Neutrality, 1935-1938

PSF Noutrality - 1935-1935. - Subject File Box 160 Box 160 1. PSF neutrality REPORT April 1, 1935 The United States Senate Special Committee Investigating the Munitions Industry, pursuant to Senate Resolution No. 8, (Seventy- Fourth Congress, First Session), wishes to make the following preliminory report: I. The Committee has examined 116 witnesses, taken 3502 pages of testimony and exhibits, and has spent 62 days in the discussion of that testimony. It has consulted with a considerable number of Government Departments in executive session. II. The Committee is in substontial agreement on 0 very thor- ough plan to toke the profits out of wor and to equolize the econom- 1c burden of war, and expects to report on this subject to the Senoto legislation on the motter in the immediate future, and for action in the present session of Congress. This relates to the actual period of wor only. The presentation of this report and the legislation covers one of the three major obligations imposed upon the Committee. III. The Committee 1s emphatically convinced that no bill which contains only general authorizations to the President to fix prices, or to commundeer industry or to orronge for priorities and licensing is at oll odequate "to equalize the burdens and toke the profits out of wor." Report '-2- IV. The Committee is in substantial agreement on a principle to govern the export of munitions and contraband in case of a major war, and expects to make certain recommendations to the Senate on this subject in the immediate future and for action in the present session of Congress. This is the only phase of the neutrality problem which the Committee considers to be within its jurisdiction. V. The Committee has investigated in detail the foreign sales activities of certain munitions companies and the significance of the methods used in the industry. This study is not yet completed. When it is completed the Committee will have definite recommendations to make for the control of the industry in peace-time. VI. At the moment the Committee looks with interest and sympathy on the efforts of the American Government to secure agree- ment on more rigorous international control of the arms traffic, and believes that the United States Senate should be glad to con- sider cordially an international convention based on the general broad outlines of control now known as the American draft convention. VII. The Committee also expresses its interest in and support of a Constitutional Amendment to eliminate tax exempt bonds because it finds this exemption to be an inevitable and unjustified loophole in respect to the conclusive control of war profits. VIII. The Committee has taken considerable testimony on the incressed costs and profits of the industry engaged in naval ship- building for the Government. The Committee expects to close its hearings on this subject in April and to report as promptly as possi- ble thereafter. Hundreds of millions of dollars are involved in the present system of naval building, and evidence of collusion is under consideration. IX. The Committee has heard a great amount of testimony cover- ing Government aid in support of the private munitions mokers in their domestic and foreign business. It requests ample time to con- tinue this investigation, and to make its findings constructive and conclusive. Report -3- X. The Committee has heard sufficient evidence concerning the interchange of militory information to begin its report on this sub- ject. XI. The Committee has heard a considerable amount of evidence on the part taken by munitions makers in embargoes and international conferences and international policy. It requests ample time to complete its studies of this subject. XII. In addition to subjects olready listed as in preparation, the Committee hos yet to finish its study of the profits and inter- est of the banking group in the munitions business during and since the war. The Committee earnestly desires to progress with this study. XIII. The Committee has not yot finished its study of the influence of certain other large groups on the nation's munitions policy und foreign policy, including the chemical warfore companies, the steel companies and the airplane and machine gun companies. No munitions investigation can be considered reasonably adequate and 001 plete unless this field 1s conclusively studied, with a view to adequate protection of the public interest. XIV. The Committee has olso heard and enalyzed a great moss of evidence on the industrial conduct and control during the World War and hos had referred to it certain "rmy bills intended to mobilize industry und manpower effectively in any future wor. The Committee believes it should continue hearings on the subject matter of these bills before reporting on them. XV. The Committee has been unable so for to engage in a thorough study of one obligation loid upon it by the Senate, that of the practicability of the Government's purchasing and owning munitions plants. A study of the number and cost of plants necessay for peace-time production is a feasible study clthough involving a very considerable engineering personnel which the Committee is now in no position to obtain. Report -4- XVI. The Matter of these further studies will be discussed in the Senate later at a time when the Committee will have presented the first of its legislativo recommendations, and the benate must then determine whother on additional and final appropriation shall be made ovoilable to implement those finol investigations. Relesse - April 3d A.M. [1935]2 U. S. SENATE SPECIAL COMMITTEE ON MUNITIONS SUMMARY OF EMERGENCY WAR TIME ACT TITLE I Tax Provisions Sec. 1 - The Act is to be known as the mergency War Time Act. It is to be effective only during the period of a war. Sec. 2 - Most of the purely mechanical sections of the Revenue Act of 1934 are adopted to cover administration and technique. Sec. 3 - A normal tax of 6 per cent is levied on all individual incomes in excess of the credits against net income provided in Sec. 25 of the Revenue Act of 1934 as modified in the present Act. Sec. 4 - Surtaxes on individual incomes in excess of $3,000. These range from 10 per cent of the income in excess of $3,000, but not in excess of $5,000 up to $2,800 upon incomes of $8,000 but not in excess of $10,000. On all incomes in excess of $10,000 the sur- tax 1s 94 per cent of the excess. Sec. 5 - This section levies an income tax upon every corpo- ration income included in the taxable description of Section 701 of the Revenue Act of 1934, equal to 50 per centum of such portion of its net income as is not in excess of 6 per centum of the adjust- ed declared volue of the capital stock (or in the case of a foreign corporation the adjusted declared value of capital employed in the transaction of the business in the United States); plus 100 per centum of its net income as in excess of its capital stock. The valuation of corporations for excess profit tax purposes is that which has been filed by such corporations under Section 701 of the Revenue Act of 1934 relating to Capital Stock Taxes. These income taxes are levied on an annual basis but must be reported quarterly and paid within & month of the quarter in which they are earned. Adjustments can be made in the last quarter. Sec. 6 - Numerous references to the Revenue Act of 1934 are made and this section defines meaning of cross references. Sec. 7 - This tax act shall become operative immediately upon the declaration of war and remain in force until the emergency is declared at an end by Congress. Sec. 8 - This deals with the subject of deductions permissible under the war time tax act. They are much more severe than de- ductions in the peace time revenue acts. Deductions for depletion, exhaustion and depreciation are strictly limited. No deductions are permitted for amortization until the expiration of the war. Sec. 9 and 10 - Provide methods of payment of tax. Seo. 11 - Provides penalty taxes for deliberate diminution of tax payments. Sec. 12 - Provides surtaxes on corporations improperly no- cumulating surpluses. The remoining sections, after imposing prohibitive taxes on personol holding companies during the war, outline exemptions, orodits, etc. Unmarried persons will have a credit of $500. Married persons will have an exemption of $1,000 and $100 for each dependent. Husband, wife and minor children must make a single return. -2- TITLE II An Industrial Management Board is set up. On declaration of wor it shall immediately corry out a draft of all persons engaged as officers or directors of a corporation or persons in policy-forming positions in such corporations. They will be registered first by boards set up after the model of the combat droft boards. The President moy, when such industry is declared to be essential to the war, cause such officers to be inducted into the armed forces of the United States. They will continue to remain with their respective corporations, but will be prohibited from accepting any other compensation than that paid by the Army, and shall have rank and compensation appropriate thereto, not exceeding that of brigadier-general and shall be subject to military law and punishable under it, and may be at the will of the government shifted from the Industrial Management Corps to the combat corps of the army and thus removed from their civilian posts. But the army and the government are given no powers over the internal management of the industry. TITLE III A Commodities Control Commission is provided for with power to close all commodity exchanges, to fix the prices of all commodities, to prohibit the sale of such commodities to persons other than the government, to provide for purchasing the whole output of any com- modity industry and to allocate such commodity to processors as the Commission may deem necessary for the conduct of the war. TITLE IV The President is given power to close all security exchanges and to issue rules covering the sale of securities at private sale for the duration of the emergency. These are in addition to the powers conferred by the Securities Axchange Act. TITLE V In the field of war financing, a securities commission is es- tablished with power to approve or disapprove all new issues of private securities during war time. The approval of the securities commission is a prerequisite to registration of any security for sale under the Securities Act. The commission has power to take over for itself the financing of war industry, and an additional half billion dollar fund is established for that purpose. Commercial transactions for short terms are exempted from the provisions of the act, as are resoles and exchanges. All approvals and financing are made public records under the bill. The commission is specifically released from any responsibility for the approval of the value of any security ap- proved for sale. TITLE VI The President is empowered to fix prices for any article, on a pre-war or regional parity, to estoblish priorities in sale and use of urticles, and to conscript the use of property deemed essential to the successful prosecution of the war. The bill deals with property of all types, real and personal. Owners who lose property rights through the operation of these provisions are entitled to compensation in a fixed manner after judicial proceedings. As on adjunct to his other war time powers, the President is authorized to license in- dustries and fix the conditions for issuance of licenses in businesses or industries related to the prosecution of the war. The President is also authorized by executive order to prevent the waste and hoard- ing of commodities and goods and to enjoin profiteering. -3- TITLE VII Severe penalties, reaching to a maximum sum of $100,000, are imposed for violation of the terms of the bill. 3 PSF [COMMITTEE PRINT] Neutrality APRIL 2, 1935 74TH CONGRESS 1st SESSION S. IN THE SENATE OF THE UNITED STATES APRIL -, 1935 Mr. introduced the following bill; which was read twice and referred to the Committee on A BILL To provide revenue and facilitate the regulation and control of the economic and industrial structure of the Nation for the successful prosecution of war, and for other purposes. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 STATEMENT OF INTENTION 4 It is hereby declared to be the intention of Congress 5 that no person subject to the jurisdiction of the United States 6 shall profit in any manner whatsoever from the conduct of 7 any war to which the United States is or may be a party. 8 It is the intention of Congress to protect the economic 9 organization of the Nation from the disturbances due to 10 war in order that such economic organization may be en- J. 125108-1 2 1 abled to function at the highest efficiency in support of the 2 armed forces and other agencies engaged in the prosecution 3 of war. 4 It is the intention of Congress to protect the economic 5 organization from the inflation of prices, wages, earnings, 6 profits, and the consequent destructive deflationary collapse 7 which follows the actual ending of military and naval 8 operations. 9 It is the intention of Congress that the expenditures 10 to the successful conduct of the war and the protection of 11 the economic organization in the emergency shall be made 12 out of current revenues and that any private interest con- 13 flicting with the Government's war objectives and opera- 14 tions shall be for the duration of the war subjected to the 15 supervening necessities of the public interest in successful 16 prosecution of war. 17 It is further declared to be the intention of Congress 18 that in the event of war all technical and industrial resources 19 shall be mobilized for the successful prosecution of such 20 war, and that industrial management shall be subject to 21 enlistment and conscription for the successful prosecution 22 of war in the same general manner as combat man power 23 has been and is subject to enlistment and conscription for 24 the same purposes. 3 TABLE OF CONTENTS Time I-Tax PROVISIONS Sec. 1. Short title. Sec. 2. Incorporation and reenactment of prior act. Sec. 3. Normal tax on individuals. Sec. 4. Surtax on individuals. Sec. 5. Tax on corporate incomes. Sec. 6. Cross references. Sec. 7. Effective date; taxes in lieu of income and profits taxes; pay- ment of such taxes for short period. Sec. 8. Deductions from gross income. Sec. 9. Times and place for filing returns. Sec. 10. Time of payment of tax. Sec. 11. Penalty. Sec. 12. Surtax on corporations improperly accumulating surplus. Sec. 18. Overpayment of installments. Sec. 14. Imposition of surtax on personal holding companies. Sec. 15. Board of Tax Appeals; jurisdiction; rule of evidence. Sec. 16. Additional penalties. Sec. 17. General auditor. Sec. 18. Credits for both normal tax and surtax; personal exemption. Sec. 19. Individual returns. See. 20. Loans to be treated as dividends. Sec. 21. Deficiency; petition to Board of Tax Appeals. Sec. 22. Limitation on capital losses. Sec. 23. Jurisdiction of courts. TITLE II-INDUSTRIAL MANAGEMENT PROVISIONS Sec. 101. Short title. Sec. 102. Creation of Industrial Management Board and Industrial Management Corps; powers and duties. Sec. 108. Creation of local and district boards. Sec. 104. Powers of President; rules and regulations. Sec. 105. Registration of persons. Sec. 106. Exemptions. Sec. 107. Power of President; status and powers of registrants. Sec. 108. Limitation on income of members of Industrial Management Corps; penalties. Sec. 109. Definitions. Sec. 110. Emergency power; requisition of industrial resources. TITLE III-COMMODITY CONTROL PROVISIONS Sec. 201. Short title. See. 202. Definitions. Sec. 203. Commodity Control Commission. Sec. 204. Powers of Commission. Sec. 205. Additional powers of Commission. Sec. 206. Fees and commissions prohibited. Sec. 207. Standards for fixing prices. Sec. 208. Control of other agencies. Sec. 209. Appropriation. Sec. 210. Compensation to owners. Sec. 211. Illegal exchanges and traffic. Sec. 212. Effective date. 4 TITLE IV-SECURITIES EXCHANGE PROVISIONS Sec. 301. Short title. Sec. 302. Powers of the President. Time V-WAR FINANCE CONTROL PROVISIONS Sec. 401. Short title. Sec. 402. Finance Control Commission. Sec: 408. Powers of Commission: Approval of securities. Sec. 404. Powers of Commission; Financing. Sec. 405. Tax credits and allowances. Sec. 406, Revolving fund; Appropriation. Sec. 407. Definitions. Sec. 408. Publicity. See. 409. Time limitations on action. Sec. 410. Limitation on powers of Commission. Sec. 411. Limitation of effect of approval. Time VI-WAR RESOURCES CONTROL Sec. 501. Short title. Sec. 502. Prices. Sec. 508. Priorities. Sec. 504. Requisitions. Sec. 505. Licenses. Sec. 506. Conservation of resources. Sec. 507. Administration of title. Sec. 508. Rules and regulations. Time VII-GENERAL PROVISIONS Sec. 601. Short title. Sec. 602. General powers of boards or commissions. Sec. 608. Suspension of conflicting and inconsistent acts. Sec. 604. Criminal penalties. Sec. 605. Succession to rights and duties. Sec. 606. Separability clause. Sec. 607. Effective date. I TITLE I 2 TAX PROVISIONS 3 SECTION 1. SHORT TITLE.-This title may be cited 4 as the Emergency War Time Tax Act." 5 SEC. 2. INCORPORATION AND REENACTMENT OF 6 PRIOR Act.-All provisions of titles I, IA, V, and VI of 7 the Revenue Act of 1934, as in effect on March 15, 1935, 8 are hereby incorporated and made a part of this title, and 5 1 reenacted as of the effective date of this Act, whether or 2 not they may otherwise be in effect as of such date and 3 regardless of any amendments made subsequent to March 4 15, 1935, except those provisions obtained in the sections 5 and subsections listed in schedule A annexed hereto, which 6 annexed sections and subsections are not herein incorporated 7 nor made a part of this Act nor in any respect reenacted 8 hereby, except as expressly provided hereafter, and which 9 annexed sections shall be superseded as of the effective date 10 of this Act. 11 SCHEDULE A 12 The following sections and subsections of Title I of 13 the Revenue Act of 1934: Sections 11, 12, and 13; sec- 14 tion 22, subsections (b) and (3) ; section 23, subsections 15 (a), (b), (j), and (n) : section 25, subsections (a) and 16 (1) ; section 25, subsections (a) and (4) ; section 25, sub- 17 sections (b) and (1) ; section 47, subsection (d) : section 18 51; section 53, subsections (a) and (1) ; section 56, sub- 19 sections (a) and (b) : section 63; section 102, subsection 20 (a) ; section 115, subsection (f) ; section 185; section 272, 21 subsection (a) ; section 321. 22 The following sections and subsections of title IV of 23 the same: Section 351, subsection (a) ; section 351, subsec- 24 tion (b) and (2) (B). 6 1 The following section and subsection of title V of the 2 same: Section 702, subsection (a). 3 (Where a subsection symbol follows a more general 4 symbol, only such subsection and not the whole of such gen- 5 eral symbol is included within the aforesaid schedule.) HA 6 SEC. 3. (11) NORMAL TAX ON INDIVIDUALS.-There 7 shall be levied, collected, and paid for each taxable year upon 8 the net income of every individual a normal tax of 6 per 9 centum of the amount of the net income in excess of the 10 credits against net income provided in section 25 of the 11 Revenue Act of 1934, as herein modified. 12 (12) SURTAX ON INDIVIDUALS 13 SEC. 4. (a) DEFINITION OF "SURTAX NET INCOME". 14 As used in this section the term " surtax net income" means 15 the amount of the net income in excess of the credits against 16 net income provided in section 25 (b) of the Revenue Act of 17 1934, as herein modified. 18 (b) RATES OF SURTAX.-There shall be levied, col- 19 lected, and paid for each taxable year upon the surtax net 20 income of every individual in quarterly payments as herein- 21 after provided, a surtax as follows: 22 Upon a surtax net income of $3,000 there shall be no 23 surtax; upon surtax net income in excess of $3,000 but not 24 in excess of $5,000, 10 per centum of such excess. 7 1 $200 upon surtax net incomes of $5,000; and upon 2 surtax net incomes in excess of $5,000 and not in excess of 3 $6,500, 30 per centum in addition of such excess. 4 $650 upon surtax net incomes of $6,500; and upon 5 surtax net incomes in excess of $6,500 and not in excess of 6 $8,000, 50 per centum in addition of such excess. 7 $1,400 upon surtax net incomes of $8,000; and upon 8 surtax net incomes in excess of $8,000 and not in excess 9 of $10,000, 70 per centum in addition of such excess. 10 $2,800 upon surtax net income of $10,000, and upon 11 surtax net incomes in excess of $10,000, 94 per centum in 12 addition of such excess. 13 SEC. 5. (702 (a)) TAX ON CORPORATE INCOMES.- 14 (a) There is hereby imposed upon the net income of every 15 corporation included within the taxable description of sec- 16 tion 701 of the Revenue Act of 1934, for each income-tax 17 payable year or portion of a year during which this Act 18 is in effect, an income tax equal to the following: 19 Fifty per centum of such portion of its net income as 20 is not in excess of 6 per centum of the adjusted declared 21 value of its capital stock (or in the case of a foreign cor- 22 poration the adjusted declared value of capital employed in 23 the transaction of its business in the United States) as at 24 the close of the preceding income-tax taxable year (or as 8 1 of the date of organization if it had no preceding income- 2 tax taxable year) ; plus 100 per centum of such portion 3 of its net income as is in excess of 6 per centum of the 4 adjusted declared value of its capital stock (or in the case 5 of a foreign corporation the adjusted declared value of cap- 6 ital employed in the transaction of its business in the United 7 States) as at the close of the preceding income-tax taxable 8 year (or as of the date of organization if it had no preceding 9 income-tax taxable year). 10 (b) The maximum of the adjusted declared value of the 11 capital stock of a corporation for the purposes of this section 12 shall be determined as provided in section 701 of the Rev- 13 enue Act of 1934, if the said section 701 is in full force and 14 effect upon the effective date of this Act, and the adjusted 15 declared value therein determined shall be adopted as a 16 maximum for the purposes of this section. If the said sec- 17 tion 701 is modified or repealed prior to the effective date 18 of this Act, such maximum adjusted declared value of the 19 capital stock of a corporation shall be determined as though 20 the said section 701 is, and has at all times subsequent to 21 March 15, 1935, been and remained, in full force and effect. 22 (c) If the Commissioner shall determine, upon his 23 own volition, upon notice and hearing to the taxpayer, 24 that the said maximum adjusted declared value of capital 25 stock as herein determined is excessive, he may order an 9 1 appraisal to be made of such capital stock pursuant to such 2 rules and regulations as he may prescribe, and thereafter, 3 if the Commissioner shall deem such appraised value to be 4 more nearly in accord with fact than the adjusted declared 5 value as otherwise determined hereunder, he shall order 6 a modification of such adjusted declared value to conform 7 with such appraisal and thereupon such appraised value 8 shall be the adjusted declared value of such capital stock 9 for the purposes of this title. 10 (d) In the case of any corporation newly organized 11 within one year prior or at any time subsequent to the 12 effective date of this title the adjusted declared value of 13 capital stock shall be determined by the Commissioner by 14 appraisal pursuant to such rules and regulations as he may 15 prescribe, notwithstanding any other provision of law or 16 of this title to the contrary. 17 (e) In the event that any corporation subject to the 18 tax herein imposed shall have been reorganized or party 19 to a reorganization, affiliation, or merger at any time within 20 one year of the effective date of this Act, or shall be re- 21 organized or party to a reorganization, affiliation, or merger 22 subsequent to the effective date of this Act, the maximum 23 of the adjusted declared value of the capital stock of such 24 corporation for the purposes of this section shall be the 25 same as such adjusted declared value as herein set forth 10 1 prior to such reorganization, affiliation, or merger or the 2 sum of such adjusted declared values in the event that two 3 or more corporations have become one corporation for 4 purposes of this tax as the result of such reorganization, 5 affiliation, or merger, except that cash actually paid in as a 6 result of such reorganization, affiliation, or merger may be 7 added to such adjusted declared value. Adjusted declared 8 values as computed pursuant to this section shall be maxi- 9 mum adjusted declared values and may be reduced by the 10 Commissioner after notice and hearing if in his opinion they 11 are excessive or unrepresentative of the true values involved. 12 (f) If the income-tax taxable year in respect of which 13 the tax under this section is imposed is a period of less than 14 twelve months, such adjusted declared value shall be reduced 15 to an amount which bears the same ratio thereto as the 16 number of months in the period bears to twelve months. 17 (g) The tax imposed by this section shall be on an 18 annual basis, but the corporation subject thereto shall file 19 returns upon the dates fixed and for the periods stated in 20 section 9 of this Act. Returns for the first three-quarters 21 of each year shall be made upon an estimated annual basis 22 except that the total tax due and payable for such quarter 23 shall be returned as a sum equal to one-fourth of the total 24 annual tax as computed upon such estimated annual basis. A 11 1 return for the fourth quarter shall be made upon an esti- 2 mated annual basis, except that such return shall also include 3 an actual return for the entire taxable year, and the total 4 tax due and payable for such fourth quarter shall be returned 5 as a sum equal to the total annual tax due and payable 6 for the entire taxable year on the basis of such actual return 7 for the entire taxable year, minus & sum equal to the total 8 amount of payments previously made for or on behalf of 9 taxes due and payable for the first three-quarters of such 10 taxable year pursuant to the provisions of this title. The 11 full amount of the tax imposed by this section shall be due 12 and payable upon the date upon which a return is filed 13 pursuant to the provisions of this Act, and such payment 14 shall be for the period covered by such return. 15 (h) For the purpose of this section the net income 16 shall be computed in like manner as provided for income- 17 tax purposes under the provisions of the Revenue Act of 18 1934 as incorporated herein and modified hereby. 19 SEC. 6. CROSS-REFERENCES.-Cross reference num- 20 bers enclosed in parentheses immediately following section 21 numbers of this Act are for convenience only, and shall be 22 given no legal effect, except that where any provision of 23 the Revenue Act of 1934 herein reenacted or of this title 24 refers by number to any section included in schedule A of 12 1 section 5 of this Act, such reference shall be deemed to 2 apply, insofar as may be, to the section of this Act bearing 3 the corresponding cross-reference number. 4 SEC. 7. EFFECTIVE DATE; TAXES IN LIEU OF INCOME 5 AND PROFITS TAXES; PAYMENT OF SUCH TAXES FOR 6 SHORT PERIOD.-The provisions of this title shall become 7 operative and in full force and effect immediately upon the 8 declaration by Congress that a state of war exists between 9 the United States and any foreign government and shall 10 remain in full force and effect for the duration of such war 11 and thereafter until the Congress shall declare the emer- 12 gency created by such war to be at an end, and in any event 13 for at least one calendar year. The taxes imposed by this 14 Act shall be in lieu of all other corresponding income or 15 profit taxes which are or may be in effect at the time of 16 such declaration of war, for the period during which this 17 Act shall be in effect. 18 Regardless of any other statutory provision, taxes 19 under any such law, which is superseded by the provisions 20 of this title, shall be due and payable and a return shall be 21 filed covering such taxes on the 15th day of the second 22 month following the effective date of this title. Such 23 return and taxes shall be due for any period which may 24 have elapsed between the close of the last preceding taxable 25 year and the effective date of this title. The Commissioner 13 1 shall make rules and regulations which shall have the force 2 and effect of law in regard to the manner of computing 3 income on the basis of such period of less than one taxable 4 year, and placing such incomes on an annual basis. The 5 provisions of section 47 of the Revenue Act of 1934 shall 6 apply insofar as may be to such return for such period. 7 Fractions of months shall be disregarded for all purposes 8 in connection with computations made pursuant to the pro- 9 visions of this section. 10 SEC. 8. (23 (a)) DEDUCTIONS FROM GROSS IN- 11 COME. (a) In computing net income there shall be allowed 12 as deductions all the ordinary and necessary expenses paid 13 or incurred during the taxable year in carrying on any 14 trade or business, including a reasonable allowance for 15 salaries or other compensation for personal services actually 16 rendered; traveling expenses (including the entire amount 17 expended for meals and lodging) while away from home 18 in the pursuit of a trade or business; and rentals or other 19 payments required to be made as a condition to the con- 20 tinued use or possession, for the purposes of the trade or 21 business, of property to which the taxpayer has not taken 22 or is not taking title or in which he has no equity: Pro- 23 vided, however, That if any such expenses, salaries, com- 24 pensation, or other payments hereinbefore referred to shall 25 be made to any officer or director of a corporation, or to 14 1 any stockholder owning in excess of 1 per centum of any 2 class of the stock of the corporation, or to any relative of 3 such officer, director, or stockholder, such expenses, salaries, 4 compensation, or other payments shall only be allowed as 5 deductions from the gross income of such corporation if 6 they shall amount in total to less than $5,000, and if they 7 exceed the amount of $5,000 they shall be allowed as deduc- 8 tions from gross income only to the extent of such $5,000: 9 And provided further, That promotional, public relation, 10 and all selling costs and expenses shall in no event be 11 allowed as a deduction in a sum larger than the yearly 12 average of such expenses for the three years immediately 13 preceding the effective date of this Act, and if such expenses 14 do in fact exceed such preceding three-year average they 15 shall be allowed as a deduction only to the extent of such 16 average. 17 (b) (23 (b) In computing net income there shall 18 be allowed as deductions all interest paid or accrued within 19 the taxable year on indebtedness, except on indebtedness 20 the interest on which is payable solely from income and is 21 secured by and payable from no other property or funds, 22 and except on indebtedness incurred or continued to pur- 23 chase or carry obligations (other than obligations of the 24 United States issued between September 24, 1917, and 25 January 1, 1921, and originally subscribed for by the tax- 15 1 payer) the interest upon which is exempt from the taxes 2 imposed by this title: Provided, That in no event shall such 3 deduction for interest paid or accrued be allowed in excess 4 of the yearly average of such interest paid or accrued for 5 the three years preceding the effective date of this title, 6 except insofar as such interest is paid or accrued for or on 7 account of moneys borrowed and actually paid to the tax- 8 payer, and if such interest does in fact exceed such preced- 9 ing three-year average it shall be allowed as a deduction 10 only to the extent of such average. 11 (c) (23 (j) ) In computing net income there shall 12 be allowed as deductions, losses from sales or exchanges of 13 capital assets only to the extent provided in section 22 of 14 this Act. 15 (d) (23 (n) ) In computing net income there shall 16 be allowed as deductions exhaustion, wear and tear, repairs, 17 obsolescence, and depletion; and the basis upon which 18 exhaustion, wear and tear, repairs, obsolescence, and deple- 19 tion are to be allowed, in respect of any property shall be 20 as provided in section 114 of the Revenue Act of 1934 as 21 herein incorporated: Provided, That irrespective of the - 22 provisions of either section 23 or section 114 of the said 23 Act the total of deductions allowed for exhaustion, wear and 24 tear, repairs, and obsolescence shall not exceed 2 per centum 25 of the gross income of the taxpayer during the taxable year: 16 1 And provided further, That irrespective of the provisions 2 of either section 23 or section 114 of the Revenue Act of 3 1934 as herein incorporated the total of deductions allowed 4 for depletion shall not exceed the following percentages of the 5 gross income from the property during the taxable year: 6 21 per centum in the case of coal mines. 7 5 per centum in the case of metal mines. 8 71 per centum in the case of sulphur mines or deposits. 9 71 per centum in the case of all other mines or wells. 10 9 per centum in the case of oil or gas wells. 11 (e) Notwithstanding any other provision of law or 12 interpretation made thereunder, no deduction from gross 13 income shall be allowed or allowable under any circum- 14 stances for- 15 (A) Any sums paid to foreign corporations, indi- 16 viduals, or other persons either as dividends or other 17 distribution of earnings, or profits; 18 (B) Any sum received as distribution or disburse- 19 ment of reserves against depletion, depreciation, or 20 other capital charge or account or as distribution in 21 complete or partial liquidation as defined in section 22 115 (i) of the Revenue Act of 1934; or 23 (C) Any sum accounted or paid or reserved for 24 payment as an interest or amortization charge upon 25 any obligation, bonded debt, or security created or 17 1 accruing as the result of an exchange or transference 2 of securities of the same corporation of any other char- 3 acter for such obligation, bonded debt, or security, in 4 the event that such exchange or transference occurred 5 after or within one year prior to the effective date of 6 this title. 7 SEO. 9. (53 (a) TIMES AND PLACE FOR FILING 8 RETURNS.- (a) All Taxes levied, collected, and paid pur- 9 suant to this Act shall be on an annual basis, and all rates, 10 deductions, exemptions, credits, and other accounting com- 11 putations of all kinds whatsoever shall likewise be on an 12 annual basis, but individuals and corporations required to 13 file returns under this Act shall file such returns quarterly, 14 and if on the basis of the calendar year, on or before the 15 1st day of May following for the first quarter, on or before 16 the 1st day of August following for the second quarter, on 17 or before the 1st day of November following for the third 18 quarter, and on or before the 1st day of March following 19 for the fourth quarter. If made on the basis of the fiscal 20 year such returns shall be filed on or before the 1st day 21 of the second month following the close of the first three 22 quarters of any fiscal year, and on or before the 1st day of 23 the third month following the close of the fourth quarter 24 of such fiscal year. As used in this section the term 25 "quarter" shall mean three calendar months. J. 125108-2 18 1 Returns for the first three-quarters of each year shall 2 be made on an estimated annual basis, except that the total 3 tax due and payable for such quarter shall be returned as a 4 sum equal to one-fourth of the total annual tax as computed 5 upon such estimated annual basis. A return for the fourth 6 quarter shall be made on an estimated annual basis, except 7 that such return shall also include an actual return for the 8 entire taxable year, and the total tax due and payable for 9 such fourth quarter shall be returned as a sum equal to the 10 total annual tax due and payable for the entire taxable year 11 on the basis of such actual return for the entire taxable year, 12 minus a sum equal to the total amount of payments pre- 13 viously made for or on behalf of taxes due and payable for 14 the first three quarters of such taxable year pursuant to the 15 provisions of this Act. 16 (b) If the effective date of this title is other than the 17 first day of any quarter for which returns are due pursuant 18 to the provisions of this title, no return shall be due until 19 the date fixed herein for the filing of same at the expiration 20 of the first full quarter for which returns are due as herein- 21 before provided. Such return shall be made for the full 22 quarter for which such return is legally due, and in addition 28 to such full quarter shall include a return for the period 24 commencing at the effective date of this title and expiring 25 at midnight of the last day preceding the first day of such 19 1 full quarter. The Commissioner shall make rules and regu- 2 lations which shall have the force and effect of law in regard 3 to the manner of computing income on the basis of such 4 period of less than one full quarter. The provisions of sec- 5 tion 47 of the Revenue Act of 1934 shall not apply to such 6 return for such period. Fractions of months shall be dis- 7 regarded for all purposes in connection with computations 8 made pursuant to the provisions of this section. 9 (c) Immediately upon the effective date of this Act, 10 the President shall make public, upon such terms and condi- 11 tions as he may see fit, the returns of all taxpayers for the 12 year prior to such effective date, notwithstanding and in 13 addition to any other terms or provisions of law relating 14 to such publicity. 15 SEC. 10. (a) TIME OF PAYMENT OF TAX-The 16 full amount of the tax imposed by this Act shall be paid 17 upon the date upon which a return is filed pursuant to 18 the provisions of this Act, and such payment shall be for 19 the period covered by such return. di 20 SEC. 11. PENALTY.-In addition to the tax imposed 21 by this Act, there shall be imposed a penalty to be added 22 to the tax and collected as a part thereof, equal to 5 per 23 centum of the amount by which the tax due and payable 24 for the fourth quarter of any taxable year, pursuant to the 25 return filed in accordance with section 9 of this Act, exceeds 20 1 one-fourth of the total amount of such tax for the entire 2 taxable year, unlèss it shall appear to the satisfaction of 3 the Commissioner that such excess is not due to the with- 4 holding of amounts properly apportionable to the first three 5 quarters of the taxable year. 6 Sec. 12. (102 (a) SURTAX ON CORPORATIONS IM- 7 PROPERLY ACCUMULATING SURPLUS.-There shall be 8 levied, collected, and paid for each taxable year upon the 9 adjusted net income of every corporation (other than a 10 personal holding company as defined in section 351 of the 11 Revenue Act of 1934) if such corporation, however created 12 or organized, is formed or availed of for the purpose of 13 preventing the imposition of the surtax upon its shareholders 14 or the shareholders of any other corporation, through the 15 medium of permitting gains and profits to accumulate instead 16 of being divided or distributed, a surtax equal to the sum 17 of the following: 18 (1) 98 per centum of the amount of the adjusted net 19 income not in excess of $100,000; plus 20 (2) 100 per centum of the amount of the adjusted 21 net income in excess of $100,000. 22 SEC. 13. OVERPAYMENT OF INSTALLMENTS.-If the 23 taxpayer has paid, on the basis of returns filed for the first 24 three quarters of any taxable year, an amount which exceeds 25 his tax liability pursuant to this Act for the entire year, 21 1 such overpayment shall be credited against the tax due 2 from such taxpayer under the terms of this or any previous 3 or subsequent Act for the next ensuing quarter or quarters, 4 as the case may be; or shall be refunded at the option of 5 the taxpayer. Section 322 (a) of the Revenue Act of 1934 6 as herein incorporated is superseded only to the extent neces- 7 sary to give effect to this section. 8 SEC. 14. (351 (a)) IMPOSITION OF SURTAX ON 9 PERSONAL HOLDING COMPANIES.-There shall be levied, 10 collected, and paid, for each taxable year upon the undis- 11 tributed adjusted net income of every personal holding 12 company a surtax equal to the sum of the following: 13 (1). 98 per centum of the amount thereof not in excess 14 of $100,000; plus 15 (2) 100 per centum of the amount thereof in excess 16 of $100,000. 17 SEC. 15. BOARD OF TAX APPEALS; JURISDICTION; 18 RULE OF EVIDENCE.-If the operation of any rule, stand- 19 ard, or limitation established by any subsection of section 8 20 or by section 20, or by section 22 of this title, shall result 21 in a gross and unconscionable factual disparity or error, or 22 if the operation of such section or subsection shall entail an 23 unconstitutional result as against any taxpayer, such tax- 24 payer may file a claim for adjustment or refund with the 25 Board of Tax Appeals, or its successor in law or in fact. 22 1 Such Board, in addition to all other powers and duties, is 2 hereby authorized and empowered to hear and determine 3 claims filed pursuant to this section, and if such determina- 4 tion is in favor of the claimant, such adjustment or refund 5 as is allowed shall be a legal claim against the United States. 6 No such claim shall be heard or determined unless the full 7 sum in dispute has been paid into the Treasury of the United 8 States, as though actually due; nor shall any such claim be 9 heard or determined until a date subsequent to the expira- 10 tion of this title, but such delay shall not prejudice in any 11 respect, by limitation or otherwise, the rights of the claim- 12 ant. In any such proceeding, there shall be a presumption 13 that the sum in dispute was validly collected and paid, and 14 the burden shall be upon the claimant to show the contrary. 15 All other rules, regulations, and statutory provisions relating 16 to tax refunds shall apply to proceedings brought under this 17 title, so far as applicable, except that the remedy herein 18 provided for gross or unconscionable factual disparity or 19 error or unconstitutional result under sections 8, 20, and 22 20 of this title shall be an exclusive remedy. 21 SEC. 16. ADDITIONAL PENALTIES.-In addition to all 22 other penalties provided by law, any person who willfully 23 violates any provision of this title or who willfully fails 24 to pay such tax, make such return, keep such records, supply 25 such information as required by this title, or who willfully 28 1 attempts in any manner to evade or defeat any tax imposed 2 by this title or the payment thereof, shall be liable to a 3 penalty of three times the amount of such tax withheld or 4 evaded on the basis or as a result thereof, and the failure 5 to pay such penalty within thirty days of its determination 6 shall constitute a misdemeanor punishable by a fine of not 7 more than $10,000 or imprisonment for not more than one 8 year, or by both such fine and imprisonment. 9 SEC. 17. GENERAL AUDITOR.-There shall be ap- 10 pointed by the chairman of the Senate Finance Committee, 11 with the advice and consent of the Senate, a general auditor, 12 who shall at all times have access to all records, files, and 13 documents in the possession of the Treasury Department 14 or any other department, bureau, or agency of the United 15 States relating to the tax imposed by this title. Such gen- 16 eral auditor shall hold office for the duration of the effective- 17 ness of this title and shall not be removable except for 18 misconduct. He shall have the power to subpena witnesses 19 and administer oaths. He shall, upon request by any Mem- 20 ber of Congress, produce for the official use of such Member 21 all details of any record, file, or document relating to the 22 tax imposed by this title. 23 SEC. 18. CREDITS FOR BOTH NORMAL TAX AND SUB- 24 TAX; PERSONAL EXEMPTIONS.-There shall be allowed for 24 1 the purposes of the normal tax and the surtax the following 2 credits against net income: 3 (a) (25 (b) (1) In the case of a single person or a 4 married person not living with husband or wife, a personal 5 exemption of $500; or in the case of married persons living 6 with husband or wife, an exemption of $1,000. A husband 7 and wife living together shall receive but one personal ex- 8 emption. 9 (b) (25 (b) (2) ) $100 for each person (other than 10 husband or wife) dependent upon and receiving his chief 11 support from the taxpayer if such dependent person is under 12 eighteen years of age or is incapable of self-support because 13 mentally or physically defective. 14 (c) Notwithstanding any other provision of this seo- 15 tion or other provision of law, no personal exemption shall 16 be allowed to any minor child whose parent or parents are 17 alive, but such minor child shall make a joint return with 18 such parent or parents and only such personal exemption 19 as is applicable to such parent or parents shall apply to 20 the aggregate income included in such joint return. 21 (51) INDIVIDUAL RETURNS 22 SEC. 19. (a) REQUIREMENTS.-The following individ- 23 unls shall each make under oath a return stating specifically 24 the items of his gross income and the deductions and credits 25 allowed under this title: 25 1 (1) Every individual having a net income for the tax- 2 able year of $500 or over, if single, or if married and not 3 living with husband or wife; 4 (2) Every husband and wife having a net income 5 for the taxable year of $1,000 or over, if living together; and 6 (3) Every individual having a gross income for the 7 taxable year of $5,000 or over, regardless of the amount 8 of his net income. 9 (b) HUSBAND AND WIFE.-If a husband and wife 10 living together have an aggregate net income for the taxable 11 year of $1,000 or over, or an aggregate gross income of 12 $5,000 or over, the income of both shall be included in a 13 single joint return, and the tax shall be computed on the 14 aggregate income. 15 (c) MINOR CHILDREN.-If a minor child whose parent 16 or parents are alive has a net income of $100 or more, his 17 income shall be included in a single joint return with his 18 parent or parents and the tax shall be computed on the 19 aggregate income. If such parents file separate returns, 20 such joint return shall be with the parent with which the 21 minor child resides; and if such parents file separate returns 22 and the minor child resides with neither, such return may 23 be filed with either such parent at the option of the child. 24 (d) PERSONS UNDER DISABILITY.-If the taxpayer is 25 unable to make his own return, the return shall be made 26 1 by & duly authorized agent or by the guardian or other 2 person charged with the care of the person or property of 8 such taxpayer. 4 Sec. 20. LOANS TO BE TREATED AS DIVIDENDS.-For 5 all purposes under this title, and notwithstanding any other 6' provisions of law to the contrary, any loan or advance 7 made by any corporation to a stockholder or officer or for 8 the benefit or on behalf of any stockholder or officer shall 9 be treated as a dividend of such corporation for all purposes 10 in connection with any tax imposed upon such officer or 11 stockholder, but such loan or advance shall not be treated 12 as a dividend of such corporation for any purpose in con- 13 nection with any tax imposed upon such corporation. 14 SEC. 21. (272 (a)) DEFICIENCY: PETITION TO 15 BOARD OF TAX APPRALS.-If in the case of any taxpayer 16 the Commissioner determines that there is a deficiency 17 in respect of the tax imposed by this title, the Commissioner 18, is authorized to send notice of such deficiency to the tax- 19 payer by registered mail. Within thirty days after such 20 notice is mailed (not counting Sunday or a legal holiday 21 within the District of Columbia as the thirtieth day), the 22 taxpayer may file a petition with the Board of Tax Appeals 23 for & redetermination of the deficiency. Assessment of a 24 deficiency in respect of the tax imposed by this title and 25 distraint or proceeding in court for its collection may be 27 1 made, begun, or prosecuted after such notice has been 2 mailed to the taxpayer, but in the event that the decision 3 of the Board subsequently becomes final in favor of the 4 taxpayer, he shall be entitled to a refund of such amount 5 as has been collected on the basis of such deficiency. In 6 any proceeding relative to a deficiency in respect of the 7 tax imposed by this title, there shall be a presumption that 8 the finding of such deficiency by the Commissioner is 9 correct and the burden shall be upon the taxpayer to show 10 the contrary to the satisfaction of the tribunal before which 11 such proceeding is brought. 12 SEC. 22. (117 (d) LIMITATION ON CAPITAL 13 LOSSES.-Losses from sales or exchanges of capital assets 14 shall be allowed only to the extent of $2,000. In no event 15 and under no circumstances shall such limitation be 16 extended on account or to the extent of capital gains. If 17 a bank or trust company incorporated under the laws of 18 the United States or of any State or Territory, a substantial 19 part of whose business is the receipt of deposits, sells any 20 bond, debenture, note, or certificate or other evidence of 21 indebtedness issued by any corporation (including one issued 22 by a government or political subdivision thereof), with 23 interest coupons or in registered form, any loss resulting 24 from such sale (except such portion of the loss as does 25 not exceed the amount, if any, by which the adjusted basis 28 I of such instrument exceeds the par or face value thereof) 2 shall not be subject to the foregoing limitation, and shall not 8 be included in determining the applicability of such limita- 4 tion to other losses. 5 SEC. 23. JURISDICTION OF COURTS.-No suit for the 6 purpose of restraining the assessment or collection of any 7 tax, tax penalty, or tax deficiency as determined by the 8 Commissioner shall be maintained in any court. Nor shall 9 any action by any party to restrain either the voluntary or 10 involuntary payment of any such tax, tax penalty, or tax 11 deficiency be maintained in any court irrespective of the 12 character of the party defendant, and irrespective of the 13 circumstances. 14 TITLE II 15 INDUSTRIAL MANAGEMENT PROVISIONS 16 SECTION 101. SHORT TITLE-This title may be cited 17 as the Industrial Management Draft Act." 18 SEC. 102. CREATION OF INDUSTRIAL MANAGEMENT DUI 19 BOARD AND INDUSTRIAL MANAGEMENT CORPS; POWER 20 AND DUTIES.-There is hereby created as an independent 21 office & board to be known as the "Industrial Management 22 Board' to consist of five members appointed by the Presi- 23 dent, by and with the advice and consent of the Senate. At 24 least three of such members shall be civilians. Such Board 25 shall be officered and staffed in such manner as the President 29 1 may designate, and shall exercise the powers conferred upon 2 it by this title and such additional powers as the President 3 may from time to time confer upon it. Such Board shall 4 have jurisdiction and control over the Industrial Manage- 5 ment Corps, which is hereby created and which shall be a 6 military corps; but in addition to all powers conferred upon 7 such Board, the Secretary of War, through such officers as 8 he may designate, shall have disciplinary powers in like 9 manner and to like extent as over any corps of the Regular 10 Army, including the power of court martial for any offense 11 cognizable under the law by military authority, and shall 12 also have power of court martial or other military process 13 for violation of any rule or regulation of the Industrial Man- 14 agement Board. It shall be the duty of the Industrial 15 Management Board to cooperate to the utmost possible extent 16 with all commissions, boards, or other authorities created 17 or existing for the purpose of successfully prosecuting such 18 war. In the event of any jurisdictional dispute or diffi- 19 culty with any other Government department, board, or 20 agency the President may decide such dispute or difficulty 21 by Executive order. The Industrial Management Board 22 shall have power to make rules and regulations for the 23 government and control of such Industrial Management 24 Corps, and such rules and regulations shall have the force 25 and effect of law. 30 1 SEC. 103. CREATION OF LOCAL AND DISTRICT 2 BOARDS.-The President is authorized and directed, imme- 3 diately upon the declaration by Congress that a state of war 4 exists between the United States and any foreign govern- 5 ment, to create and establish throughout the several States 6 and subdivisions thereof and in the Territories and the Dis- 7 triet of Columbia local boards, and where, in his discretion 8 practicable, there shall be one such local board in each county 9 or similar subdivision in each State and additional boards 10 may be created within counties at his discretion. Such 11 boards shall be appointed by the President, and shall con- 12 sist of three or more members, to be chosen from among 13 the local authorities of such subdivisions or from other citi- 14 zens residing in the subdivision or area over which the 15 respective boards will have jurisdiction, under rules and 16 regulations to be prescribed by the President. Such boards 17 shall have power within their respective jurisdiction to hear 18 and determine, subject to review as hereinafter provided, all 19 questions of exemption under this Act, and all questions 20 of or claims for including or discharging individuals or 21 classes of individuals from the draft as provided in this Act. 22 The President is hereby authorized and directed to 23 establish additional boards, one or more in each State in 24 his discretion, to be called " district boards consisting of 25 such number of citizens as he may determine, who shall be 31 1 appointed by the President. Such district boards may, in 2 their discretion, review on appeal and affirm, modify, or 3 reverse any decision of any local board having jurisdiction 4 in the area in which such district board has jurisdiction 5 under the rules and regulations prescribed by the President. 6 The decisions of such district boards shall be final, except 7 that if the President shall later modify any rule, regulation, 8 or order upon which such decision was based, such decision 9 may be reconsidered by the said district board. 10 Any vacancy in any such local board or district board 11 shall be filled by the President, and any member of such 12 local board or district board may be removed by the Presi- 13 dent whenever he considers that the public interest requires 14 such removal. 15 SEC. 104. POWERS OF PRESIDENT; RULES AND REG- 16 ULATIONS.-The President shall make rules and regula- 17 tions governing the organization and procedure of such 18 local boards and district boards, and providing for and gov- 19 erning appeals from such local boards to such district boards, 20 and reviews of the decisions of any local board by the dis- 21 trict board having jurisdiction, and determining and pre- 22 scribing the several areas in which the respective local 23 boards and district boards shall have jurisdiction, and all 24 other rules and regulations necessary to carry out the terms 25 and provisions of this title, and shall provide for the issuance 82 1 of certificates of exemption, or partial or limited exemptions, 2 to such persons as may be exempted from the terms and 3 provisions of this Act. 4 SEC. 105. REGISTRATION OF PERSONS.-All persons 5 engaged, wholly or partially, in any executive, supervisory, 6 administrative, or policy-forming position with or in con- 7 nection with any technical, industrial, or manufacturing 8 plant or establishment of any kind whatsoever, whatever 9 the form of ownership thereof, corporate or otherwise, or 10 who have been engaged within three years of any declara- 11 tion of war as heretofore referred to, shall register in ac- 12 cordance with regulations to be prescribed by the President, 13 and upon proclamation by the President or other public 14 notice to be given by him which proclamation or public 15 notice shall be as nearly contemporaneous with any declara- 16 tion of war as may be. All such registration shall be con- 17 ducted and recorded by local boards, as herein established, 18 and shall be at such times and places as the President, or 19 in the event of his failure to do so the local board, shall 20 designate. Every such person shall be deemed to have 21 notice of the requirement of this Act upon the publication 22 or other notice as aforesaid given by the President or by 23 his direction, and it shall be the duty of all persons of the 24 aforesaid engagements to present themselves to the local 25 board having jurisdiction over the areas in which they reside 33 1 and submit thereat for registration as herein provided. Any 2 person who shall willfully fail or refuse to present himself 3 for registration or submit thereto as herein provided, 4 shall be guilty of a misdemeanor, and shall, upon conviction 5 in the District Court of the United States having jurisdiction 6 thereof, be punished by imprisonment of not less than one 7 nor more than five years or by a fine of not less than $1,000 8 nor more than $10,000, or by both such fine and imprison- 9 ment, and shall thereupon be duly registered: Provided, 10 That in the call of the docket precedence shall be given, 11 in courts trying the same, to the trial of criminal proceeding 12 under this Act. In the case of temporary absence from 13 actual place of legal residence, any person subject to this 14 Act may register by mail pursuant to regulations to be 15 made by the President. For the purposes of criminal 16 prosecution under this Act a person shall be deemed prima 17 facie to be engaged in executive, supervisory, administra- 18 tive, or policy-forming position within the terms of this 19 Act if his salary, compensation, or other emoluments shall 20 equal or exceed during any previous year within a three- 21 year period of the declaration of war herein referred to the 22 sum of $4,000: Provided further, That the President may 23 at such intervals as he may desire from time to time require 24 any person who has become engaged in any position of 25 which the occupant has or would have been subject to reg- J. 125108 3 34 1 istration pursuant to this title since the last preceding date 2 of registration and on or before the next date set for registra- 3 tion by proclamation by the President, except such persons 4 as are exempt from such registration hereunder, to register 5 in the same manner and subject to the same requirements 6 and liabilities as those previously registered under the terms 7 hereof: Provided further, That all such persons when reg- 8 istered shall be liable to combat military service and to draft 9 under the terms of any other Act of Congress and under 10 such regulations as may be prescribed thereunder: And 11 provided further, That in the event that any member of 12 the Industrial Management Corps shall be removed from 13 the position which he occupied prior to declaration of war 14 pursuant to the provisions of section 107 of this title and 15 be not immediately transferred to some other position or 16 status under the Industrial Management Board, he shall 17 forthwith be transferred to such other branch of the Military 18 Establishment as the Secretary of War may direct, provided 19 that he is otherwise qualified for such service. 20 SEC. 106. Exemptions.-The following classes of 21 persons shall be exempt from registration under the terms 22 of this Act: 23 (a) Officers and enlisted men of the Regular Army, 24 the Navy, the National Guard, Naval Militia, and all other 35 1 persons in the military and naval services of the United 2 States. 3 (b) Persons found by local boards to be morally 4 deficient for service in the military forces of the United 5 States, or insane. 6 (c) Aliens who have not declared their intention to 7 become citizens. 8 (d) Persons who may be exempted by unanimous 9 vote of a local board, confirmed by a unanimous vote of a 10 district board for unique, exceptional, extraordinary, and 11 unforeseen reasons which make satisfactory service in the 12 military forces of the United States impossible, but in no 13 case shall mere physical disability be sufficient cause for 14 exemption under this section. 15 SEO. 107. POWER OF THE PRESIDENT; STATUS AND 16 POWERS OF REGISTRATION.-Whenever the President shall, 17 in his discretion, deem any technical, industrial, or manu- 18 facturing plant or establishment or any group of such com- 19 prised in an industry to be necessary to the maintenance of 20 the Military Establishment or the effective operation of the 21 military forces or the maintenance of the national interest 22 during the emergency, he may proclaim such plant, estab- 23 lishment, or industry so to be. Upon making such procla- 24 mation the President shall determine and state in the said 25 proclamation either that- 36 1 (a) Any person registered pursuant to the provisions 2 of this title engaged or employed wholly or partially in such 3 plant, establishment, or industry; or 4 (b) Any person registered pursuant to the provisions 5 of this title engaged in a capacity which involves the deter- 6 mination, or a part in the determination, of the business 7 and industrial policy of such plant, establishment, or in- 8 dustry, including in the case of corporations the president, 9 directors, vice presidents, and general manager or those 10 occupying corresponding positions among others- 11 shall be drafted for service in the Industrial Managements 12 Corps. Thereupon each person 80 drafted shall become a 13 member of the United States Army and of the Industrial 14 Management Corps thereof, and subject to military dis- 15 cipline through such officers as the Secretary of War may 16 designate pursuant to section 102 of this title. Such person 17 shall receive a commission from the said Army of a rank 18 not superior to brigadier general, and if possible such rank 19 shall correspond approximately to the Regular Army rank 20 of an officer in charge of a like number of men. Such corps 21 shall be maintained, organized, and equipped in such manner 22 as the Indistrial Management Board may direct. Members 28 of the Industrial Management Corps shall receive from their 24 employers only such compensation and allowances as are 25 received by officers of the Regular Army of even rank and 37 1 grade, and in no case and under no circumstances shall such 2 compensation and allowances exceed the amount paid to 3 officers of the Regular Army of even rank and grade. All / 4 members of the Industrial Management Corps of the Army 5 of the United States shall, from the date of enrollment 6 therein, be subject to the laws and regulations governing 7 the Regular Army, except as to promotions, so far as such 8 laws and regulations are applicable to persons whose per- 9 manent retention in the military service on the active or 10 retired list is not contemplated by existing law, and the dura- 11 tion of military service of such members of the Industrial 12 Management Corps shall be for the duration of the war and 13 for such time thereafter as the President may declare to be 14 a period of national emergency. Each member of the In- 15 dustrial Management Corps shall continue to occupy such 16 position, in his normal status, except as otherwise provided 17 by this title in any technical, manufacturing, or indus- 18 trial plant or establishment as he occupied prior to the 19 effective date of this title, unless promoted or demoted 20 by the management thereof with the consent of the In- 21 dustrial Management Board. If at any time, however, 22 the Industrial Management Board shall find the serv- 23 ices of such member of the Industrial Management Corps to 24 be inefficient, unsatisfactory, or contrary to the public in- 25 terest, such Board may order his removal therefrom and 38 1 thereupon he shall be assigned to such other branch of the 2 Military Establishment as provided in section 105 of this 3 title. Upon such removal or in the event of any vacancy 4 for any cause, the owners or managers of such plant or 5 establishment shall replace such removed person in the 6 normal manner thereupon the person chosen as such replace- 7 ment shall be enrolled forthwith as a member of the Industrial 8 Management Corps. 8 9 SEC: 108. LIMITATION ON INCOME OF MEMBERS OF 10 INDUSTRIAL MANAGEMENT CORPS; PENALTIES.-No or 11 member of the Industrial Management Corps shall at any 12 time receive any salary, gift, compensation, or any other 13 emolument whatsoever for services rendered during war time 14 from any partnership, association, trust, corporation, or other 15 person interested in or connected with any technical, indus- 16 trial, or manufacturing plant or establishment for or in which 17 such member may render services during time of war. Such 18 member shall receive for services rendered during time of 19 war only such compensation and allowances as shall equal 20 the amount paid to officers of the Regular Army of even 21 rank and grade, and no other person shall receive on his 22 behalf or account nor shall any person receive in trust or 23 by other means any additional compensation or allowance. 24 If any member of the Industrial Management Corps does 25 receive such additional salary, gift, compensation, or emolu- 39 1 ment he shall be forthwith dishonorably discharged from 2 the United States Army, and such dismissal shall be in 3 addition to other penalties. Neither shall any such person 4 be permitted to escape such service or to be discharged 5 therefrom prior to the expiration of his term of service by 6 the payment of money or any other valuable thing whatso- 7 ever as consideration for his release from such service or 8 liability thereto. Any violation of the terms of this section 9 shall constitute a felony and shall be punishable by a fine 10 of not exceeding $10,000 or by imprisonment for not more 11 than ten years, or by both such fine and imprisonment. 12 SEC. 109. DEFINITION.-Where used in this title the 13 phrase technical, industrial, or manufacturing plant or 14 establishment" shall include, among others, gas and electric 15 power plants, mines and wells, railroads, pipe lines, and 16 other public utilities, as well as all other plants or establish- 17 ments of consequence to the successful prosecution of war. 18 SEO. 110. EMERGENCY POWER; REQUISITION OF IN- 19 DUSTRIAL RESOURCES.-In the event of emergency, or in 20 the event that inefficiency, labor dispute, or inability to 21 agree on rates or terms of public contracts or any other 22 cause has impaired or delayed the usefulness of any technical, 23 industrial, or manufacturing plant or establishment to the 24 successful prosecution of any war, the Industrial Manage- 25 ment Board may upon a finding of such fact, and shall 26 upon the request of the President, requisition the physical 40 1 establishment or any part thereof and resources of such 2 plant or establishment and operate it under such rules and 3 regulations as it may deem proper in the circumstances, 4 and with such personnel as it may provide. If the Presi- 5 dent designates any other governmental agency to operate 6 such plant or restablishment the jurisdiction of the Industrial 7 Management Board under this section shall be superseded. 8 The owner of such plant or establishment shall be entitled 9 to a return of such plant or establishment at the termina- 10 tion of the effectiveness of this title, together with just 11 compensation for such loss as he may have suffered as a 12 result of such requisition. Such loss shall be determined 13 by the Industrial Management Board upon application 14 made within thirty days of the return of such plant or 15 establishment to the owner, and when so determined shall 16 be a legal. claim against the United States. The jurisdiction 17 of the Industrial Management Board is extended for a 18 period of one year beyond the expiration of this Act for 19 determination of claims filed hereunder, and such extension 20 of time for such purpose shall be an exception to any 21 inconsistent provision of this Act. 22 TITLE III 23 COMMODITY CONTROL PROVISIONS 24 SECTION 201. SHORT TITLE.-This title may be cited 25 as the War Commodity Control Act." 41 1 Sec. 202. DEFINITIONS.-For the purposes of this 2 title the term commodity" shall mean any article of 3 commerce sold or offered for sale upon a commodity ex- 4 change; the term commodity exchange" shall mean any 5 central market place where articles of commerce are sold 6 on a short, long, future, or marginal basis, or where common 7 articles of commerce are continuously sold without being 8 present or in view of either the buyer or seller, or whether 9 "bid and asked" quotations are commonly furnished on 10 demand for articles of commerce, or any place commonly 11 known as a commodity exchange." 12 Sec. 203. COMMODITY CONTROL COMMISSION.- 13 There is hereby created the Commodity Control Commission, 14 hereinafter in this title called the Commission to consist 15 of five members appointed by the President, with the advice 16 and consent of the Senate, for a term of office to expire at 17 the expiration date of this title, unless sooner removed by 18 the President in his discretion. Such members shall receive 19 the same compensation and allowances as are paid to officers 20 of the Regular Army of the rank of colonel. No such 21 member, so appointed, shall refuse to serve as & member 22 of such Commission. Neither during his term of office nor 23 thereafter, on account of services rendered during such term, 24 shall any such member receive, nor shall any other person 25 receive on his behalf, any reward, compensation, or emolu- 42 1 ment whatsoever from any source directly or indirectly regu- 2 lated or affected by the provisions of this title, nor shall any 3 member, attorney, agent, or employee of the Commission 4 in any manner, directly or indirectly, participate in the 5 determination of any question affecting his personal interest, 6 or the interests of any corporation, partnership, association, 7 or trust in which he is directly or indirectly interested. 8 SEC. 204. POWERS OF Commission.-The Commis- 9 sion shall have power, in its discretion, if it deem the public 10 interest and the successful prosecution of the war to so 11 require or render advisable: 12 (a) To close any commodity exchange. 13 (b) To publish rules and regulations with the force 14 and effect of law for the government of such commodity 15 exchanges as are not closed, which rules and regulations 16 may include, among other things, the regulation of the prices 17 or parities at which commodities may be sold; the establish- 18 ment of priorities and rationing in favor of purchasers or 19 users most vitally linked with the successful prosecution of 20 the war; the limitation or fixation of fees, commissions, or 21 other charges collected by such commodity exchanges or 22 their agents for any service whatsoever; the elimination or 23 limitation of short, long, future, and marginal selling and 24 hedging and speculation of all types and varieties whatsoever. 43 1 (c) To prohibit the publication of prices quoted on 2 commodities sold or formerly sold on such commodity 3 exchanges and to proscribe and prohibit the delivery or 4 transmission for delivery through the mails or by telegraph, 5 telephone, wireless, or other form of communication of such 6 prices or of any quotation or report of the price of or con- 7 tracts or sales made of commodities sold or formerly sold on 8 such exchanges. 9 SEO. 205. ADDITIONAL POWERS OF COMMISSION.- 10 If the Commission shall close all or any commodity ex- 11 changes it shall have power, in its discretion, if it deem the 12 public interest and the successful prosecution of the war so 13 require or render advisable- 14 (a) To requisition the physical plant of or place occu- 15 pied by any commodity exchange or such part of such plant 16 or place, together with such elevators, warehouses, and 17 other marketing facilities wherever located, including pri- 18 vate telegraph and telephone wires, as it may require; and 19 to requisition all stores or supplies of any such commodities 20 held by any person. 21 (b) To fix the price at which any commodity may be 22 sold and to limit sale of such commodity to itself; and 23 to establish allocations, quotas, and priorities for sales to 24 itself and others, either at the time of such sale or in ad- 25 vance of such sale. 44 1 (c) To resell any commodity purchased by itself at 2 cost, plus such differential as shall equal the cost of handling 3 and other expenses; and to establish allocations, quotas, and 4 priorities among purchasers and users in favor of those most 5 vitally linked with the successful prosecution of the war. 6 (d) To conserve or limit to war purposes the use of 7 any commodity. 8 SEC. 206. FEES AND COMMISSIONS PROHIBITED.- 9 At no time and under no circumstances shall any fee, com- 10 mission, or other emolument be paid as or in lieu of broker- 11 age on any transaction in which the Commission is either 12 buyer or seller of a commodity. 13 SEC. 207. STANDARD FOR FIXING OF PRICES.-In 14 fixing any price pursuant to the provisions of this title for 15 any agricultural commodity within the purview of this title, 16 the Commission shall be guided but not bound by such level 17 as will give such agricultural commodity a purchasing power 18 with respect to articles that farmers buy equivalent to the 19 purchasing power of agricultural commodities in the base 20 period, and shall be guided, further, by the necessities of the 21 Government and the public interest in successful prosecution 22 of the war. The base period shall be all or any period of five 23 consecutive years or more, in the discretion of the Com- 24 mission, of the period commencing on January 1 of the 25 twentieth year preceding the effective date of this title and 45 1 ending on January 1 of the second year preceding such 2 effective date. 3 SEO. 208. CONTROL OF OTHER AGENCIES.-In the 4 event that any other governmental authority or agency 5 is actually engaged in the control, management, operation, 6 or government of any industrial establishment connected 7 with or necessary to the successful prosecution of the war, 8 any request for priority in the allocation of commodities 9 to such industrial establishment by such authority or agency 10 shall be binding upon the Commission. 11 SEC. 209. APPROPRIATION.-There is hereby author- 12 ized to be appropriated for the creation of a revolving fund 13 to enable the Commission to make purchases of commodities 14 as herein authorized the sum of $500,000,000. All moneys 15 received by the Commission in the exercise of its powers 16 under this title shall revert to such revolving fund. 17 SEC. 210. COMPENSATION TO OWNERS.-The owner 18 of any physical plant or place or elevator, warehouse, other 19 marketing facilities, or private telephone or telegraph wires 20 subjected to requisition pursuant to the provisions of this 21 title shall be entitled to the return of such property at the 22 termination of the effectiveness of this title, together with 23 compensation for such loss as he may have suffered as & 24 result of such requisition. Such loss shall be determined 25 by the Commission upon application made within thirty 46 1 days of the return of such property to the owner, and when 2 so determined shall be & legal claim against the United 3 States. The jurisdiction of the Commission is extended 4 for a period of one year beyond the termination of this title 5 for determination of claims filed hereunder, and such exten- 6 sion of term for such purpose shall be an exception to any 7 inconsistent provision of this Act. 8 SEC. 211. ILLEGAL EXCHANGE AND TRAFFIC.- 9 Where, under the authority of this title, the Commission 10 has closed all exchanges in the United States dealing in 11 the purchase or sale of any commodity, it shall be unlawful 12 for any person to establish an exchange or to deal or 13 traffic in the purchase or sale of such commodity in any 14 extemporized market or over-the-counter trade or in any 15 other manner. 16 SEC. 212. EFFECTIVE DATE.-Notwithstanding the 17 provisions of any other section of this Act, the effective 18 date of this title shall be upon the declaration of any war 19 between the United States and any foreign power or upon 20 the declaration by the President that an emergency has 21 arisen due to the possible future declaration of war or due 22 to the existence of & state of war between two foreign 23 powers. The effectiveness of this title shall cease upon & 24 declaration by Congress that the emergency herein referred 25 to has ceased to exist. 47 1 TITLE IV 2 SECURITIES EXCHANGE PROVISIONS 3 SECTION 301. SHORT TITLE.-This Act may be cited 4 as the War Securities Exchange Control Act." 5 SEC. 302. POWERS OF THE PRESIDENT.-In addition 6 to all other powers possessed by the President by law as 7 of the effective date of this title, and not in substitution 8 therefor, the President may by proclamation close any or 9 all exchanges where securities are bought, sold, or offered 10 for sale and by rules or regulations prevent any public 11 or private sale of any such securities. Such rules and regu- 12 lations shall have the force and effect of law. Such procla- 13 mation shall remain effective, if 80 intended by the Presi- 14 dent, for the duration of the effectiveness of this title. For 15 the purposes of this section, the word "security" shall be 16 defined in like manner as the same is defined by section 2 17 of the Securities Act of 1933, as amended by Act approved 18 June 6, 1934, as in effect on March 15, 1935. 19 TITLE V 20 WAR FINANCE CONTROL 21 SECTION 401. SHORT TITLE.-This title may be cited 22 as the War Finance Control Act." 23 SEC. 402. FINANCE CONTROL Commission.-There 24 is hereby created the War Finance Control Commission, 25 hereinafter in this title called the "Commission", to con- 48 1 sist of five members appointed by the President, with the 2 advice and consent of the Senate, for a term of office to 8 expire at the expiration date of this Act, unless sooner 4 removed by the President in his discretion. Such members 5 shall receive the same compensation and allowances as 6 are paid to officers of the Regular Army of the rank of 7 colonel. No such member, so appointed, shall refuse to 8 serve as a member of such Commission. Neither during 9 his term of office, nor thereafter on account of services ren- 10 dered during such term, shall any such member receive, 11 nor shall any person receive on his behalf, any reward, 12 compensation, or emolument whatsoever from any source 13 directly or indirectly regulated or affected by the provisions 14 of this title, nor shall any member, attorney, agent or em- 15 ployee of the Commission in any manner, directly or 16 indirectly, participate in the determination of any question 17 affecting his personal interest, or the interest of any cor- 18 poration, partnership, association, or trust in which he is 19 directly or indirectly interested. 20 SEC. 403, POWERS OF COMMISSION; APPROVAL OF 21 SECURETIES.-No security may be registered with the 22 Securities and Exchange Commission as provided in the 23 Securities Act of 1933, as amended, and as in effect March 24 15, 1935, or its successor in law or in fact, unless it shall 25 have been approved previously by the Finance Control 49 1 Commission pursuant to the provisions of this title. No 2 security the total or aggregate par, face, or actual value of 3 which plus the aggregate par, face, or actual value of any 4 other securities issued by the same person since the effec- 5 tive date of this title, is in excess of $100,000, shall be 6 sold or offered for sale or for subscription either publicly 7 or privately unless such security shall have been approved 8 previously by the Finance Control Commission pursuant 9 to the provisions of this title. Such approval shall be 10 granted if the Commission find, after hearing held upon 11 notice to any applicant for such approval, if such hearing 12 is requested, that either- 13 (a) The security is part of a current transaction matur- 14 ing in less than nine months; 15 (b) The security is issued solely in exchange for an 16 outstanding security and that no money or other property 17 consideration is involved in the transaction; 18 (o) The security is offered for resale, having been 19 originally sold prior to the effective date of this Act or 20 pursuant to its provisions; or 21 (d) The sale of such security is compatible with the 22 public interest in the successful prosecution of war, and that 23 the proceeds from the sale of such security will be applied 24 to the extension or improvement of the capital plant or J. 125108 4 50 1. efficiency of an industry, establishment, or agency necessary 2 or desirable to the successful prosecution of war. 3 Under no circumstances shall the Commission grant ap- 4 proval under this section if it shall find none of the pre- 5 ceding conditions to exist, nor shall it grant such approval 6 if it shall find that the proceeds from the sale of such securi- 7 ties will or may be applied to purposes not connected with 8 the successful prosecution of war or that the sale of such 9 securities may attract or absorb funds potentially more use- 10 ful to the successful prosecution of war. 11 SEC. 404. POWERS OF COMMISSION: FINANCING.- 12 The Commission may, upon application to the Commission 13 by any officer or agent of the United States or upon appli- 14 cation of any officer or agent of any industry, establishment, 15 or agency, after finding that due to inadequate capital plant 16 or other inadequate financial resources the efficiency or use- 17 fulness of any such industry, establishment, or agency for 18 the successful prosecution of war is impaired or impeded, 19 loan or advance such sums as may in its judgment be neces- 20 sary to eliminate such impaired or impeded usefulness or 21 efficiency, upon such security, if any, as it deems necessary. 22 If such loan or advance is made upon application of any 23 officer or agent of the United States, no reimbursement 24 except interest at & rate to be fixed by the Commission 25 shall be required during the effective date of this Act, but 51 1 the United States shall have a lien superior to all other 2 liens for the repayment of such loan or advance upon all 3 real assets or fixtures constructed or purchased with such 4 funds. 5 SEC. 405. TAX CREDITS AND ALLOWANCES.-No de- 6 preciation, amortization, exhaustion, wear and tear, obso- 7 lescence, or other deduction shall be allowed or credited 8 against gross income under any tax act, including title I 9 of this Act, for any part or portion of the construction or 10 purchase cost of any real asset or fixture constructed or 11 purchased with funds provided by the Commission pursuant 12 to section 404 of this title for any war or taxable period 13 during which this Act is in effect. 14 SEC. 406. REVOLVING FUND; APPROPRIATION.-- 15 There is hereby authorized to be appropriated the sum of 16 $500,000,000 to be used by the Commission as a revolving 17 fund for the purposes of making loans and advances pursuant 18 to the provisions of section 404 of this title. 19 SEC. 407. DEFINITIONS.-Unless the context other- 20 wise requires, the definitions established by section 2 of the 21 Security Act of 1933, as amended by Act approved June 6, 22 1934, as in effect March 15, 1935, are hereby adopted as 23 applicable to this title. 24 SEC. 408. PUBLICITY.-All approvals of securities 25 made by the Commission pursuant to section 403 and all 52 1 loans or advances made pursuant to section 404 of this 2 title shall be public records and shall be available for public 3 inspection in such detail and under such reasonable rules 4 and regulations as the Commission may prescribe. 5 SEC. 409. TIME LIMITATIONS ON ACTION.-Wher- 6 ever in this title provision is made for an application to the 7 Commission for any purpose, and such application is made, 8 the Commission shall act upon such application within 9 thirty days of the filing of same, or state publicly the reason 10 for failing to do so. 11 SEC. 410. LIMITATION ON POWERS OF COMMIS- 12 SION.-Nothing contained in this title shall be deemed to 13 limit or control the power of the United States Government 14 or any agency thereof to issue securities. 15 SEC. 411. LIMITATION OF EFFECT OF APPROVAL.- 16 No action taken by the Commission pursuant to the provi- 17 sion of section 403 of this title shall be construed as approv- 18 ing the legality, validity, worth, or safety of any security. 19 TITLE VI 20 WAR RESOURCES CONTROL 21 SECTION 501. SHORT TITLE.-This title may be cited 22 as " The War Resources Control Act." 23 SEC. 502. PRICES.-The President is hereby authorized, 24 with respect to any product, foodstuff, material, real prop- 25 erty, right, or service, declared by him essential for the 58 1 national security and defense in the prosecution of the war, 2 to fix and, establish just and reasonable, maximum, minimum, 3 or absolute prices or rates or rentals at which such product, 4 foodstuff, material, commodity, real property, right, or serv- 5 ice may be bought, sold, rented, or otherwise contracted for, 6 whether such transaction be with the Government or be- 7 tween persons of the civilian population, on the basis of 8 differentials established on the basis of pre-war parities as of 9 any year or period of years, as the President may designate, 10 prior to the declaration of war but not more than twenty 11 years prior to such declaration. Prices fixed pursuant to 12 the provisions of title III of this Act are not subject to the 13 provisions of this section. Any such differential may be 14 altered or modified from time to time as the President may 15 direct. The President may also prescribe differentials based 16 either on primary market or markets or upon zones or dis- 17 tricts or may prescribe different prices or rates for different 18 localities or for different uses in the same locality. The 19 President is further authorized to fix and establish just and 20 reasonable rates of profit, compensation, wage, or commis- 21 sion which shall be allowed for the production, the manu- 22 facture, the sale, the marketing, or the distribution of any 23 such product, foodstuff, material, commodity, real property, 24 right, or service. Any such rate, compensation, wage, or 54 1 commission may be altered or modified from time to time 2 as the President may direct. 3 SEC. 503. PRIORITIES.-The President is hereby all- 4 thorized, whenever he deems it necessary or advisable to 5 the successful prosecution of the war, to- 6 (a) Fix and establish the order of preference to be 7 observed (hereinafter called "priority") by any manu- 8 facturer, producer, dealer, distributor, carrier, public utility, 9 or other person whatsoever, in manufacturing, producing, 10 filling existing or future contracts for, complying with requi- 11 sitions or orders for, transporting, distributing, or delivering 12 of, or 13 (b) Regulate, limit, or prohibit the purchase, sale, use, 14 transportation, manufacture, or distribution of any product. 15 foodstuff, material, commodity, real estate, right, or service. 16 SEC. 504. REQUISITIONS.-The President is author- 17 ized, whenever he deems it necessary or advisable to the 18 successful prosecution of war, to requisition and take pos- 19 session of any product, foodstuff, materials, commodity, real 20 property, or right, and on such terms as he may deem 21 desirable to sell or otherwise dispose of such product, food- 22 stuff, material, commodity, real property, or right. For 23 compliance with any such requisition the United States shall 24 make just compensation, to be determined by the President. 25 If the compensation 80 determined be unsatisfactory to the 55 1 person entitled to receive the same, such person shall be 2 paid 75 per centum thereof, and shall be entitled to sue 3 the United States immediately upon the close of war to 4 recover such further sum as added to said 75 per centum 5 will make up such amount as will be just compensation 6 therefor, and jurisdiction is hereby conferred, regardless 7 of the amount in controversy, on the United States District 8 Court for the district in which such product, foodstuff, 9 material, commodity, real property, or right is situated to 10 hear and determine all such controversies in the manner 11 provided for by section 24, paragraph 20, of the Judicial 12 Code: Provided, That no court shall have jurisdiction to 13 entertain suit, whatever the character, of either party, 14 plaintiff or defendant, to restrain or enjoin requisition, by 15 the Government of the United States, under this section. 16 Any moneys received by the United States for or in 17 connection with the sale or disposition of any product, 18 foodstuff, material, commodity, real property, right, or 19 service pursuant to this title may, in the discretion of the 20 President, be used as a revolving fund for further carrying 21 out the purposes of this title. 22 SEC. 505. LICENSES.-(a) From time to time when- 23 ever the President shall find it essential to license the 24 production, manufacture, sale, storage, distribution, or trans- 25, portation of any product, foodstuff, material, commodity, 56 1 real property, right, or service, in order to carry into effect 2 any of the purposes of this title to and in the successful 3 prosecution of war, and shall publicly so announce, it shall 4 be unlawful for any person, after a date fixed in the an- 5 nouncement, to engage in or carry on any such business 6 enumerated in this section, unless he shall secure and hold 7 a license pursuant to this section. 8 (b) The President is authorized to issue such licenses, 9 to fix the conditions of such licenses, and to prescribe 10 requirements for systems of accounts and auditing of 11 accounts to be kept by licensees, submission of reports by 12 them with or without oath or affirmation, and the entry 13 and inspection by the President's duly authorized agents 14 of the places of business of licensees. The President may 15 order the revocation of the licenses of any licensee who fails 16 to comply with any condition of or in a license, or who 17 fails to observe any price, rate, wage, or priority fixed or 18 established pursuant to this title, or who fails to perform 19 or comply with any contract, requisition, or requirement of 20 the United States, or otherwise fails to comply with the 21 provisions contained in such license. 22 SEO. 506. CONSERVATION OF RESOURCES.-The Presi- 23 dent is authorized, whenever he deems it necessary or advis- 24 able to the successful prosecution of the war, to promulgate 25 and enforce rules and regulations against waste, destruction, 57 1 hoarding, speculation, and profiteering with respect to any 2 product, foodstuff, material, commodity, real property, right, 3 or service. 4 SEO. 507. ADMINISTRATION OF TITLE.-The authority 5 and power conferred by this title may be exercised under 6 the direction and during the pleasure of the President, 7 through any department, establishment, service, agency, or 8 officer of the United States, or any person designated by 9 the President for the purpose, and to that end he is author- 10 ized to create or provide for such additional agencies of the 11 Government and prescribe such rules and regulations as he 12 may deem necessary; and for the duration of the emergency 13 only, the President is authorized to regroup, redistribute, or 14 reassign duties and functions of procurement of war supplies 15 for the Military and Naval Establishments: Provided, That 16 no one appointed or designated by the President hereunder 17 shall in any manner, directly or indirectly, participate in 18 the determination of any questions affecting his personal 3 19 interests, or the interests of any corporation, partnership, 20 association, or trust in which he is directly or indirectly 21 interested. 22 SEC. 508. RULES AND REGULATIONS.-Rules and 23 regulations made by the President under this title shall have 24 the force and effect of law, 58 1 TITLE VII 2 GENERAL PROVISIONS 3 SECTION 601. SHORT TITLE.-This Act may be cited 4 as the War Emergency Act." 5 SEC. 602. GENERAL POWERS OF BOARD OR COM- 6 MISSIONS.-Any board or commission created pursuant to 7. the provisions shall be a body corporate in name and deed 8 and shall establish and maintain a general office in the 9 District of Columbia. Such board or commission may rent 10 suitable offices for its use, and purchase such furniture, equip- 11 ment, and supplies as may be necessary. Such board or 12 commission is authorized to appoint and dismiss at pleasure 13 such officers and employees as are necessary to execute its 14 functions under this Act, and fix their salaries and com- 15 pensation, and may delegate to such officers and employees 16 by designation in writing such part of its authority as may 17 be necessary to the efficient execution of its powers and 18 functions. Such board or commission shall have power to 19 make all rules and regulations appropriate and necessary to 20 the execution of its functions, duties, and powers under this 21 Act and such rules and regulations shall have the force and 22 effect of law. Such board or commission may make such 23 expenditures as are necessary to execute its functions under 24 this Act, which shall be allowed and paid upon the presenta- 25 tion of itemized vouchers therefor approved by the chairman 59 1 of the committee. Such board or commission shall make 2 a report to Congress on the first day of each regular session, 3 which shall include the names and compensation of all of 4 its officers and employees. There is hereby authorized to 5 be appropriated such amounts as may be necessary to the 6 proper execution of the purposes of this Act. 7 SEO. 603. SUSPENSION OF CONFLICTING AND INCON- 8 SISTENT Acts.-All Acts or parts of Acts conflicting or 9 inconsistent with the provisions of this Act are to the extent 10 of such conflict or inconsistency suspended during the ef- 11 fectiveness of this Act. 12 SEc.604. CRIMINAL PENALTIES.-Any person who 13 willfully violates any provisions of this Act or any of the 14 rules and regulations made thereunder shall, unless other 15 criminal penalties be provided herein for such violation, be 16 guilty of a misdemeanor, and shall upon conviction thereof, 17 be fined not more than $100,000 or imprisoned for not more 18 than one year, or both, together with the costs of pros- 19 ecution. 20 SEC. 605. SUCCESSION TO RIGHTS AND DUTIES.-On 21 the expiration of this Act, the United States of America 22 shall be successor to the rights and duties acquired or in- 23 curred by any board or commission created by this Act. 24 SEC. 606. SEPARABILITY CLAUSE.-If any pro- 25 visions of this Act, or the application thereof to any person 60 1 or circumstances, is held invalid, the remainder of the Act, 2 and the application of such provision to other persons and 8 circumstances, shall not be affected thereby. 4 SEO. 607. EFFECTIVE DATE.-Except as otherwise 5 specifically provided herein, the provisions of this Act shall 6 take effect immediately upon any declaration of war by the 7 United States and shall continue in full force and effect 8 until the termination of such war and the declaration by 9 Congress that the emergency created by such war has ceased 10 to exist. w [COMMITTEE PRINT] APRIL 2, 1935 74TH CONGRESS 1sT SESSION S. A BILL To provide revenue and facilitate the regula- tion and control of the economic and industrial structure of the Nation for the successful prosecution of war, and for other purposes. By Mr. APRIL -, 1935 Read twice and referred to the Committee on [April 11, 1935; see Hull, Memoirs, est [Apr. 11, 1935 ] PSF: newticlity P.F MEMORANDUM COOPERATION WITH THE NYE COMMITTEE It is my understanding that in your conference with the Nye Committee there was some reference to a further conference between you and the Committee on your return to Washington. I am informed that the Committee will request another conference in the near future. In view of the importance of the questions involved, I respect- fully suggest that you may wish to give consideration to the following observations. There are four phases of the activities of the Nye Committee to which I invite your attention -- Neutrality, Taking the Profits Out of War, Control of the Arms Traffic, and the Investigation of Loans Made by the Allied Powers through American Banks in the Period 1914-17. NEUTRALITY The Nye Committee had not, before their recent conference with you, contemplated the introduction of legislation modifying our neutrality policy. Something which was said in that conference was interpreted by some of the members of the Committee as a desire on your part that the Committee study that problem and, after a further conference with you, introduce appropriate legislation. In statements given to the press by Senator Nye, the impression was given that at your request the Committee was turning aside from other problems which it had in hand to expedite the preparation of draft legislation on neutrality. A few days later, statements were published to the effect that the Committee was in practical agreement on -2- on the type of legislation which should be introduced. Thereupon Senator Pittman called me by telephone and protested in his own name and in that of Senator Borah against what was construed as an attempt of the Executive to charge the Nye Committee with the preparation of legislation on a subject which, under the rules of the Senate, and according to precedent, properly fell within the jurisdiction of the Committee on Foreign Relations. I brought Senator Pittman's observation to the attention of members of the Nye Committee and I am informed that the Committee thereupon decided not to go forward with the preparation of legislation on all phases of our neutrality policy. However, the report which the Committee made to the Senate on April 1 contains the following Article: "IV. The Committee is in substantial agree- ment on a principle to govern the export of muni- tions and contraband in case of a major war, and expects to make certain recommendations to the Senate on this subject in the immediate future and for action in the present session of Congress. This is the only phase of the neutrality problem which the Committee considers to be within its jurisdiction." This phase of the neutrality problem is sufficiently broad to cover most of the important of the questionswith which neutrality legislation would be likely to deal. It is my understanding that the Committee at its conference with you will probably present & draft of legislation on this subject, for your approval. You may wish to refrain from committing yourself to the support of any specific legislation in respect to neutrality at this time. There 1s apparently great diversity of opinion among your closest advisers as to the proper -3- proper method of dealing with this subject and certainly great diversity of public opinion. I an informed that the leaders in the Senate are opposed to the raising of any question of foreign policy which would result in aorimonious discussion and in delaying action on necessary domestic legislation. Furthermore it is contended that in view of the present situation in Europe, discussion of this question at this time would tend to arouse unjustifi- able fears of imminent war. The subject is so complicated in respect to domestic law, international law and questions of policy that you may deem it unwise for the Administra- tion to commit itself to the support of any specific program of legislation until the subject has been further studied and until a program can be drawn up on which your advisers are in substantial agreement. A Committee of the Department has been studying this problem for some time and I am prepared to submit to you, if you 80 desire, a draft of possible legislative pro- visions. This draft may be of assistance to you in considering this subject although I am not prepared to advocate this or any other specific program for legisla- tion on this subject at this time. LEGISLATION TO TAKE THE PROFITS OUT OF WAR I have been informed that from something said in your conference with the Nye Committee, members of the Committee have inferred that you approved the draft of the bill to take the profits out of war which the Committee was then considering. The report which the Committee made to to the Senate on April 1, contains the following articles: "II. The Committee is in substantial agreement on a very thorough plan to take the profits out of war and to equalize the economic burden of war, and expects to report on this subject to the Senate legislation on the matter in the immediate future, and for action in the present session of Congress. This relates to the actual period of war only. The presentation of this report and the legislation covers one of the three major obligations imposed upon the Committee. "III. The Committee is emphatically convinced that no bill which contains only general authoriza- tions to the President to fix prices or to commandeer industry or to arrange for priorities and licensing is at all adequate 'to equalize the burdens and take the profits out of war'." Article III refers to the MoSwain Bill which, in amended form, passed the House on April 9. There are attached hereto a digest of the Committee's bill and a copy of the text. The Senate, in setting up the Nye Committee, charged it, among other things, "to review the findings of the War Policies Commission and to recommend .... specific legisla- tion". The attached bill constitutes the "specific legisla- tion" which the Committee was charged to prepare. Taking the profits out of war is a difficult thing to accomplish as past experience has demonstrated. It may be doubted whether any means can be found to accomplish it to the extent to which some proponents of the idea appear to believe possible. You may regard it as wise to refrain from committing yourself to support any specific legisla- tion on this subject, until a great deal of further care- ful study has enabled the Administration to formulate some definite program for dealing with this complicated matter. An attitude of complete neutrality on the part of the Administration may perhaps be particularly desirable at th is time when there is 80 much controversy in Congress between the proponents of rival bills. - CONTROL OF THE ARMS TRAFFIC Two principal methods have been suggested for deal- ing with the evils of the international traffic in arms. The suggestion has been made in various quarters that a Government monopoly of the manufacture of and trade in arms and implements of war is the best method of dealing with the evils which have arisen from the present lack of Governmental supervision and control in that field. From various public statements made by Senator Nye, it would appear that this is the solution which he favors. The Committee has not, however, oom- mitted itself to this program and there appears to be reason to hope that it may be willing to support a pro- gram in accord with the policy of the Administration. In your discussion with Mr. Phillips and Mr. Green of our telegram of May 28, 1934, to Norman Davis, you de- cided, wisely I believe, that although the elimination of all private manufacture of arms and munitions might be admirable as an ultimate objective, it is not feasible at this time. Since the negotiation of the Arms Traffic Convention of 1925, this Government has consistently followed the policy of attempting to establish, by international agree- ment, a system of supervision and control of the inter- national traffic in arms based upon export and import licenses and full publicity. Under your administration, we have proceeded one step further and have attempted to establish by international agreement a similar system of licenses and publicity for the manufacture of arms. Although Although this Government has been foremost during the last two years in efforts to obtain an international agreement along the lines I have indicated, we have lagged behind almost all the other civilized nations of the world in our domestic legislation. The Nye Commit- tee, asked Mr. Green of the Department to prepare a draft of legislation following the principles embodied in the Draft Articles now under discussion in Geneva, insofar as they could be put into effect by constitutional legisla- tion in advance of the Convention, Mr. Green was authorized by me to comply with the Committee's request and he has submitted a draft of legislation to the Committee. I attach a copy of this draft legislation. Two Articles -- 5a and 5b -- were submitted separately because they embody the principle of the Arms Embargo Resolution, which en- countered opposition in the Senate. Should the Committee decide to present this legislation, it might wish to omit these articles, in order to avoid the controversy which arose when the Arms Embargo Resolution was under discussion. Should the Committee decide otherwise, these Articles could be incorporated in the draft legislation. I believe that this draft legislation embodies the wisest and most practical method of dealing with the evils inherent in the manufacture of and traffic in arms. The Committee has apparently in recent weeks been diverted from its original interest in the supervision of the arms traffic by its interest in neutrality legis- lation and legislation designed to take the profits out of war. I believe a word from you in support of this draft legislation might serve to concentrate the efforts of -7- of the Committee on this subject and to accomplish some tangible result. I suggest, therefore, that you tell the Committee that you have been informed that Mr. Green has, at the Committee's request, presented a draft of legislation to establish some measure of supervision and control of the manufacture of and traffic in arms; that you understand that the Committee now has this legislation under consideration; that this legislation is based upon the same principles as the Draft Articles which are now under discussion in Geneva; that you hope that the Committee may decide to report favorably on legislation of this type; and that if 80 you are pre- pared to give the Committee the backing of the Adminis- tration in this matter and, if circumstances appear to warrant it, to send an appropriate Message to Congress. INVESTIGATION OF LOANS MADE BY THE ALLIED POWERS THROUGH AMERICAN BANKS 1914-17. The Committee, in connection with its study of methods to take the profits out of war, is proceeding with the examination of documents in the files of the Guaranty Trust Company of New York pertaining to the dealings between that Bank and the British Government in 1916 and with documents from the files of the Central Hanover Bank of New York in regard to the French loan of April 1, 1917, made by the Central Union Trust Company of New York, predecessor of the Central Hanover Bank. The Committee is proposing to examine several thousand documents in the files of J. P. Morgan and Company, relating to the dealings between the British Government -8- Government and that Bank in 1914-17. The British and French Ambassadors, acting under instructions of their Governments, have protested against this procedure. Mr. John W. Davis, acting as counsel for two of the Banks, has drawn up a brief, questioning the legal right of the Committee to examine the documents in question. My legal advisers do not believe that the legal arguments of the British and French Governments and of Mr. Davis are well founded. Nevertheless, as there is a question of inter- national comity involved, I approached the Chairmen of the Committee and suggested that he refrain from this phase of its proposed investigation. This suggestion was not agreeable to Senator Nye. He agreed, however, that none of the documents in question, the publicity of which might result in embarrassment to the British and French Governments, would be published until they had been re- ferred to me and I had had an opportunity to consult the interested Ambassador in order to ascertain the attitude of his Government. This agreement did not satisfy the Ambassadors who, acting under instructions, object on principle to any examination of the documents by the Committee whether their contents are made public or not. Waiving the question of the legal right of the Com- mittee in the premises, I recommend that in your confer- ence with the Committee, you urge that it do not proceed with the examination of these documents. The proposed action of the Committee would result in irritating the British and French Governments and it is difficult to conceive that any useful purpose could be served by a study of these documents. It can scarcely be maintained with -9- with reason that such a study is a necessary preliminary to the study of legislation for taking profits out of war particularly as the Committee has already prepared its Bill on that subject. Correcther Enclosures: 1. The Nye Committee report to the Senate of April 1, 1935. 2. Digest of the Committee's Bill to take the profits out of war. 3. Copy of the Committee's Bill to take the profits out of war. 4. Draft Bill to Control the trade in arms and implements of war prepared in the Department of State. PSF 4 neutrality DRAFT BILL NATIONAL MUNITIONS ACT AN ACT To control the trade in arms, ammunition and implements of war. Be it enaoted by the Senate and House of Representa- tives of the United States of America in Congress assembled, That for the purposes of this Act-- (a) The term "Board" means the National Munitions Control Board which is hereby established to carry out the provisions of this Act. The Board shall consist of the Secretary of State, who shall be chairman and execu- tive officer of the Board, the Secretary of the Treasury, the Secretary of War, the Secretary of the Navy, and the Secretary of Commerce. Except as otherwise provided in this Act or by other law, the administration of this Act is vested in the Department of State; (b) The term "United States" when used in a geograph- ical sense includes the several States and Territories, the insular possessions of the United States (including the Philippine Islands), the Canal Zone and the District of Columbia; (o) The term "person" includes & partnership, company, association or corporation, as well as a natural person. SEC. 2. The President is hereby authorized to proclaim from time to time a list of articles which shall be considered arms, ammunition and implements of war for the purposes of this Act. SEC. 3 -2- SEC. 3 (a) Within ninety days after the effective date of this Act or upon first engaging in business every person who engages in the business of exporting or importing any of the arms, ammunition and implements of war, whether as an exporter, importer, manufacturer or dealer, shall register with the Secretary of State his name, or style, principal place of business, and places of business in the United States, and a list of the arms, ammunition and implements of war, which he habitually exports, imports. or is equipped to manu- facture for import. (b) Every person required to register under the provisions of this section shall pay a registration fee of $500.00 and upon receipt of such fee the Secretary of State shall issue & registration certificate valid for five years which shall be renewable for further periods of five years upon the payment for each renewal of a fee of $500.00. (o) Every person required to register under this section shall notify the Secretary of State of any change in the arms, ammunition, and implements of war which he habitually exports, importe or is equipped to -3- to manufacture; and upon such notification the Secretary of State shall issue to such person an amended certificate of registration, free of charge. which shall remain valid until the date of expiration of the original certificate. (d) It shall be unlawful for any person required to register under the provisions of this section to import or export any of the arms, ammunition or implements of war without having registered in accordance with the provisions of this section. SEO. 4. It shall be unlawful for any person to export, or attempt to export, from the United States any arms, ammunition or implements of war to any other country or to import, or attempt to import. to the United States from any other country any arms, ammuni- tion or implements of war without first having obtained a license therefor from the Department of State. SEO. 5. No licenses shall be issued to persons who have failed to register as provided for in Section 3, nor shall licenses be issued for the export of arms, ammuni- tion and implements of war unless the government of the country to which such arms are to be exported has indi- cated to the satisfaction of the Secretary of State that permission for the importation has been accorded; Provided, however, That no licenses shall be issued for the export of toxio gases or instruments designed for their use in warfare. SEO. 6 SEC. 6. (a) Any arms, ammunition or implements of war which have at any time been exported or imported or which it has been attempted to export or import, in vio- lation of the provisions of this Act shall be subject to seizure and forfeiture. (b) In the case of the forfeiture of any arms, ammunition or implements of war by reason of a. violation of this act, no notice of public sale shall be required; no such arms, ammunition or implements of war shall be sold at public sale, but they shall be delivered to the Secretary of War; and the Secretary of War may order such arms, ammunition or implements of war destroyed or may retain them for the use of the armed forces of the United States. SEC. 7. (a) The Secretary of State, after consulta- tion with the Board, shall issue regulations for carrying out the provisions of this Act. (b) The Board shall be called by the Chair- man and shall hold at least one meeting a year. It shall furnish the Secretary of State such advice and informa- tion 8.8 he may request. The Secretary of the Treasury shall issue such regulations with regard to the export and import of arms, ammunition and implements of war as may be necessary for carrying out the provisions of this Act. SEC. 8. (a) No purchases of arms, ammunition and implements of war shall be made on behalf of the United States by any officer, executive department, or indepen- dent establishment of the Government from any person who shall -5- shall have failed to register under the provisions of Section 3 of this Act. (b) Any contract in violation of the pro- visions of this section is hereby declared to be contrary to the public policy of the United States, shall not be enforceable in any court of the United States and shall not afford any basis for the granting of legal or equitable relief by any such court. SEO. 9, No sale of arms, ammunition or implements of war shall be made on behalf of the United States by any officer, executive department or independent estab- lishment of the Government to any foreign Government. The Act of August 29, 1916, relating to the sale of ordnance and stores to the Government of Cuba, is hereby abrogated. SEC. 10. All persons required to register under Section 3 of this Act shall maintain such permanent records of manufacture, importation and exportation of arms, ammunition and implements of war as the Board shall prescribe. SEC. 11. Any person who violates or fails to comply with any of the requirements of this Act or any regula- tions under this Aot shall, on conviction, be fined not more than $10,000. or be imprisoned for not more than five years, or both, in the discretion of the court. SEC. 12. -6- SEC. 13. The sum of $25,000 is hereby authorised to be appropriated out of any money in the Treasury not other- wise appropriated to be expended by the Secretary of State for the expenses of the Board in carrying out the duties as aforesaid. SEO. 13. The Board shall make an annual report to Congress, copies of which shall be distributed as are other reports transmitted to Congress. Such report shall contain such information and data collected by the Board as may be considered of value in the determination of questions connected with the control of trade in arms, ammunition and implements of war. It shall include a list of all persons required to register under the pro- visions of Section 3 and full information concerning the licenses issued under the provisions of Section 4. SEO. 14. If. any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the remainder of the Act, and the appli- cation of such provision to other persons or circumstances shall not be affected thereby. SEO. 15. This Act shall take effect on the nine- tieth day after the date of its enactment. SEO. 16. This Act may be cited as the "National Munitions Act". -7- Additional Articles SEO. 5. (a) Whenever the President finds that in any part of the world conditions exist such that the shipment of arms, ammunition or implements of war from countries which produce these commodities may promote or encourage the employment of force in the course of a dispute or conflict between nations, and after having secured the cooperation of such governments as the Presi- dent deems necessary he shall make proclamation thereof, no licenses for the export of the arms, ammunition or implements of war listed in Section 2 shall be issued except under such limitations and exceptions as the President may prescribe, from any place in the United States to such country or countries as he may designate until otherwise ordered by the President, or by Congress. (b) Whenever the President finds that in any part of the world conditions exist such that the shipment of arms, ammunition or implements of war from countries which produce these commodities may promote or encourage the employment of force in the course of & dispute or conflict within a nation, and after having secured the cooperation of such governments as the President deems necessary he shall make proclamation thereof, no licenses for the export of the arms, ammunition or implements of war listed in Section 2 shall be issued except under such limitations and exceptions as the President may prescribe, from any place in the United States to such country or countries as he may designate until otherwise ordered by the President or by Congress. PSF: Neutrality THE UNDER SECRETARY OF STATE WASHINGTON Fill October 30, 1935. Dear Mr. President: I am enclosing herewith the two statements which the Secretary and I discussed with you yesterday. The Secretary gave out his statement at 12:30 today. I hope I have prepared your state- ment in accordance with your wishes. Faithfully yours, The President The White House. DEPARTMENT OF STATE THE UNDERSECRETARY The Secretary Statement // rate THE A member of the press having made inquiry as to whether the United States Government is keeping in touch with exports to the belligerent countries, the Secretary said: "We have been and are each day giving the most diligent and earnest attention to this and other phases of our situation as it relates to the Ethiopian-Italian controversy. At this stage I reiterate and call special attention to the definite implications and the effect of the policy of this Government to discourage dealings with the two belligerent nations as set forth in the President's public statement of October 5 and my statement of October 10 warning our people not to trade with the belligerents except at their own risk. The general policy of the government as thus defined reste upon the recent neutrality act designed to keep the nation out of war, and upon the further purpose not to aid in protracting the war. It is my opinion that our citizens will not be disposed to insist upon transactions to derive war profits at the expense of human lives and human misery. In this connection, I again repeat that an early peace with the restoration of normal business and normal business profits 18 far sounder and far preferable to temporary and risky war profits." Br: her pus male subject File ASSISTANT SECRETARY OF STATE WASHINGTON December 31, 1935. Dear Mr. President: There are one or two points with reference to the Neutrality Bill which I think you will wish to consider in advance of the conference this afternoon. Enclosed is B. printed copy of the existing law. The more the matter has been thought about here, the more we are inclined to believe that the law is sufficiently flexible in declaring that E proclamation shall be made and the embargo become effective "upon the outbreak or during the progress of war between or among two or more foreign states". My belief is that the Senate will insist on that provision or a provision of that character being retained. But also enclosed is a redraft of the section which would make it more flexible, and which in all probability the Senate would reject. :- new section has to be considered pertain- ing to the executive authority relative to articles such as oil, copper, steel, and iron that can be readily used or converted for use in conducting war. The question will be raised as to whether the Executive should be given authority to embargo the export of such articles or simply restrict their export The President, The White House. - 2 - export to a normal quantity, say based on the average for five preceding years. You may expect a great deal to be said on this subject. Yours very sincerely, Enclosures: As stated. [PUBLIC RESOLUTION-No. 67-74TH CONGRESS] [S. J. Res. 173] JOINT RESOLUTION Providing for the prohibition of the export of arms, ammunition, and implements of war to belligerent countries; the prohibition of the transportation of arms, ammunition, and implements of war by vessels of the United States for the use of belligerent states; for the registration and licensing of persons engaged in the business of manufacturing, exporting, or importing arms, ammunition, or implements of war; and restricting travel by American citizens on belligerent ships during war. Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That upon the out- break or during the progress of war between, or among, two or more foreign states, the President shall proclaim such fact, and it shall thereafter be unlawful to export arms, ammunition, or implements of war from any place in the United States, or possessions of the United States, to any port of such belligerent states, or to any neutral port for transshipment to, or for the use of, a belligerent country. The President, by proclamation, shall definitely enumerate the arms, ammunition, or implements of war, the export of which is prohibited by this Act. The President may, from time to time, by proclamation, extend such embargo upon the export of arms, ammunition, or implements of war to other states as and when they may become involved in such war. Whoever, in violation of any of the provisions of this section, shall export, or attempt to export, or cause to be exported, arms, ammunition, or implements of war from the United States, or any of its possessions, shall be fined not more than $10,000 or imprisoned not more than five years, or both, and the property, vessel, or vehicle containing the same shall be subject to the provisions of sections 1 to 8, inclusive, title 6, chapter 30. of the Act approved June 15, 1917 (40 Stat. 223-225; U.S.C., title 22, secs. 238-245). In the case of the forfeiture of any arms, ammunition, or imple- ments of war by reason of a violation of this Act, no public or private sale shall be required; but such arms, ammunition, or imple- ments of war shall be delivered to the Secretary of War for such use or disposal thereof as shall be approved by the President of the United States. When in the judgment of the President the conditions which have caused him to issue his proclamation have ceased to exist he shall revoke the same and the provisions hereof shall thereupon cease to apply. Except with respect to prosecutions committed or forfeitures incurred prior to March 1, 1936, this section and all proclamations issued thereunder shall not be effective after February 29, 1936. SEC. 2. That for the purposes of this Act- (a) The term Board means the National Munitions Control Board which is hereby established to carry out the provisions of this 2 [Pus. que e.) 3 [Pus. Rss. 67.) department, or independent establishment of the Government from Act. The Board shall consist of the Secretary of State, who shall any person who shall have failed to register under the provisions be chairman and executive officer of the Board; the Secretary of of this Act. the Treasury; the Secretary of War; the Secretary of the Navy; The Board shall make an annual report to Congress, copies of and the Secretary of Commerce. Except as otherwise provided in which shall be distributed as are other reports transmitted to this Act, or by other law, the administration of this Act is vested Congress. Such report shall contain such information and data in the Department of State; collected by the Board as may be considered of value in the deter- (b) The term " United States when used in a geographical sense, mination of questions connected with the control of trade in arms, includes the several States and Territories, the insular possessions of ammunition, and implements of war. It shall include a list of all the United States (including the Philippine Islands), the Canal Zone, persons required to register under the provisions of this Act, and and the District of Columbia; full information concerning the licenses issued hereunder. (c) The term " person includes a partnership, company, BSSO- The Secretary of State shall promulgate such rules and regula- ciation, or corporation, as well as a natural person. tions with regard to the enforcement of this section as he may Within ninety days after the effective date of this Act, or upon deem necessary to carry out its provisions. first engaging in business, every person who engages in the business The President is hereby authorized to proclaim upon recom- of manufacturing, exporting, or importing any of the arms, ammu- mendation of the Board from time to time a list of articles which nition, and implements of war referred to in this Act, whether as shall be considered arms, ammunition, and implements of war for an exporter, importer, manufacturer, or dealer, shall register with the purposes of this section. the Secretary of State his name, or business name, principal place This section shall take effect on the ninetieth day after the date of business, and places of business in the United States, and a list of its enactment. of the arms, ammunition, and implements of war which he manu- Sec. 3. Whenever the President shall issue the proclamation pro- factures, imports, or exports. vided for in section 1 of this Act, thereafter it shall be unlawful Every person required to register under this section shall notify for any American vessel to carry any arms, ammunition, or imple- the Secretary of State of any change in the arms, ammunition, and ments of war to any port of the belligerent countries named in implements of war which he exports, imports, or manufactures; and such proclamation as being at war, or to any neutral port for trans- upon such notification the Secretary of State shall issue to such per- shipment to, or for the use of, a belligerent country. son an amended certificate of registration, free of charge, which shall Whoever, in violation of the provisions of this section, shall take, remain valid until the date of expiration of the original certificate. attempt to take, or shall authorize, hire, or solicit another to take Every person required to register under the provisions of this section any such vessel carrying such cargo out of port or from the juris- shall pay a registration fee of $500, and upon receipt of such fee diction of the United States shall be fined not more than $10,000 the Secretary of State shall issue a registration certificate valid for or imprisoned not more than five years, or both; and, in addition, five years, which shall be renewable for further periods of five years such vessel, her tackle, apparel, furniture, equipment, and the arms, upon the payment of each renewal of a fee of $500. ammunition, and implements of war on board shall be forfeited to It shall be unlawful for any person to export, or attempt to the United States. export, from the United States any of the arms, ammunition, or When the President finds the conditions which have caused him implements of war referred to in this Act to any other country or to issue his proclamation have ceased to exist, he shall revoke his to import, or attempt to import, to the United States from any proclamation, and the provisions of this section shall thereupon other country any of the arms, ammunition, or implements of war cease to apply. referred to in this Act without first having obtained a license SEC. 4. Whenever, during any war in which the United States therefor. is* neutral, the President, or any person thereunto authorized by All persons required to register under this section shall maintain, him, shall have cause to believe that any vessel, domestic or foreign, subject to the inspection of the Board, such permanent records of whether requiring clearance or not, is about to carry out of a port manufacture for export, importation, and exportation of arms, of the United States, or its possession, men or fuel, arms, ammu- ammunition, and implements of war as the Board shall prescribe. nition, implements of war, or other supplies to any warship, tender, Licenses shall be issued to persons who have registered as provided or supply ship of a foreign belligerent nation, but the evidence is for, except in cases of export or import licenses where exportation not deemed sufficient to justify forbidding the departure of the of arms, ammunition, or implements of war would be in violation vessel as provided for by section 1, title V, chapter 30, of the Act of this Act or any other law of the United States, or of n treaty to approved June 15, 1917 (40 Stat. 1; U. S. C., title 18, sec. 31), which the United States is a party, in which cases such licenses shall and if, in the President's judgment, such action will serve to main- not be issued. tain peace between the United States and foreign nations, or to The Board shall be called by the Chairman and shall hold at least protect the commercial interests of the United States and its citi- one meeting a year. zens, or to promote the security of the United States, he shall have No purchase of arms, ammunition, and implements of war shall the power and it shall be his duty to require the owner, master, or be made on behalf of the United States by any officer, executive # Bo in original. 4 (Pus. Rm 67.)* (Pus. er.) 5 person in command thereof, before departing from a port of the United States, or any of its possessions, for a foreign port, to give SEC. 8. If any of the provisions of this Act, or the application thereof to any person or circumstance, is held invalid, the remainder a bond to the United States, with sufficient sureties, in such amount as he shall deem proper, conditioned that the vessel will not deliver of the Act, and the application of such provision to other persons or circumstances, shall not be affected thereby. the men, or the cargo, or any part thereof, to any warship, tender, SEC. 9. The sum of $25,000 is hereby authorized to be appropri- or supply ship of a belligerent nation; and, if the President, or ated, out of any money in the Treasury not otherwise appropriated, any person t'ereunto authorized by him, shall find that a vessel, domestic or foreign, in a port of the United States, or one of its to be expended by the Secretary of State in administering this Act. possessions, has previously cleared from such port during such war Approved, August 31, 1935. and delivered its cargo or any part thereof to a warship, tender, or supply ship of a belligerent nation, he may prohibit the departure of such vessel during the duration of the war. SEC. 5. Whenever, during any war in which the United States is neutral, the President shall find that special restrictions placed on the use of the ports and territorial waters of the United States, or of its possessions, by the submarines of a foreign nation will serve to maintain peace between the United States and foreign nations, or to protect the commercial interests of the United States and its citizens, or to promote the security of the United States, and shall make proclamation thereof, it shall thereafter be unlawful for any such submarine to enter a port or the territorial waters of the United States or any of its possessions, or to depart therefrom, except under such conditions and subject to such limitations as the President may prescribe. When, in his judgment, the conditions which have caused him to issue his proclamation have ceased to exist, he shall revoke his proclamation and the provisions of this section shall thereupon cease to apply. SEC. 6. Whenever, during any war in which the United States ts neutral, the President shall find that the maintenance of peace between the United States and foreign nations, or the protection of the lives of citizens of the United States, or the protection of the commercial interests of the United States and its citizens, or the security of the United States requires that the American citizens should refrain from traveling as passengers on the vessels of any belligerent nation, he shall so proclaim, and thereafter no citizen of the United States shall travel on any vessel of any belligerent nation except at his own risk, unless in accordance with such rules and regulations as the President shall prescribe: Provided, however, That the provisions of this section shall not apply to a citizen travel- ing on the vessel of a belligerent whose voyage was begun in advance of the date of the President's proclamation, and who had no oppor- tunity to discontinue his voyage after that date: And provided further, That they shall not apply under ninety days after the date of the President's proclamation to a citizen returning from n. foreign country to the United States or to any of its possessions. When, in the President's judgment, the conditions which have caused him to issue his proclamation have ceased to exist, he shall revoke his proclamation and the provisions of this section shall thereupon cease to apply. SEC. 7. In every case of the violation of any of the provisions of this Act where a specific penalty is not herein provided, such violator or violators, upon conviction, shall be fined not more than $10,000 or imprisoned not more than five years, or both. REVISED DRAFT OF SECTIONS 3 AND 4 OF DRAFT NO. 4 OF DECEMBER 12, 1935. SEC. 3. EXPORT OF ARMS, AMMUNITION, AND IMPLEMENTS OF WAR, (a) Whenever during any war in which the United States is neutral, the President shall find that the prohibition of the shipment of arms, ammunition, or implements of war from the United States will serve to maintain peace and discourage war, or to protest the commercial and economic interests of the United States and its nationals, or to promote the security or preserve the neutrality of the United States and shall 80 proclaim, it shall thereafter be unlawful to export, or attempt to export, or cause to be exported, or sell for export, any such articles from any place in the United States to any belligerent country, named in the proclamation, or to any neutral country for transshipment to or for the use of any such belligerent country: Provided, That any prohibition of export shall apply equally to all belligerents, including those subse- quently entering the war, the names of which shall be proclaimed by the President as and when they 80 enter. (b) The President shall, by proclamation, definitely enumerate the arms, ammunition, and implements of war, the export of which is prohibited by this act. (o) When in the judgment of the President the condi- tions which have caused him to issue a proclamation have ceased to exist, he shall revoke the same and the provi- sions of this section shall thereupon cease to apply. December 31, 1935. x1561 REVISED DRAFT NO. 6 Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress assembled, That this act may be cited as the "Neutrality Act of 1936". SEC. 1. DEFINITIONS. For the purposes of this act - (a) The term "Board" means the National Munitions Control Board. (b) The term "United States" when used in a geographical sense means the continental United States, the territories and insular possessions of the United States (including the Philippine Islands), the Canal Zone, and the District of Columbia. (c) The term "person" means a natural person, corpora- tion, partnership, organization or association. (d) The term "vessel" means every description of water- craft (including aircraft) or other contrivance used, or capable of being used, as a means of transportation on or over water. (e) The term "American vessel" means any vessel (includ- ing airoraft) documented under the laws of the United States. (f) The term "vehicle" means every description of car- riage (including aircraft) or other contrivance used, or capable of being used, as a means of transportation on or over land. SEC. 2. SEC. 2. EXPORT OF ARMS, AMMUNITION, AND IMPLEMENTS OF WAR. (a) Upon the outbreak or during the progress of any war between, or among, two or more foreign states, the President shall proolaim such fact, and it shall thereafter be un- lawful to export, or attempt to export, or cause to be exported, or sell for export, arms, ammunition, or implements of war from any place in the United States to any belligerent country, named in the proclamation, or to any neutral coun- try for transshipment to or for the use of any such bellig- erent country. (b) The President shall, by proclamation, definitely enumerate the arms, ammunition, and implements of war, the export of which 1s prohibited by this act. (o) The President shall, from time to time, by procla- mation, extend such embargo upon the export of arms, am- munition, and implements of war to other countries as and when they may become involved in such war. (d) When in the judgment of the President the condi- tions which have caused him to issue a proclamation have ceased to exist, he shall revoke the same and the pro- visions of this section shall thereupon cease to apply. SEC. 3. SEO. 3. EXPORT OF ARTICLES AND MATERIALS USED FOR WAR PURPOSES. (a) Whenever during any war in which the United States is neutral, the President shall find that the placing of restrictions on the shipment from the United States to belligerent countries of articles or materials used in the manufacture of arms, ammunition or implements of war, or in the conduct of war will serve to promote peace, or to protect the commercial interests of the United States and its nationals, or to promote the security or preserve the neutrality of the United States and shall so proclaim, it shall thereafter be unlawful to export, or attempt to export, or cause to be exported, or sell for export, such articles or materials from any place in the United States to any belligerent country named in the proclamation, or to any neutral country for transshipment to or for the use of any such belligerent country in excess of the average amount per annum, in quantity and kind, of exports from the United States to the respective belligerent countries during the three calendar years preceding the date of the proclama- tion: Provided, That no restriction or prohibition imposed under this section shall under any circumstances be applied to food or medical supplies. (b) The President shall, by proclamation, definitely enumerate the articles or materials the exportation of which is to be restricted or prohibited, and he may, from time to time, modify or revoke in whole or in part any proclamation issued by him under this section. (o) The President shall, from time to time, by proola- mation, extend such restrictions or prohibitions as are imposed under this section to other countries as and when they may become involved in such war. SEC. 4. FINANCIAL TRANSACTIONS WITH BELLIGERENT GOVERNMENTS. (a) Whenever the President shall have issued his proclamation as provided for in Section 2 of this act, it shall thereafter during the period of the war be un- lawful for any person within the United States to pur- chase or sell bonds, securities or other obligations of the government of any belligerent country, or of any political subdivision thereof, or of any person acting for or on behalf of such government, issued after the date of such proclamation, or to make any loan or extend any credit to any such government or person: Provided, That if the President shall find that such action will serve to protect the commercial or other interests of the United States or its nationals, he may, in his dis- cretion, and to such extent and under such regulations as he may prescribe, except from the operation of this section ordinary commercial credits and short-time obli- gations of 8. character customarily used in current com- mercial transactions. (b) The provisions of this section shall not apply to a renewal or adjustment of indebtedness existing on the date of the President's proclamation. (c) Whoever shall violate the provisions of this section or of any regulations issued hereunder shall, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both. Should the violation be by a corporation, organization or association, any officer or agent thereof participat- ing in the violation shall be liable to the penalty herein prescribed. (d) (d) When in the judgment of the President the con- ditions which have caused him to issue a proclamation have ceased to exist, he shall revoke the same and the provisions of this section and of any regulations issued by the President hereunder shall thereupon cease to apply.