Memorandum of Disapproval of Bill Relating to Refund of Taxes Illegally Paid by Indian Citizens.

[Released July 31, 1947. Dated July 30, 1947]

I HAVE withheld my approval of H.R. 981, a bill "To amend section 2 of the Act of January 29, 1942 (56 Stat. 21), relating to the refund of taxes illegally paid by Indian citizens."

H.R. 981 would amend section 2 of the Act of January 29, 1942 (56 Stat. 21), to direct the refund of certain income taxes to Indians falling within designated classes who filed claims for refunds under that Act but whose claims were rejected. All claims for refund properly filed under the Act of January 29, 1942, relating to taxes illegally assessed upon the income of the Indians concerned, have been paid. The rejected claims which H.R. 981 would allow, related to legally collected taxes paid on income received during the taxable years from 1913 to April 26, 1931, the termination date for all restrictions on alienability and taxability of lands belonging to the affected Indians.

It has been clearly established by the courts that the Indians in question were fully taxable upon the income involved. Accordingly, the effect of H.R. 981 is to set up retroactively a period of exemption prior to 1931 when it is clear that the Indians concerned were taxable during that period. There appears to be no satisfactory reason why a particular group on whom taxes were legally assessed should be classified with other groups from whom taxes were collected illegally.

Another objectionable feature of the bill is the provision for the payment of interest at 4 per centum per annum for the years before and since 1931 when these persons had no claim, legal or equitable, to refund of the taxes paid. The amount of interest payable under the bill would almost equal the taxes. It would be unsound policy and an inadvisable precedent to provide for the payment of interest on these refunds of taxes which were legally and properly collected.

For these reasons, I have withheld my approval of the bill.

HARRY S. TRUMAN