
ment of the sick and/or the rehabilitaE,ion of the physically handi-
capped, or to an eleemosynary corporation under State law exempt
under section 101 (6) of the Internal R(venue Code.
The House recedes with an :arnendmerrt striking out, the reference to
"an eleemosynary corporation under St ite law exempt under section
101 (6) of the Internal Revenue Code," and with a clarifying amend-
ment providing that no implication is to be drawn from the amendment
as to the tax status for taxable years prior to 1951 ojj' so-called feeder or-
ganizations not dealt with in section 302 of the Revenue Act of 1950
as amended.
Amendment No. 246: The House bill provided that the percentage
of the average base period net income to be taken into account in
ANA
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REVENUE ACT OF 1951 105
computing the excess-profits credit based on income shall be reduced
from 85 percent of the average base period net income to 75 percent
thereof. This reduction was effective, under the House bill, as of
January 1, 1951. The Senate amendment struck this provision of
the House bill. The House recedes with an amendment under which
the percentage of the base period net income is reduced from 85 to
83 percent, effective January 1, 1952. Provision is made under the
conference agreement for the case of a fiscal year beginning in 1951
and ending in 1952 so that a proportionate part of the decrease in the
excess-profits credit will be reflected.
Amendment No. 247: This amendment, for which there is no
corresponding provision in the House bill, amends sections 813 and
936 of the code to provide that, where property included for Federal
estate tax purposes in the gross estate of a resident or citizen of the
United States is situated in a foreign country and subjected to a
death tax by such country; a credit shall be allowed against the estate
tax for such foreign death tax. The amendment applies only with
res e, + to estat f d t l t' d' f L.
d
f
p es o rest en s anc ci hens ying a ter t e
ate o
enactment of the bill.
The House recedes with clarifying amendments.
Amendment No. 248: This is a clerical amendment. The House
recedes with a clerical amendment.
Amendment No. 249: This amendment, for which there is no cor-
responding provision in the House bill, amends section 863 (c) of
the code to extend the estate tax exemption granted by that section
with respect to works of art loaned by a nonresident alien to the
National Gallery of Art, Washington, D. C., to works of art loaned
to other public galleries or museums.
The House recedes with a clerical amendment.
Amendment No. 250: This amendment, for which there is no cor-
responding provision in the House bill, makes certain changes in
section 939 of the code, relating to the estate tax treatment of certain
members of the Armed Forces.
The amendment provides that the tax imposed by section 935
(the additional estate tax) shall not apply to the transfer of the net
estate of a citizen or resident of the United States dying after June 24,
1950, and before January 1, 1954, while in active service as a member
of the Armed Forces of the United States, if such decedent (1) was
killed in action while serving in a combat zone, as determined tinder
section 22 (b) (13), or (2) died at any place as a result of wounds,
disease, or injury suffered, while serving in a combat zone (as deter-
mined under section 22 (b) (1.3)) and while in line of duty, by reason
of a hazard to which lie was subjected as an incident of such service.
The House recedes with a clerical amendment.
Amendment No. 251: This amendment, for which there is no cor-
responding provision in the House bill, adds a new section to the
bill to provide that in the case of a decedent dying after March 18,
1937, and before February 11, 1939, the determination of whether
property is included in the gross estate of the decedent as a transfer
intended to take effect in possession or enjoyment at or after his death
shall be made in conformity with the provisions of article 17 of Regu-
lations 80, as amended by Treasury Decision 4729. The House
recedes with a clerical amendment.
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106 REVENUE ACT OF 1951
Amendment No. 252: This amendment, for which there is no cor-
responding provision in the House bill, amends section 7 (b) of
Public Law 378, Eighty-first Congress (the Technical Changes Act of
1949). Section 7 (b) now provides that the provisions of section 811 (c)
(1) (B) of the code, providing for inclusion ina decedent's estate of
property transferred with reservation of rights in income, shall not be
applicable to transfers made before March 4, 1931 (and, in some cases,
before June 6, 1932), if the decedent died before January 1, 1950.
Under the amendment, inapplicability of section 811 (c) (1) (B) is
extended to estates of decedents dying before January 1, 1951. The
House recedes with a clerical amendment.
Amendment No. 253: This amendment, for which there is no corre-
sponding provision: in the House bill, amends section 7 (b) of Public
Law 378, Eighty-first Congress (the Technical. Changes Act of 1949)
to provide that the provisions of section 811 (c) (1) (C) of the code
(relating to inclusion in gross estate of transfers intended to take
effect in possession or enjoyment at or after death) shall not apply to
transfers made before September 8, 1916. The effect of the last sen-
tence of this section, which makes section 7 (c) of such public law
inapplicable to overpayments resulting from the enactment of this
section of the bill, is to limit refunds of such overpayments to those
situations in which the refund is not prohibited by the statute of
limitations or some other law or rule of law. The House recedes with
a clerical amendment.
Amendment No. 254: This amendment, for which there is no cor-
responding provision in the House bill, permits the making of re-
fund or credit of any overpayment resulting from the application of
section 503 of the Revenue Act of 1950, if claim therefor is filed within
1 year from the date of enactment of the bill, even though the making
of such refund or credit is otherwise prohibited by the statute of
limitations or any other law or rule of law (other than sec. 3760 or
3761 of the code which relate, respectively, to closing agreements
and compromises). The effect of section 503 of the Revenue Act of
1950 was to provide that proceeds of life insurance policies attributable
to premiums paid on or before January 10, 1941,: should not be included
in the gross estate of the insured person for estate tax purposes by
reason of the fact that the premiums were paid by him, unless on
January 1.0, 1941, or thereafter he had substantial rights in the life
insurance policy. The House recedes with an amendment providing
that claim for'credit or refund must be made after October 25, 1949,
and on or before October 25, 1950.
Amendment No. 255: This amendment, for which there is no cor-
responding provision in the House bill, provides that in the case of the
award made on December 4, 1950, by the Interstate Commerce Com-
mission as retroactive compensation for the transportation of mail,
such compensation shall be deemed to be income which accrued in the
taxable year in which the services to which such compensation relates
were rendered. It is provided that no interest shall be assessed for
deficiencies created by the inclusion of such income in prior years and
that the period for assessment and collection of such deficiencies shall
be extended to the date closing the period for assessment and collec-
tion for the taxable year of the taxpayer which includes December 4,
1950. The amendment also amends section 292 of the code to provide
that in the case of retroactive mail payments, if such payments are
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107
required to be included in income in the year or years in which the
mail was carried, no interest shall be due with respect to deficiencies
resulting from such inclusion for any period prior to 30 days after the
award of payment is granted. The House recedes with a clerical
amendment.
Amendment No. 256: This amendment, for which there is no cor-
responding provision in the House bill, adds to the bill a new sec-
tion 611 which provides with respect to certain taxable years a special
rule to be followed whereby in the computation of corporation surtax
net income certain amounts received as dividends on the preferred
stock of a public utility will not be disregarded in computing the
credit for dividends received.
Section 116 (a) of the Revenue Act of 1943 so amended section 26
(n) (1) of the Internal Revenue Code that, in the computation of the
credit for dividends paid on the preferred stock of a public utility,
amounts distributed in the current taxable year with respect to divi-
dends unpaid and accumulated in any taxable year ending prior
to October 1, 1942, were to be excluded from the amount of dividends
paid on its preferred stock during the taxable year. The 1943 act
did not contain a conforming amendment so that in the computation
of corporation surtax net income the 85-percent credit for dividends
received would always be allowed with respect to such amounts as
were to be excluded in computing the credit for dividends paid on the
preferred stock of a public utility.
Pursuant to new section 611, in the case of taxable years beginning
before April 1, 1951, the 85-percent credit for dividends received will
be allowed in the computation of corporation surtax net income with
respect to those amounts which are to be excluded in computing the
credit for dividends paid on the preferred stock of a public utility.
In the case of the calendar year 1951 and taxable years beginning
after March 31, 1951, see the amendments made to section 26 (b) of
the code by section 122 of the bill (amendment No. 8). The House
recedes with a clerical amendment.
Amendment No. 257: This amendment, for which there is no corres-
ponding provision in the House bill, provides that if an affiliated
group making a consolidated return with respect to the first taxable
year of the group ending after June 30, 1950, included a corporation
described in section 454 (f) of the code, pursuant to the consent pro-
vided in section 141 (e) (7) of the code, such corporation may with-
draw such consent at any time within 90 days after the enactment of
the Revenue Act of 1951. If such consent is withdrawn under this
provision, the tax liability of the affiliated group and its several
members for the taxable year shall be determined, assessed, and
collected as if such corporation had never joined in the making of the
consolidated return. The House recedes with a clerical amendment.
Amendment No. 258: This amendment, for which there is no
corresponding provision in the House bill, adds to the bill a new sec-
tion 613 pursuant to which the due date for filing income tax returns of,
or for paving the income tax by, China Trade Act corporations for
any taxable year beginning.after December 31, 1948, and ending before
October 1, 1953, shall be not later than December 31, 1953. The due
date thus prescribed shall apply, however, only with respect to any
such corporation and any such taxable year as the Secretary of the
Treasury, pursuant to such regulations as he may prescribe, may
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108 REVENUE. ACT OF 1951
determine to be reasonable in view of circumstances in China. New
section 613 recognizes that certain China Trade Act corporations,
despite the situation existing in China, are fully able to comply with
requirements of existing law as to the time for filing returns and paying
the tax.
The due date of December 31, 1953, hereby prescribed is subject to
the power of the Secretary to extend, as in other cases, the time for
filing returns or paying the tax. The House recedes with a clerical
amendment.
Amendment No. 259: This amendment, for which there is no cor-
responding provision in the House bill, adds a new section which
provides that no amendment made by the bill shall apply in any case
where its application would be contrary to any treaty obligation of
the United States. The House recedes with a clerical amendment.
Amendment No. 260: This is a clerical amendment. The House
recedes with a clerical amendment.
Amendment No. 261: This amendment, for which there is no cor-
responding provision in the House bill, extends for 4 months the
date on or before which a claim for net renegotiation rebates arising
under the World War II Renegotiation Act may be filed. Section 201
(c) of the Renegotiation Act of 1951, approved on March 23, 1951, sets
the expiration date as June 30, 1951. This amendment extends such
date to October 31, 1951. The House recedes with a clerical amend-
ment.
Amendment No. 262: This amendment, for which there is no cor-
responding provision in the House bill, adds to the bill a new section
relating to prohibition upon the denial of payments by the Fed-
eral Government to a State under title I, IV, X, or XIV of the
Social Security Act. These titles relate to grants by the Federal
Government to States for aid to needy aged individuals, needy de-
pendent children, needy blind individuals, and needy permanently
and totally disabled individuals, respectively. The Federal Govern-
ment and the States share the cost of these assistance programs. A
State is not entitled to payments from the Federal Government unless
the State plan for assistance has been approved by the Federal Security
Administrator. Under existing law a State assistance plan in order
to be approved must, inter alia, provide safeguards which restrict the
use or disclosure of information concerning applicants and recipients
to purposes directly connected with the administration of the assist-
ance program. The Senate amendment provides that no State or any
agency or political subdivision thereof shall be deprived of any grant-
in-aid or other payment to which it otherwise is or has become entitled
pursuant to title I, IV, X, or XIV of the Social Security Act by reason
of the enactment or enforcement by such State of any legislation pre-
scribing any conditions under which public access may be had to
records of the disbursement of any such funds or payments within
such State. The House recedes with an amendment which imposes
a condition that the State legislation providing public access to the
records of disbursement must prohibit the use of any list or names ob-
tained through such access to such records. for commercial or political
purposes. .
Under this amendment, as agreed to by the conferees, the State of
Indiana, which has a law which permits public access to the records
of disbursements of public welfare funds but which contains, inter
alia, a prohibition upon the use of any lists or names so obtained for
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commercial or political purposes of any nature, will be entitled to
receive its payments under the Social Security Act in the future and
will also be entitled to receive any such payments which have been
withhold because of the enactment and enforcement of the Indiana
law.
Amendment No. 263: This amendment, for which there is no
corresponding provision in the House bill, amends the provisions of
existing law which provide the President, the Vice President, the
Speaker of the House, and the Members of Congress an expense allow-
ance which is tax-exempt and for which no accounting is made. Under
this amendment, the President would receive $150,000 a year for his
services, instead of the $100,000 plus the $50,000 tax-exempt expense
allowance he now receives. Under existing law, the President neither
pays tax on nor accounts for this $50,000. Under this amendment,
$50,000 would be added to his compensation and his $50,000 tax-
exempt expense allowance would be eliminated. Likewise, the salary
.ry of the Vice President, and that of the Speaker of the House, would
be increased by $10,000 and his $10,000 tax-exempt expense allow-
ance would be eliminated. And, similarly, the salary of each Mem-
ber of Congress would be increased by $2,500 and his $2,500 tax-
exempt expense allowance would be eliminated. This amendment
would become effective, with respect to the President, on January 20,
1953, and with respect to the Vice President, the Speaker, and.
Members of Congress, on January 3, 1953.
The House recedes with an amendment which eliminates the pro-
visions of the Senate amendment increasing the compensation of the
President, the Vice President, the Speaker of the House, and the
Members of Congress but which removes the tax-exempt status of the
expense allowances of such officials. The expense allowance provided
.the President by section 102 of title 3 of the United States Code and
that provided the Vice President by section 111 of title 3 of the United
States Code shall be taxable on and after January 20, 1953; the expense
allowance provided the Speaker of the House by subsection (e) of the
first section of Public Law 2, Eighty-first Congress, approved January
19, 1949, and that provided each Member of Congress by section 601
(b) of the Legislative Reorganization Act of 1946 (Public Law 601,
79th Cong.) shall be taxable on and after January 3, 1953. The
President, the Vice President, the Speaker of the House, and each
Member of Congress will be required to account for such expense al-
lowances insofar as is necessary for the purpose of deducting such
expenses for income-tax purposes.
Amendment No. 264. This amendment struck out the table of
contents to the bill and inserted a now table of contents conforming
to the amendments to the bill made by the Senate. The House
recedes with an amendment to conform the table of contents to the
action of the conference committee.
R. L. DOUGHTON,
JERE COOPER,
JOHN D. DINGELL,
W. D. MILLS,
THOMAS A. JENKINS,
RICHARD M. SIMPSON,
Managers on the Part of the House.
0
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