B-33413, APRIL 5, 1943, 22 COMP. GEN. 940

B-33413: Apr 5, 1943

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FROM THE COMPENSATION OF CERTAIN OFFICERS AND EMPLOYEES OF THE FEDERAL GOVERNMENT TO WHOSE COMPENSATION THE COMMISSIONER OF INTERNAL REVENUE HAS DETERMINED OR SHALL DETERMINE THAT SUCH WITHHOLDING TAX IS APPLICABLE MAY. 1943: I HAVE YOUR LETTER OF MARCH 23. AS FOLLOWS: THERE ARE ENCLOSED HEREWITH LETTERS ADDRESSED TO THE UNITED STATES MARSHAL FOR THE VIRGIN ISLANDS SIGNED JOINTLY BY THE DIRECTOR OF THE ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS AND THE ADMINISTRATIVE ASSISTANT TO THE ATTORNEY GENERAL. BOTH OF THESE LETTERS HAVE REFERENCE TO THE APPLICATION OF THE WITHHOLDING PROVISIONS OF THE INTERNAL REVENUE ACT TO THE COMPENSATION OF OFFICERS AND EMPLOYEES OF THE UNITED STATES COURTS AND OF THIS DEPARTMENT IN THE VIRGIN ISLANDS.

B-33413, APRIL 5, 1943, 22 COMP. GEN. 940

DISPOSITION OF VICTORY TAX WITHHELD FROM COMPENSATION OF FEDERAL EMPLOYEES IN VIRGIN ISLANDS AMOUNTS WITHHELD IN ACCORDANCE WITH THE VICTORY TAX PROVISIONS OF THE REVENUE ACT OF 1942 BY THE UNITED STATES MARSHAL FOR THE VIRGIN ISLANDS, AS DISBURSING OFFICER, FROM THE COMPENSATION OF CERTAIN OFFICERS AND EMPLOYEES OF THE FEDERAL GOVERNMENT TO WHOSE COMPENSATION THE COMMISSIONER OF INTERNAL REVENUE HAS DETERMINED OR SHALL DETERMINE THAT SUCH WITHHOLDING TAX IS APPLICABLE MAY, IF ADMINISTRATIVELY APPROVED BY THE BUREAU OF INTERNAL REVENUE, BE TURNED OVER BY THE MARSHAL TO THE TREASURIES OF THE VIRGIN ISLANDS RATHER THAN TO A COLLECTOR OF INTERNAL REVENUE.

COMPTROLLER GENERAL WARREN TO THE ATTORNEY GENERAL, APRIL 5, 1943:

I HAVE YOUR LETTER OF MARCH 23, 1943, AS FOLLOWS:

THERE ARE ENCLOSED HEREWITH LETTERS ADDRESSED TO THE UNITED STATES MARSHAL FOR THE VIRGIN ISLANDS SIGNED JOINTLY BY THE DIRECTOR OF THE ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS AND THE ADMINISTRATIVE ASSISTANT TO THE ATTORNEY GENERAL, AND A LETTER TO THE UNITED STATES ATTORNEY FOR THE VIRGIN ISLANDS SIGNED BY THE ADMINISTRATIVE ASSISTANT TO THE ATTORNEY GENERAL. BOTH OF THESE LETTERS HAVE REFERENCE TO THE APPLICATION OF THE WITHHOLDING PROVISIONS OF THE INTERNAL REVENUE ACT TO THE COMPENSATION OF OFFICERS AND EMPLOYEES OF THE UNITED STATES COURTS AND OF THIS DEPARTMENT IN THE VIRGIN ISLANDS.

IT WILL BE OBSERVED THAT AS A RESULT OF SEVERAL CONFERENCES HELD WITH REPRESENTATIVES OF THE BUREAU OF INTERNAL REVENUE, IT HAS BEEN ASCERTAINED THAT THE WITHHOLDING TAX IS APPLICABLE TO ALL SALARY PAYMENTS TO NATIVE EMPLOYEES OF THE COURTS AND OF THE DEPARTMENT OF JUSTICE, NATIVES HAVING BEEN DEFINED AS PERMANENT RESIDENTS OF THE VIRGIN ISLANDS AND PERSONS WHO PAY THEIR INCOME TAXES TO THE TREASURIES OF THE VIRGIN ISLANDS. THE BUREAU OF INTERNAL REVENUE ALSO ADVISES THAT THEY ARE NOW CONSIDERING THE APPLICABILITY OF THE ACT WITH REFERENCE TO OFFICERS AND EMPLOYEES OF THE FEDERAL GOVERNMENT WHO ARE CITIZENS OF THE UNITED STATES AND RESIDENT IN THE VIRGIN ISLANDS SOLELY BY REASON OF THEIR EMPLOYMENT.

AFTER THE ATTACHED LETTERS WERE PREPARED, THE QUESTION AROSE AS TO THE LEGALITY OF A DISBURSING OFFICER OF THE FEDERAL GOVERNMENT TO WITHHOLD ANY AMOUNT FROM THE COMPENSATION OF A FEDERAL EMPLOYEE AND DELIVER SUCH AMOUNT TO ANY PERSON OR ORGANIZATION OTHER THAN THE FEDERAL GOVERNMENT AND SPECIFICALLY WHETHER THE MARSHAL AS DISBURSING OFFICER IS AUTHORIZED TO WITHHOLD ANY AMOUNT FROM THE COMPENSATION OF OFFICERS AND EMPLOYEES OF THE COURTS AND OF THE DEPARTMENT OF JUSTICE AND TO TURN SUCH AMOUNTS OVER TO THE TREASURIES OF THE VIRGIN ISLANDS. YOUR VIEWS IN THE MATTER WILL BE APPRECIATED.

INASMUCH AS THE REGULATIONS OF THE COMMISSIONER OF FINANCE OF THE VIRGIN ISLANDS REQUIRE THE WITHHOLDING EFFECTIVE MARCH 1, 1943, WHICH AFFECTS THE PAYROLLS FOR THE MONTH OF MARCH, IT WILL BE APPRECIATED IF YOU WILL GIVE THIS MATTER YOUR EARLY ATTENTION.

THE VICTORY TAX PROVISIONS OF THE REVENUE ACT OF 1942, PUBLIC LAW 753, APPROVED OCTOBER 21, 1942, 56 STAT. 884, TO WHICH YOUR LETTER APPARENTLY HAS REFERENCE, WERE ADDED TO TITLE I OF THE INTERNAL REVENUE CODE--- " INDIVIDUAL AND CORPORATION INCOME TAXES.' SECTION 466 (A) OF THE INTERNAL REVENUE CODE, AS AMENDED, 56 STAT. 888, PROVIDES IN PART:

THERE SHALL BE WITHHELD, COLLECTED, AND PAID UPON ALL WAGES OF EVERY PERSON, TO THE EXTENT THAT SUCH WAGES ARE INCLUDIBLE IN GROSS INCOME, A TAX EQUAL TO 5 PERCENTUM OF THE EXCESS OF EACH PAYMENT OF SUCH WAGES OVER THE WITHHOLDING DEDUCTION ALLOWABLE UNDER THIS PART. * * *

SECTION 467 (A), 56 STAT. 891, PROVIDES:

THE TAX REQUIRED TO BE WITHHELD BY SECTION 466 SHALL BE COLLECTED BY THE PERSON HAVING CONTROL OF THE PAYMENT OF SUCH WAGES BY DEDUCTING SUCH AMOUNT FROM SUCH WAGES AS AND WHEN PAID. AS USED IN THIS SUBSECTION, THE TERM "PERSON" INCLUDES OFFICERS AND EMPLOYEES OF THE UNITED STATES, OR OF A STATE, TERRITORY, OR ANY POLITICAL SUBDIVISION THEREOF, OR OF THE DISTRICT OF COLUMBIA, OR ANY AGENCY OR INSTRUMENTALITY OF ANY ONE OR MORE OF THE FOREGOING.

SECTION 468, 56 STAT. 891, PROVIDES:

IN LIEU OF THE TIME PRESCRIBED IN SECTIONS 53 AND 56 FOR THE RETURN AND PAYMENT OF THE TAX IMPOSED BY THIS CHAPTER, EVERY PERSON REQUIRED TO WITHHOLD AND COLLECT ANY TAX UNDER SECTION 466 SHALL MAKE A RETURN AND PAY SUCH TAX ON OR BEFORE THE LAST DAY OF THE MONTH FOLLOWING THE CLOSE OF EACH QUARTER OF EACH CALENDAR YEAR. EVERY SUCH PERSON SHALL INCLUDE WITH THE FINAL RETURN FOR THE CALENDAR YEAR A DUPLICATE COPY OF EACH RECEIPT REQUIRED TO BE FURNISHED UNDER SECTION 469. EVERY SUCH PERSON SHALL ALSO KEEP SUCH RECORDS AND RENDER UNDER OATH SUCH STATEMENTS WITH RESPECT TO THE TAX SO WITHHELD AND COLLECTED AS MAY BE REQUIRED UNDER REGULATIONS PRESCRIBED BY THE COMMISSIONER, WITH THE APPROVAL OF THE SECRETARY.

THE ONLY QUESTION ACTUALLY PRESENTED BY THE FACTS STATED IN YOUR LETTER AND ENCLOSURES WOULD APPEAR TO BE WHETHER THE UNITED STATES MARSHAL FOR THE VIRGIN ISLANDS IS AUTHORIZED OR REQUIRED, AS DISBURSING OFFICER, TO WITHHOLD THE AMOUNT OF THE VICTORY TAX FROM THE COMPENSATION OF THOSE OFFICERS AND EMPLOYEES OF THE FEDERAL GOVERNMENT TO WHOSE COMPENSATION THE COMMISSIONER OF INTERNAL REVENUE HAS DETERMINED OR SHALL DETERMINE THAT SUCH WITHHOLDING TAX IS APPLICABLE AND TO TURN SUCH AMOUNTS OVER TO THE TREASURIES OF THE VIRGIN ISLANDS. AND IT IS TO THIS SPECIFIC QUESTION RATHER THAN TO THE QUESTION OF THE AUTHORITY, GENERALLY, OF DISBURSING OFFICERS OF THE GOVERNMENT TO WITHHOLD PART OF THE COMPENSATION OF A GOVERNMENT EMPLOYEE FOR PAYMENT TO OTHER THAN AN OFFICIAL OF THE FEDERAL GOVERNMENT THAT CONSIDERATION WILL HERE BE GIVEN AND TO WHICH THE CONCLUSIONS HEREINAFTER REACHED HAVE REFERENCE. SEE, HOWEVER, IN THIS LATTER CONNECTION, 5 COMP. GEN. 6.

PRESUMABLY, THE ONLY DOUBT AS TO THE AUTHORITY OF THE MARSHAL FOR THE VIRGIN ISLANDS TO PAY SUCH AMOUNTS AS ARE REQUIRED TO BE WITHHELD UNDER THE ABOVE-QUOTED PROVISIONS OF THE INTERNAL REVENUE CODE FROM THE COMPENSATION OF GOVERNMENT EMPLOYEES IS THE FACT THAT IN SUCH INSTANCES THE PAYMENTS ARE TO BE MADE BY THE MARSHAL TO CERTAIN DESIGNATED AGENTS OF THE TREASURIES OF THE VIRGIN ISLANDS RATHER THAN TO COLLECTORS OF INTERNAL REVENUE. HOWEVER, THERE WOULD APPEAR TO BE FOR CONSIDERATION IN CONNECTION WITH THIS MATTER, ACT, JULY 12, 1921, 42 STAT. 123, 48 U.S.C. 1397, WHICH PROVIDES:

THE INCOME-TAX LAWS IN FORCE IN THE UNITED STATES OF AMERICA AND THOSE WHICH MAY HEREAFTER BE ENACTED SHALL BE HELD TO BE LIKEWISE IN FORCE IN THE VIRGIN ISLANDS OF THE UNITED STATES, EXCEPT THAT THE PROCEEDS OF SUCH TAXES SHALL BE PAID INTO THE TREASURIES OF SAID ISLANDS.

MOREOVER, SECTION 35 OF THE ORGANIC ACT OF THE VIRGIN ISLANDS OF THE UNITED STATES OF 1936, 49 STAT. 1816, PROVIDES IN PART AS FOLLOWS:

* * * PROVIDED, THAT THE PROCEEDS OF CUSTOMS DUTIES, LESS THE COST OF COLLECTION, AND THE PROCEEDS OF THE UNITED STATES INCOME TAX, AND THE PROCEEDS OF ANY TAXES LEVIED BY THE CONGRESS ON THE INHABITANTS OF THE VIRGIN ISLANDS, AND ALL QUARANTINE, PASSPORT, IMMIGRATION, AND NATURALIZATION FEES COLLECTED IN THE VIRGIN ISLANDS SHALL BE COVERED INTO THE TREASURY OF THE VIRGIN ISLANDS AND HELD IN ACCOUNT FOR THE RESPECTIVE MUNICIPALITIES, AND SHALL BE EXPENDED FOR THE BENEFIT AND GOVERNMENT OF SAID MUNICIPALITIES IN ACCORDANCE WITH THE ANNUAL MUNICIPAL BUDGETS. * *

A LETTER ADDRESSED TO THIS OFFICE UNDER DATE OF NOVEMBER 10, 1939, BY THE SECRETARY OF THE TREASURY, DESCRIBED A PROPOSED PLAN FOR THE COLLECTION OF INCOME TAXES IN THE VIRGIN ISLANDS AS FOLLOWS:

* * * THIS DEPARTMENT NOW PROPOSES TO TAKE OVER FROM THE ISLANDS OFFICIALS THE DUTY OF ADMINISTERING THE INCOME TAX LAWS IN THE ISLANDS. THAT IS, THIS DEPARTMENT WILL ADMINISTER AND ENFORCE THE INCOME TAX LAWS IN THE VIRGIN ISLANDS IN THE SAME MANNER AS THE LAWS ARE ADMINISTERED IN THE VARIOUS STATES; HOWEVER, THE REVENUE SO COLLECTED WILL NOT BE RETAINED BY THE UNITED STATES BUT WILL BE TURNED OVER TO THE ISLANDS. THE REVENUE WHICH WILL BE COLLECTED IS NOT SUFFICIENT TO JUSTIFY SETTING UP THE ISLANDS AS A SEPARATE COLLECTION DISTRICT. HENCE, IT IS PROPOSED TO ATTACH THE ISLANDS TO THE EXISTING BALTIMORE DISTRICT. ALL OF THE VIRGIN ISLANDS RETURNS WILL BE FILED IN THE BALTIMORE OFFICE AND THE TAXES WILL BE PAID THERE. ANY NECESSARY INVESTIGATIONS WILL BE MADE BY REPRESENTATIVES FROM THE BUREAU OF INTERNAL REVENUE WHO WILL BE SENT TO THE ISLANDS FROM TIME TO TIME. THE BALTIMORE OFFICE WILL KEEP AN ACCOUNT OF THE REVENUE WHICH RIGHTFULLY BELONGS TO THE ISLANDS.

SAID LETTER REQUESTED THE APPROVAL OF THIS OFFICE TO THE PROPOSED CHANGE IN COLLECTION PROCEDURE, AND IN A DECISION DATED DECEMBER 9, 1939 (B- 7123), IT WAS HELD:

WHETHER THE REVENUE LAWS OF THE UNITED STATES APPLICABLE TO THE VIRGIN ISLANDS SHOULD BE ENFORCED BY THE FEDERAL TREASURY DEPARTMENT OR BY THE ISLAND GOVERNMENT APPEARS TO BE A MATTER PRIMARILY FOR ADMINISTRATIVE CONSIDERATION AND DETERMINATION, AND THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT IF IT SHOULD BE ADMINISTRATIVELY DETERMINED TO PUT THE PLAN WHICH YOU SUGGEST INTO OPERATION. * * *

IT WOULD APPEAR FROM THE NATURE OF THE QUESTION WHICH YOU NOW PRESENT THAT THE PROPOSED PLAN CONSIDERED IN SAID DECISION HAS NOT AS YET BEEN PUT INTO OPERATION. HOWEVER, THE HOLDING OF THAT DECISION IS EQUALLY FOR APPLICATION IN THE INSTANT MATTER. THAT IS TO SAY, IF IT HAS BEEN--- OR SHALL BE--- ADMINISTRATIVELY DETERMINED BY THE BUREAU OF INTERNAL REVENUE THAT SUCH AMOUNTS AS ARE AUTHORIZED TO BE WITHHELD FROM THE COMPENSATION OF FEDERAL EMPLOYEES WHOSE INCOME TAXES ARE TO BE PAID INTO THE TREASURIES OF THE VIRGIN ISLANDS SHOULD BE TURNED OVER BY THE MARSHAL TO OFFICIALS OF THE VIRGIN ISLANDS' GOVERNMENT RATHER THAN TO ONE OF THE COLLECTORS OF INTERNAL REVENUE, THIS OFFICE PERCEIVES NO LEGAL OBJECTION THERETO.