REVENUE ACT OF 1924. FRIDAY, MARCH 7, 1924. UNITED STATES SENATE, The committee met in executive session at 10 o'clock a. m. in the hearing room of the Senate Finance Committee, 310 Senate Office Building, Hon. Reed Smoot (chairman) presiding. Present: Senators Smoot (chairman), McLean, Curtis, Watson, Ernst, Stanfield, Simmons, Jones of New Mexico, Gerry, Walsh of Massachusetts, Harrison, and King. There were also present: A. W. Gregg, special assistant to the Secretary of the Treasury; M. Beaman, legislative draftsman of the House of Representatives; F. P. Lee, legislative draftsman of the Senate; and J. S. McCoy, special adviser to the Finance Committee of the Senate. The CHAIRMAN. The committee will come to order. The committee asked the Secretary of the Treasury to appear here this morning at 10 o'clock, but Senator Simmons yesterday advised me that he, together with others, thought it was best to make an examination of the bill and make some provisions in it before the Secretary comes before the committee. I so notified the Secretary and also advised him that I did not know the exact date on which we would call him to the committee, but we wanted him to be ready at any time the committee may summon him to appear. I was going to suggest to the committee that as long as the rates will lead to a great deal of discussion, and the Senators would like more time to examine them, that the committee this morning take up the administrative provisions of the bill. I think there is very little opposition to any of the amendments that may be made, and I suggest that we begin on page 144 of the bill, Part IV. It is true that in the first part of the bill there are administrative features, but they are of vital importance, and affect not only the revenue directly and the rates also, but the general administrative provisions. Senator SIMMONS. Which one is this you are on now, the confidential print? The CHAIRMAN. The print in which is shown the House Bill with the amendment of the existing law-committee print No. 1. Senator SIMMONS. Most of these changes made in the administrative part of the bill were suggested by the Secretary of the Treasury as the result of his experience in administering the law? The CHAIRMAN. Yes, or our own drafting bureau in consultation with the Secretary. Senator SIMMONS.. When the draftsmen of the bureau made the suggestion I suppose it was simply to clarify? The CHAIRMAN. Yes. Senator SIMMONS. Not to make any change in substance. I would like to inquire whether the changes were the changes as suggested by the officials! Senator CURTIS. I think that is a good suggestion. Senator SIMMONS. I want to inquire of them first whether they made any change except for the purpose of clarification? The CHAIRMAN. Well, Mr. Gregg can answer that question as far as the Secretary is concerned. STATEMENT OF A. W. GREGG, SPECIAL ASSISTANT TO THE SECRETARY OF THE TREASURY, WASHINGTON, D. C. Mr. GREGG. These administrative sections that we are starting on now were not changed in the House at all. They are the same as were prepared in the Treasury. There was a committee in the Treasury working all last summer on these matters with Mr. Beaman and Mr. Lee, of the drafting service; the result was sent to the Ways and Means Committee by the Secretary, and as far as the provisions that we are reading now are concerned, they were not touched in the House Ways and Means Committee nor on the floor of the House, and are just exactly the same as sent down by the Secretary. Senator SIMMONS. What do you mean by "not touched"? Do you mean that they were adopted just as you made them? Mr. GREGG. Yes; just as recommended by the Secretary. They are purely administrative provisions, and adopted by the House just as recommended by the Secretary. Senator SIMMONS. I want to know whether this committee of experts that were examining into this were examining into it with the view of making such corrections as occurred to you ought to be made, or were you considering suggestions of corrections made to you by officials of the department? Mr. GREGG. Both. We got from every division of the department their recommendations in full as to desirable changes in the law; where it worked inequities; where there were holes in the provisions of the law; where it worked a hardship; where it was indefinite; and then we went over it most carefully ourselves. Senator SIMMONS. You went over it yourself? Mr. GREGG. Yes, sir. Senator SIMMONS. You were a committee of experts? Mr. GREGG. Yes, sir; I was one of a committee. Senator SIMMONS. In going over it did you make changes arbitrarily that affected the substance, or merely changes that clarified the meaning of the law? Mr. GREGG. They were changes both of substance and of law. Senator SIMMONS. Well, who suggested those changes of substance? Mr. GREGG. Some of them came from the different divisions of the bureau that sent us suggestions. Some of them came from the inembers of the committee. Senator SIMMONS. Did you as experts in writing the law adopt suggestions made to you by officials of the department? Mr. GREGG. No, sir. What we were doing is this, we were preparing the bill Senator SIMMONS. I am just trying to get at by what authority you, representing these experts, made these changes; whether you did it upon your own suggestion and your own theory as to whether the law should be amended or not, or whether you made them at the suggestion of some official, responsible official of the department? Mr. GREGG. Well, we are all officials of the department, all of us on the board. Senator SIMMONS. I am not meaning to impeach you at all. Senator SIMMONS. But I want to see what was behind these suggestions of changes. Senator MCLEAN. Senator Simmons, if you will permit an interruption, there seems to be a supplement here to the bill which explains the very questions that you are asking. A supplemental note. Senator SIMMONS. Well, I did not know of that. I have not read it. Senator MCLEAN. And it may be that a reading of these notes will clarify the situation somewhat. These notes contain all the changes, do they not? Mr. BEAMAN. No, sir; the important ones. Mr. GREGG. They contain the changes that were made in the Treasury draft by the House. They do not refer to the changes made by the bill in the existing law. Senator MCLEAN. Oh, I thought you said that the House adopted bodily the provisions without any changes. Mr. GREGG. Not as to the whole bill, of course. The earned income, the Board of Tax Appeals, the rates, that sort of thing, of course, were changed in the House. Senator MCLEAN. Do these notes also contain changes in the administrative division? Mr. GREGG. Wherever they were made. Senator MCLEAN. Wherever they were made, and the reasons? Mr. GREGG. No, sir; it does not contain the reasons. The CHAIRMAN. But in the bill itself as printed now under a note of each amendment made will be found just what the change is. For instance, on page 145, striking out section 250, the note says: The above two paragraphs are superseded by section 270 on pages 165–167 of this print. The second sentence of the first paragraph is superseded by section 270 (b) (1); the third and fourth sentences by section 270 (c); the last sentence by section 270 (b) (2). Then after reading this section 250 as stricken out, you can turn to section 270 and just see what changes were made. Senator WATSON. Now you say the Secretary appointed this board? Mr. GREGG. Yes, sir. Senator WATSON. And when he appointed you what were your instructions? What were you to do? Mr. GREGG. We were to study the entire act. The board was composed of Mr. Moorehead, who is chairman of the Tax Simplification Board; Mr. Bright, who is the Deputy Commissioner of Internal Revenue, in charge of the Income Tax Unit, and myself; we were to work with Mr. Beaman and Mr. Lee in the technical redrafting of the bill. In other words, it was an attempt to make a technical |