A Cheap And Nasty Scam Concerning TD 2313 A SCAM HAS LONG BEEN PERPETRATED upon the ‘tax honesty’ community by which only a selected and misleading portion of Treasury Decision 2313 is presented in order to support a nonsense argument that only foreign-related revenue is subject to the income tax. TD2312 is the decision by which the effect of the Supreme Court’s ruling in Brushaber v. Union Pacific RR. Co. was incorporated into the federal revenue regulatory structure. Here is the portion of TD 2313 that is presented in this scam:
Government Printing Office
1917
(T.D. 2313)
Income Tax
Taxability of interest from bonds and dividends on stock of domestic
corporations owned by nonresident aliens, and the liabilities of
nonresident aliens under section 2 of the act of October 3, 1913.
Treasury Department
Office of Commissioner of Internal Revenue
Washington D.C., March 21, 1916
To collectors of internal revenue:
Under the decision of the Supreme Court of the United States
in the case of Brushaber v. Union Pacific Railway [sic] Co., decided
January 24, 1916, it is hereby held that income accruing to
nonresident aliens in the form of interest from the bonds and
dividends on the stock of domestic corporations is subject to the
income tax imposed by the act of October 3, 1913.
Nonresident aliens are not entitled to the specific exemption
designated in paragraph C of the income-tax law, but are liable for
the normal and additional tax upon the entire net income "from all
property owned, and of every business, trade, or profession carried
on in the United States," computed upon the basis prescribed in the
law.
The responsible heads, agents, or representatives of
nonresident aliens, who are in charge of the
property owned or business
carried on within the United States, shall make a full and
complete return of the income therefrom on Form 1040, revised, and
shall pay any and all tax, normal and additional, assessed upon the
income received by them in behalf of their nonresident alien
principals.
The person, firm, company, copartnership, corporation,
joint-stock company, or association, and insurance company in the
United States, citizen or resident alien, in whatever capacity
acting, having the control, receipt, disposal, or payment of fixed
or determinable annual or periodic gains, profits, and income of
whatever kind, to a nonresident alien, under any contract or
otherwise, which payment shall represent income of a nonresident
alien from the exercise of any
trade or
profession within the
United States, shall deduct and withhold from such annual or
periodic gains, profits, and income, regardless of amount, and pay
to the officer of the United States Government authorized to receive
the same such sum as will be sufficient to pay the normal tax of 1
per cent imposed by law, and shall make an annual return on Form
1042.
The scamsters point to this isolated excerpt and crow, “See! Only the income of non-resident aliens is subject to the tax!” But of course, the word 'only' makes no appearance in what is presented. More importantly, the remainder of TD 2313
omitted by the scamsters, makes clear that not only does the
decision not support the claim that only non-resident aliens
are taxed under the law, but it actually and specifically declares
what is more-or-less the opposite: Citizens and residents are both
taxed, but by virtue of
this decision and the ruling upon which it is based, non-resident
aliens ARE ADDED to the ranks of those taxed, and all three groups
are instructed to use 1040s. Here is the
omitted remainder of Treasury Decision 2313 (pay particular attention to the
first and fifth paragraphs of this portion of the decision):
The normal tax shall be withheld at the source from income
accrued to nonresident aliens from corporate obligations and shall
be returned and paid to the Government by debtor corporations and
withholding agents as in the case of citizens and resident aliens,
but without benefit of the specific exemption designated in
paragraph C of the law.
Form 1008, revised, claiming the benefit of such deductions
as may be applicable to income arising within the United States and
for refund of excess tax withheld, as provided by paragraphs B and P
of the income-tax law, may be filed by nonresident aliens, their
agents or representatives, with the debtor corporation, withholding
agent, or collector of internal revenue for the district in which
the withholding return is required to be made.
That part of paragraph E of the law which provides that "if
such person * * * is absent from the United States, * * * the return
and application may be made for him or her by the person required to
withhold and pay the tax * * *" is held to be applicable to the
return and application on Form 1008, revised, of nonresident aliens.
A fiduciary acting in the capacity of trustee, executor, or
administrator, when there is only one beneficiary and that
beneficiary a nonresident alien, shall render a return on Form 1040,
revised; but when there
are two or more beneficiaries, one or all of whom are nonresident
aliens, the fiduciary shall render a return on Form 1041, revised,
and a personal return on Form 1040, revised, for each nonresident
alien beneficiary.
The liability, under the provisions of the law, to render
personal returns, on or before March 1 next succeeding the tax year,
of annual net income accrued to them from sources within the United
States during the preceding calendar year, attaches to nonresident
aliens as in the case of returns required from citizens and resident
aliens. Therefore, a
return on Form 1040, revised, is required except in cases where the
total tax liability has been or is to be satisfied at the source by
withholding or has been or is to be satisfied by personal return on
Form 1040, revised, rendered in their behalf.
Returns shall be rendered to the collector of internal
revenue for the district in which a nonresident aliens carries on
his principal business within the United States or, in the absence
of a principal business within the United States and in all cases of
doubt, the collector of internal revenue at Baltimore, Md., in whose
district Washington is situated.
Nonresident aliens are held to be subject to the liabilities
and requirements of all administrative, special, and general
provisions of law in relation to the assessment, remission,
collection, and refund of the income tax imposed by the act of
October 3, 1913, and collectors of internal revenue will make
collection of the tax by distraint, garnishment, execution, or other
appropriate process provided by law.
So much of T.D. 1976 as relates to ownership certificate
1004, T.D. 1977 (certificate Form 1060), 1988 (certificate Form
1060), T.D. 2017 (nontaxability of interest from bonds and dividends
on stock), T.D. 2030 (certificate Form 1071), T.D. 2162
(nontaxability of interest from bonds and dividends on stock) and
all rulings heretofore made which are in conflict herewith are
hereby superseded and repealed.
This decision will be held effective as of January 1, 1916.
W. H. Osborn
Commissioner of Internal Revenue
Approved, March 30, 1916:
Byron R. Newton,
Acting Secretary of the Treasury
*** AFTERWORD: My initial view of the participants in what is discussed above was harsh. Upon reflection, I have come to a more forgiving view, and no longer believe that every deployment of the edited TD 2313 is a deliberate fraud. After all, no one wanting to argue that the income tax is confined to foreign-related revenue and who knew the actual text of TD2313 would draw attention to the TD for any reason. Only those who can be shown to know better while still perpetrating the scam deserve condemnation for it, such as internet radio program host Dave Champion. On October 30, 2004, Champion presented only the edited and misleading portion of TD 2312 as discussed below, and then was so shameless as to say, “I know some of the wording of that gets long… but…but I thought of editing it down, but…but I didn’t want to do that. I wanted you to hear the whole rambling bit. This one actually… it’s a photocopy out of the book, out of the Treasury… the book that contains the various Treasury Decisions… These are all original books, by the way, from the years that I’m reading to you… They’re very old… you can only find them in a law library.” Get audio here. Either Champion was casually lying about the trip to the law library, etc.-- perhaps as part of an effort to cheaply create an image as a serious researcher-- or he really DID go to the trouble he says he did, and then deliberately lied about TD 2313.) ***** P.S. The TD 2313 scam puts me in mind of another, similar misrepresentation deployed to serve the same silly "foreign" argument, which involves Section 25 of the Revenue Act of 1916. The section is presented alone, and is used to argue that the act of 1916 fundamentally altered the objects identified in the previous act of 1913 as subject to the "income" tax. However, Section 25 of the 1916 act merely ensures that nothing already assessed under the previous act (1913) gets assessed again under the new one, in what would be a double taxation of the same "income". To see this, it is necessary to read the section preceding Section 25, which, of course, those flogging the misunderstanding of Section 25 do not supply. That preceding section, Section 24, establishes that anything already assessed under the 1913 act (and thus out of the purview of the new 1916 version, per Section 25) was still due and owing. In other words, the 1913 act's provisions still applied to any "income" upon which the tax had been assessed prior to the adoption of the 1916 version; any "income" which had escaped assessment up to and beyond that point would be assessed under the 1916 act. SEC. 24. That Section II of the Act approved October third, nineteen hundred and thirteen, entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," is hereby repealed, except as herein otherwise provided, and except that it shall remain in force for the assessment and collection of all taxes which have accrued thereunder, and for the imposition and collection of all penalties or forfeitures which have accrued or may accrue in relation to any of such taxes, and except that the unexpended balance of any appropriation heretofore made and now available for the administration of such section or any provision thereof shall be available for the administration of this title or the corresponding provision thereof. SEC. 25. That income on which has been assessed the tax imposed by Section II of the Act entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," approved October third, nineteen hundred and thirteen, shall not be considered as income within the meaning of this title: Provided, That this section shall not conflict with that portion of section ten, of this title, under which a taxpayer has fixed its own fiscal year. You can now see why those attempting to use the language of Section 25 to support their erroneous theories do not furnish that of Section 24 to their readers... |