Tax situation;

              98 HASKINS & SELLS October
The Tax
PRIOR to the enactment of the Revenue
Act of October 3, 1917, the Federal
income tax was not, owing to the low tax
rates, of vital importance to the financial
community. The provisions of previous
laws and the Regulations issued by the
Treasury Department interpreting such
laws, were comparatively simple and no
great difficulty was encountered in pre­paring
the returns. Advice in connection
with any involved question was obtained
by corporations from counsel. These points
arose principally in connection with estates.
The entire situation was radically changed
upon the enactment of the Revenue Act of
1917, this Act and the subsequent Act of
1918 being looked upon by many as im­possible
of interpretation and practical
application except by accountants, or
those with a knowledge of accounting, who
have specialized in this work. This is due
largely to the involved provisions relating
to the determination of net profits and in­vested
capital.
Anticipating requests from clients and
the public in general for advice in connec­tion
with tax returns and the preparation
thereof, the firm, immediately after the
enactment of the 1917 Act, organized an
Executive Tax Department. Mr. George
M. Dallas was given charge of this depart­ment,
the personnel of which comprises
accountants who had made and who have
continued to make a thorough study of
Federal, State, and foreign taxes. A
similar department has been organized at
each of our practice offices, under the super­vision
and direction of the Executive Tax
Department, the purpose being to render
competent assistance to our clients through-
Situation
out the country in the solution of their tax
problems. The personnel of the tax or­ganization
at the practice offices has been
specially trained through tax courses and
correspondence conducted by the Execu­tive
Tax Department. Information bear­ing
on taxes is collected from all sources by
the Executive Tax Department and dis­tributed
to our practice offices with advice
as to the use to be made of it. Difficult
questions are submitted by all practice
offices to this department for discussion
and advice. This department maintains
constant contact with the officials of the
Bureau of Internal Revenue at Washington.
Mr. Dallas is quoted on the subject of
legislative tendencies as follows: "It is not
anticipated that any new tax legislation
will be enacted by Congress to become
effective prior to January 1, 1921, hence
Federal tax returns for the calendar year
1920 and for fiscal years ending in the
calendar year 1920, must be prepared in
accordance with the provisions of the
Revenue Act of 1918. Thus it is essential
that those responsible for the preparation
of Federal returns be thoroughly familiar
with this Revenue Act.
"Many severe criticisms have been made
of the Excess and War Profits sections of
the Revenue Act of 1918. Such criticisms
are due primarily to the difficulty encoun­tered
in the preparation of the returns
owing to lack of comprehensive knowledge
of the practical application of the provi­sions
of the Act, and the high percentage of
net profits exacted by the Federal Gov­ernment.
It must be conceded, however,
by those who have made a conscientious
study of the Act, that it is the most scien-