Published at Trinity College, Durham, N. C., by the OFFICERS: ROBERT L. FLOWERS, President ALBERT M. WEBB, Vice-Pres. D. W. NEWSOM, Secretary and Treasurer BOARD OF DIRECTORS: W. P. FEW WILLIAM H. GLASSON WILLIAM H. WANNAMAKER ROBERT L. FLOWERS This journal was founded in January, 1902, in order to afford better opportunity in the South for discussion of literary, historical, economic, and social questions. It knows no sectional jealousy and aims to offer a publishing medium in which respectful consideration will be accorded to all who have some worthy contribution to make in its chosen field. The QUARTERLY was originally established by the "9019," a society of young men of Trinity College, but it later passed into the control of the South Atlantic Publishing Company, Incorporated. It is under the joint editorship of Dr. W. K. Boyd and Dr. W. H. Wannamaker. For their journal the editors and publishers solicit the support of thinking people in all sections of the country and especially in the South. The subscription price is three dollars per year. Communications in regard to articles, book reviews, and editorial matters should be addressed to the Editors, SOUTH ATLANTIC QUARTERLY, Trinity College, Durham, N. C. If the return of manuscripts not accepted is desired, the required postage should be enclosed. Subscriptions and all communications relating to advertisements and business matters should be addressed to the Treasurer, SOUTH ATLANTIC QUARTERLY, Durham, N. C. Subscriptions payable in advance. Advertising accounts payable after first insertion of ad. The Place of Woodrow Wilson in American Politics-An Racial Feeling in Negro Poetry. Carlyle's Past and Present: A Prophecy.. Pro-Slavery Propaganda in American Fiction of the Fifties.. Down the World With Marna. Political Problems of Hispanic America: Their Origin and Nature. The Dido Episode. Book Reviews.. .Edward J. Woodhouse Newman 1. White .Stanley T. Williams Jeanette Reid Tandy ....Charles B. Shaw Mary Wilhelmine Williams ..Arthur L. Keith Volume XXI APRIL, 1922 Number 2 The South Atlantic Quarterly Administrative Problems in United DANIEL C. ROPER Sometime U. S. Commissioner of Internal Revenue. The new Federal income tax law is disappointing to most people who had looked forward to a thorough revision of the 1918 Act. It was hoped that a comprehensive measure, complete in itself, would be the result of the work of Congress. After debate proceeded, however, it became clear that Congress could not be brought to any such fundamental accomplishment. The new law is merely a collection of patches on the old act and both must be read and interpreted together to arrive at the existing situation. Congressional leaders in the course of their work on this law acknowledged its unsatisfactory condition and promised an early further revision. Much of the distress of taxpayers with regard to internal revenue taxation in recent years has been due to the lack of stability of the law, the necessity for business to conform to constantly changing requirements, frequently afflicted by retroactive legislation. Tax legislation should be made effective far enough ahead to enable taxpayers to adjust their affairs to its requirements with the least possible inconvenience to business. The new measure is such a conglomerate mass that great care must be exercised by taxpayers in utilizing the particular form applicable to their situations. Thus it becomes unfortunately necessary to continue to depend very largely upon experts. The strain on the already over-taxed legal forces of the Treasury Department is by no means relieved. A very commendable service has been rendered to the people in the simplification of the income tax return forms which have just been issued by the department for the new law and indicates that a great deal of constructive thought is being given to the administration of the new law with a view to relieving the people as much as possible from the affliction of its complications. It has been recognized through the history of this complicated income tax procedure which first came into existence with the law of 1917 that the government cannot properly rely on any one class of professional men to interpret and apply these laws to American business. Almost superhuman understanding of the economic life of this country has been required to make a success of such legislation. When we think of law, we usually think of lawyers; for it is the prime function of a lawyer to interpret and deal with the administration of laws. In the making and administering of laws we have the lawyer always with us, and he is of great value to the government in connection with revenue legislation. It is also clear, however, that another great profession has a peculiar and immediate relation to this particular kind of legislation. The determination of invested capital and the computation of income is a function peculiarly belonging to accountancy, supported by engineering. The engineers and classified groups of business and other activities had to be coördinated in order that we might have the fullest possible information regarding conditions to which our regulations and methods were to be applied. For this reason, many of the ablest business men, accountants, and engineers as well as lawyers cheer fully responded to appeals for advice and continued assistance. It is now generally conceded that no group of men is more essential today to the proper conduct of business than those accountants who, with high ideals of ethics and inspired by motives of equity and justice, are assisting business and government properly to conform to the terms of the partnership created between business and government by the internal revenue laws. The responsibilities which have thus come to these men are sufficient to ballast and stabilize any profession. It is gratifying to observe the splendid manner in which that profession responds to these larger duties and responsibilities. In looking to professional accountants for aid and support in administering the war revenue laws, I saw two principal objectives. Of these, the one involving the collection of revenue to meet the war needs has been fully realized. The other is an outstanding incentive to the further development of professional ethics and organization among the accountants of this country. I refer to the bringing about in the future of a situation in which the relation of accountants with the government and business may be such that audits certified to by professional accountants, in good standing, would be accepted by the government as having the highest weight as evidence and as affording a satisfactory basis upon which the government might proceed to the preliminary assessment and collection of taxes. When this recognition by the government is attained, will it not be natural for the business of insurance to seize upon the opportunity which will then be presented to insure business enterprises against unexpected assessments of additional taxes? This would solve the question of congestion in the handling of returns at Washington and would also expedite the collection of the revenue by the government. The present condition of congestion in the auditing of returns is more easily criticized than remedied. Accountants who, in the course of their professional work, come in contact with many large organizations, readily appreciate that the larger an organization becomes and the greater the volume of any given kind of work, the more serious are the obstacles to expeditious production. They also know that this difficulty is greatly enhanced when the things which are to be produced are audits and legal decisions. The things which must be produced by the Bureau of Internal Revenue cannot be delegated too far down the line, and there are relatively few men in the United States outside of the legal, engineering and accounting professions who are available for this work and its responsibilities. The result is that the neck of the bottle cannot be greatly enlarged. It is out of this small channel that we have the documents known as regulations and treasury decisions based upon actions taken in precedent cases. It has been a long, slow development to build up the body of precedent which the bureau has to work with, and all who are familiar with the subject know that there yet remain many fundamental questions to be decided. From time to time the courts make their contribution, and every time Congress revises the law there must be likewise a revision in all the regulations, precedents and decisions. By way of putting ourselves in a properly sympathetic attitude towards the department officials, it should be kept in mind that a corporation return may physically, or as a case, be dealt with by as many as one hundred persons in the course of its journey, as the following hypothetical case will serve to illustrate Assume the return of a corporation engaged in mining coal, and that there is a question of the admissibility of paid in surplus at the time of organization. We will accept it as a return for the year 1918. After diligent work by the employees and officers of the corporation, aided by accountants, the return is filed in the office of the local collector and payment made of the first quarter of the tax shown on the return to be due. In the collector's office the return is associated with thousands of others on the same day, and the first step is to separate from each return the remittance attached. The receipts are deposited immediately in the accepted depositaries for public funds and report thereof is made to Washington. The collector opens an account with every taxpayer and this particular corporation is credited with its remittance. In due course, and as rapidly as the small and underpaid force of deputy collectors and clerks can get at the vast accumulation of work, the return of this corporation is reached for the so-called collector's preliminary examination and review. Manifest errors discovered are corrected locally, probably involving conferences with representatives of the taxpayer. The return is then included in a bundle of 100 and forwarded to Washington. Here it is sent first to the Statistical Division of the Income Tax unit, where it is run through a coding process much the same as the schedule of the Census Bureau. After leaving the Statistical Division the returns are separated according to the kind of business, |