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Fifth. Cemetery company owned and operated exclusively for the benefit of its members;

Sixth. Corporation or association organized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual;

Seventh. Business league, chamber of commerce, or board of trade, not organized for profit and no part of the net income of which inures to the benefit of any private stockholder or individual;

Eighth. Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;

Ninth. Club organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member; Tenth. Farmers' or other mutual hail, cyclone, or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses;

Eleventh. Farmers', fruit growers', or like association, organized and operated as a sales agent for the purpose of marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produce furnished by them;

Twelfth. Corporation or association organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title; or

Thirteenth. Federal land banks and national farm-loan associations as provided in section 26 of the act approved July 17, 1916, entitled "An act to provide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create Government depositaries and financial agents for the United States, and for other purposes."

Fourteenth. Joint-stock land banks as to income derived from bonds or debentures of other joint-stock land banks or any federal land bank belonging to such joint-stock land bank.

The provision under paragraph "First" exempting from tax agricultural and horticultural organizations applies only to those corporations that are engaged in such activities merely for the general welfare and benefit of the public, conducting such enterprises as agricultural or horticultural fairs or exhibitions. A corporation engaged in general farming, raising cattle, or other agricultural business for profit is liable to the tax. For other rulings as to the exempt corporations see Article 67 et seq. of Income Tax Regulations No. 33 (revised).

FOREIGN CORPORATIONS.

Every corporation, joint-stock company or association, or insurance company, now or hereafter organized for profit under the laws of any foreign country and engaged in business in the United States shall pay annually a special excise tax with respect to the carrying on or doing business in the United States by such corporation, joint-stock company or association, or insurance company,

ART. 13. Foreign corporations: Scope of tax.-The tax is payable by every corporation, joint-stock company or association, or insurance company, now or hereafter organized for profit under the laws of any foreign country and engaged in business in the United States. In general, the same kinds of companies and associations are included as in the case of domestic corporations, except that to be taxable they must be organized under some statute or derive from that source some quality or benefit not existing at the common law. A foreign corporation is engaged in business in the United States if it maintains agents or an office or warehouse here, or in the case of an insurance company writes insurance policies here, or in any other way enters the United States for the purpose of its business.

equivalent to 50 cents for each $1,000 of the capital actually
invested in the transaction of its business in the United States:
Provided, That in the case of insurance companies such deposits
or reserve funds as they are required by law or contract to main-
tain or hold in the United States for the protection of or payment
to or apportionment among policyholders, shall not be included.
The amount of such annual tax shall in all cases be computed on
the basis of the average amount of capital so invested during the
preceding year:

ART. 14. Foreign corporations: Rate of tax.-The tax is at the rate of 50 cents for each full $1,000 of the capital of the foreign corporation actually invested in the transaction of its business in the United States, and is in all cases to be computed on the basis of the average amount of capital so invested during the preceding year, except for the deduction of legal reserve funds in the case of insurance companies. The basis of the tax is accordingly different from that in the case of domestic corporations, which pay a tax measured by the fair value of their capital stock. For the method of computation of the tax, see Article 20.

Provided, That for the purpose of this tax an exemption from the
amount of capital so invested shall be allowed equal to such pro-
portion of $99,000 as the amount so invested bears to the total
amount invested in the transaction of business in the United States
or elsewhere: Provided further, That this exemption shall be al-
lowed only if such corporation, joint-stock company or association,
or insurance company makes return to the Commissioner of
Internal Revenue, under regulations prescribed by him, with the
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approval of the Secretary of the Treasury, of the amount of
capital invested in the transaction of business outside the United
States:

ART. 15. Foreign corporations: Deduction.-In ascertaining the taxable invested capital an exemption from the amount of capital invested in the United States is allowed equal to such proportion of $99,000 as the amount so invested bears to the total amount of invested capital of the corporation, but this exemption applies only if the corporation makes return of the amount of capital invested in the transaction of business in the United States and elsewhere as directed in Article 20, and a corporation making no return of capital invested outside the United States, irrespective of the size of its capital, is entitled to no deduction.

And provided further, That a corporation, joint-stock company or
association, or insurance company actually paying the tax imposed
by section three hundred and one of Title III of this act, shail be
entitled to a credit as against the tax imposed by this para-
graph equal to the amount of the tax so actually paid: And
provided further, That this tax shall not be imposed upon any
corporation, joint-stock company or association, or insurance
company not engaged in business during the preceding taxable
year, or which is exempt under the provisions of section eleven,
Title I, of this Act.

ART. 16. Foreign corporations: Credit and exemptions.-A credit of any payment of the munition manufacturer's tax and the exemption from tax of certain corporations apply alike to foreign corporations and to domestic corporations. See Articles 10, 11, and 12. "Engaged in business" in the case of a foreign corporation means engaged in business in the United States.

ADMINISTRATIVE PROVISIONS.

SEC. 408. Every person who carries on any business or occupation for which special taxes are imposed by this title, without having paid the special tax therein provided, shall, besides being liable to the payment of such special tax, be deemed guilty of a misdemeanor, and upon conviction thereof shall pay a fine of not more than $500, or be imprisoned not more than six months, or both, in the discretion of the court.

ART. 17. Punishment for violation.-Every corporation which does business without having paid the tax shall be deemed guilty of a misdemeanor and upon conviction thereof shall pay a fine of not more than $500. In addition to the punishment specified such a corporation is subject to other penalties provided by the internal revenue laws, some of which are referred to in Articles 22 and 23. A corporation paying the capital stock tax is not on that account exempt from any occupational tax.

SEC. 409. That all administrative or special provisions of law, including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this title, and every person, firm, company, corporation, or association liable to any tax imposed by this title, shall keep such records and render, under oath, such statements and returns, and shall comply with such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may from time to time prescribe.

ART. 18. Return by domestic corporations.-Every domestic corporation shall make return on Form 707 (Appendix A), regardless of the par value of its capital stock. The fair average value of the capital stock of a corporation and the tax payable thereon shall be determined in accordance with the instructions in the form, which provides in Exhibit A for the book value of the capital stock, in Exhibit B for the market value, and in Exhibit C for the value based on capitalizing the earnings. All the information called for must be given in every case where it is procurable.

ART. 19. "Fair value" of capital stock. The fair value of capital stock, the statutory basis of the tax, is not necessarily the book value, or the market value, or even the earning value, although it is often more directly dependent upon the last. It can best be estimated by officers of the corporation having special knowledge of its affairs and general knowledge of the line of business in which it is engaged. Provision is accordingly made in Exhibit C of Form 707 for the determination of the fair value of the capital stock by capitalizing the net earnings of the corporation on a percentage basis fixed by its officers as fairly representing the conditions obtaining in the trade and in the locality. But such fair value must not be set at a sum less than the reconstructed book value shown by Exhibit A or the market value shown by Exhibit B, unless the corporation is materially af fected by extraordinary conditions which justify a lower figure. The Commissioner of Internal Revenue will estimate the fair value of the capital stock in cases regarded as involving any understatement or undervaluation. When a second assessment is made in case of any return which in the opinion of the collector was false or fraudulent, or contained any understatement or undervaluation, no tax collected under such assessment shall be recovered by any suit unless it is proved that the return was not false or fraudulent and did not contain any understatement or undervaluation.

ART. 20. Return by foreign corporations.-Every foreign corporation shall make return on Form 708 (Appendix B), irrespective of the amount of capital employed either at home or in this country in the transaction of its business. The capital actually invested in the transaction of the business of a foreign corporation in the United States and the tax payable thereon shall be determined as follows:

(1) Take the entire invested capital of the corporation, as shown by its last return within the year ending June 30 for the purpose of the war excess profits tax imposed by the Act of October 3, 1917, or if no such excess profits tax return has been made by the corporation, compute the invested capital for its fiscal year ending within the year ending June 30 in accordance with the War Excess Profits Tax Regulations.

(2) Find the proportion, expressed in percentage, which the net income from sources within the United States bears to the entire net income for the fiscal year ending within the year ending June 30, such income being ascertained upon the same basis and in the same manner as for the income and excess profits taxes.

(3) Apply the percentage found in (2) to the average invested capital ascertained in (1), the result being the amount of capital invested in the United States.

(4) Apply the percentage found in (2) to $99,000, and subtract the result from the amount of capital invested in the United States, as ascertained in (3).

(5) Compute the amount of the tax at the rate of 50 cents for each full $1,000 of the net amount of capital invested in the United States, as ascertained in (4).

(6) Subtract the amount of the munition manufacturer's tax, if any, paid under Title III of the Act of September 8, 1916, since the last previous return.

(7) The result of (6) is the net amount of tax due.

ART. 21. Time for making return.-It shall be the duty of every corporation liable to the tax on or before the 31st day of July in each year to make a return, verified by oath, to the collector of the district where it is located. If any corporation fails to make and file a return at the time prescribed by law, or makes, willfully or otherwise, a false or fraudulent return, the collector shall make the return from his own knowledge and from such information as he can obtain through testimony or otherwise. Any return so made and subscribed by a collector shall be prima facie good and sufficient for all legal purposes. If the failure to file a return is due to sickness or absence, the collector may allow such further time, not exceeding 30 days, for making and filing the return as he deems proper.

ART. 22. Penalty for failure to make or for false return.-In case of any failure to make and file a return within the time prescribed by law or by the collector, the Commissioner of Internal Revenue shall add to the tax 50 per cent of its amount, except that, where 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

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