by the collector, the Commissioner of Internal Revenue shall add to the tax fifty per centum of its amount except that, when a return is voluntarily and without notice from the collector filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or list is willfully made, the Commissioner of Internal Revenue shall add to the tax one hundred per centum of its amount.

"The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax."

Revised Statutes, section 3173, authorizing the Commissioner of Internal Revenue to require persons who fail or refuse to make proper returns to produce their books, is not unconstitutional, since an order to produce books is not violative of the rights of a witness, though such rights may be invaded after his appearance. (Calkins et. al. v. Smietanka, 240 Fed. 138, 1917.)

Section 3176, Revised Statutes, as amended by the act of September 8, 1916, did not take away from the Commissioner the power given by the other statutes to assess the tax on sales of grain, on memorandum of which the stamps were not affixed. (Calkins et. al. v. Smietanka, 240 Fed. 138, 1917.)

TITLE II-ESTATE TAX.

RATES OF TAX.

SEC. 201. That a tax (hereafter in this title referred to as the tax) equal to the following percentages of the value of the net estate, to be determined as provided in section two hundred and three, is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this act, whether a resident or nonresident of the United States:

One per centum of the amount of such net estate not in excess of $50,000;

Two per centum of the amount by which such net estate exceeds $50,000 and does not exceed $150,000;

Three per centum of the amount by which such net estate exceeds $150,000 and does not exceed $250,000;

Four per centum of the amount by which such net estate exceeds $250,000 and does not exceed $450,000;

Five per centum of the amount by which such net estate exceeds $450,000 and does not exceed $1,000,000;

Six per centum of the amount by which such net estate exceeds $1,000,000 and does not exceed $2,000,000;

Seven per centum of the amount by which such net estate exceeds $2,000,000 and does not exceed $3,000,000;

Eight per centum of the amount by which such net estate exceeds $3,000,000 and does not exceed $1,000,000;

Nine per centum of the amount by which such net estate exceeds $4,000.000 and does not exceed $5,000,000; and

Ten per centum of the amount by which such net estate exceeds $5,000,000.

Section 201.

See case under section 203 below.

THE NET ESTATE.

SEC. 203. That for the purpose of the tax the value of the net estate shail be determined

(a) In the case of a resident, by deducting from the value of the gross estate (1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise, support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered; and (2) An exemption of $50,000;

(b) In the case of a nonresident, by deducting from the value of that part of his gross estate which at the time of his death is situated in the United States that proportion of the deductions specified in paragraph (1) of subdivision (a) of this section which the value of such part bears to the value of his entire gross estate, wherever situated. But no deduction shall be allowed in the case of a nonresident unless the executor includes in the return required to be filed under section two hundred and five the value at the time of his death of that part of the gross estate of the nonresident not situated in the United States.

Section 203 (a-1).

In view of the history of the legislation, collateral inheritance taxes imposed by the State of Pennsylvania are to be treated as paid by the estate, and may be deducted as expenses of administration, or claims against the estate, or other charges against the estate allowed by the laws of the State, within the act of September 8, 1916, imposing a Federal tax upon the transfer of the net estate of decedents. (Northern Trust Co. v. Lederer, 257 Fed. 812, 1919.)

TITLE III-MUNITION MANUFACTURER'S TAX.

Amended by act of October 3, 1917, section 214. Repealed by act of February 24, 1919, section 1400 (a), subject to limitations in section 1400 (b).

SEC. 300. That when used in this title

The term "person" includes partnerships, corporations, and associations;

The term "taxable year" means the twelve months ending December thirty-first. The first taxable year shall be the twelve months ending December thirty-first, nineteen hundred and sixteen; and

The term "United States" means only the States, the Territories of Alaska and Hawaii, and the District of Columbia.

SEC. 301. (1) That every person manufacturing (a) gunpowder and other explosives, excepting blasting powder and dynamite used for industrial purposes; (b) cartridges, loaded and unloaded, caps or primers, exclusive of those used for industrial purposes; (c) projectiles, shells, or torpedoes of any kind, including shrapnel, loaded or unloaded, or fuses, or complete rounds of ammunition; (d) firearms of any kind and appendages, including small arms, cannon, machine guns, rifles, and bayonets; (e) electric motor boats, submarine or submersible vessels or boats; or (f) any part of any of the articles

mentioned in (b), (c), (d), or (e); shall pay for each taxable year, in addition to the income tax imposed by Title I, an excise tax of twelve and one-half per centum upon the entire net profits actually received or accrued for said year from the sale or disposition of such articles manufactured within the United States: Provided, however, That no person shall pay such tax upon net profits received during the year nineteen hundred and sixteen derived from the sale and delivery of the articles enumerated in this section under contracts executed and fully performed by such person prior to January first, nineteen hundred and sixteen.

(2) This section shall cease to be of effect at the end of one year after the termination of the present European war, which shall be evidenced by the proclamation of the President of the United States declaring such war to have ended.

"MUNITIONS MANUFACTURERS" DEFINED.

1. Munitions manufacturer's tax-Construction of statute. The pertinent subjects of inquiry where section 301 of the act of September 8, 1916, is to be applied are, first, whether the war munitions or war accessories were articles "manufactured within the United States"; second, if they were so manufactured, who manufactured such articles and what were the "net profits actually received or accrued ** from the sale or disposition of such articles"; third, if they were manufactured within the United States, who manufactured any part of such articles and what were the "net profits actually received or accrued from the sale or disposition of such articles."

2. Same Subject of taxation.

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The broad purpose of Congress in the passage of section 301 of the act of September 8, 1916, was to select as the subject of taxation war munitions and war appliances; it was not intended to tax the manufacturer of articles or parts thereof which, while susceptible of warlike use, were, in fact, not so used, but remained in the channels of normal commerce and use.

3. Same Contractor-Manufacture of shells.

A steel company which, under contract to deliver shells to a foreign Government, manufactured steel of the characteristics necessary to the manufacture of shells, retained ownership through all subsequent steps by subcontractors, followed up and checked every operation on the original steel, and delivered the completed shells to the foreign Government, was a "person manufacturing * * * shells" within the meaning of section 301 of the act of September 8, 1916, it appearing that the operations by the subcontractors depended on the composition and characteristics of the steel made in the initial step, the relative importance of which step, as compared with the remaining eight by the subcontractors, is shown by the fact that bare material and running expenses involved therein amounted to about one-half of the sum paid to the contractors for work, material, and profits.

a

Manufacture of Shells or any part thereof.

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A steel company which, proceeding under a subcontract, selected the material required in shells, made the steel which constituted the shells, and by work upon said steel segregated it from the general field of commercial use and limited it to shell making, the six several steps performed constituting about 40 per cent of the cost of the shells, was shells * "person manufacturing * or any part of the articles named," within the meaning of section 301 of the act of September 8, 1916, though 29 further steps remained to be taken by the contractor and though some of the material, when imperfect, was scrapped and used for other mechanical purposes. 5. Same Subcontractor Manufacture of shells or any part thereof. A company which, under a subcontract, agreed to manufacture and furnish to a contractor for shells, rough steel shell forgings of the character provided in the contract as to chemical constituents, tensile strength, size, shape, etc., and which to fulfill its contract either made, had made, or bought in the market the grade of steel required, of the common commercial type known as rounds, which rounds it nicked and broke into 18-inch lengths, which it then put through two forging processes, piercing a hole and lengthening the rounds, the output being a hollow steel body or shell form weighing about 170 pounds, is a "person manufacturing * * * shells or any part of" a shell, within the meaning of section 301 of the act of September 8, 1916, though the contractor, to make the shell form suitable for use as a shell, was required to dress, bore, and machine it down to 77 pounds by means of some 27 distinct and separate processes.

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6. Same "Any part"-Control of customs law decisions.

The words "any part," as used in section 301 of the act of September 8, 1916, do not mean "any completed part." Decisions involving customs laws exempting "manufactured" articles are not controlling, as the objects of the customs laws and said section 301 are not the same.

7. Judgments of lower courts.

Judgments of the District Court of the United States for the Western District of Pennsylvania in the case of Carbon Steel Co. v. Lewellyn, collector (255 Fed. 364), affirmed; judgment of the District Court of the United States for the Eastern District of Pennsylvania in the case of Worth Bros. Co. v. Lederer, collector (256 Fed. 116), affirmed; judgment of the District Court of the United States for the Western District of Pennsylvania in the case of Lewellyn, collector, v. Forged Steel Wheel Co. reversed. (258 Fed. 533.) These cases now pending in United States Supreme Court.

Supplies for manufacture furnished by the United States.

A company manufacturing munitions for the United States out of supplies furnished by the United States, which were shipped in interstate commerce, etc., is acting under the authority of the laws of the United States to as full an extent as though it had been incorporated under and in pursuance of national laws *。 (Wagner Elec. Mfg. Co. v. District Lodge No. 9, Int'l Ass'n of Mach., 252 Fed. 597.)

TITLE IV-CAPITAL STOCK TAX.

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SEC. 407. That on and after January first, nineteen hundred and seventeen, special taxes shall be, and hereby are, imposed annually, as follows, that is to say: Every corporation, joint-stock company or association, now or hereafter organized in the United States for profit and having a capital stock represented by shares, and every insurance company, now or hereafter organized under the laws of the United States, or any State or Territory of the United States, * shall pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint-stock company or association, or insurance company, (See cases under act of Aug. 5, 1909, on "Doing business," made applicable to this section by T. D. 2418.)

ACT OF MARCH 3, 1917.

(No court decisions.]

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Title I, Special preparedness fund. (Repealed by act Oct. 3, 1917, sec. 1301.)

Title II, Excess-profits tax. (Repealed by act Oct. 3, 1917, sec. 214.)

Title III, Estate tax. (Repealed by act Feb. 24, 1919, sec. 1400.) Title IV, Miscellaneous. (Sec. 402, returns of dividends, amended by act Oct. 3, 1917; sec. 1210, repealed by act Feb. 24, 1919, see. 1400.)