the purpose of distilling spirits, subject to the provisions of law, and expressly stipulating that the lien of the United States for taxes and penalties shall have priority of such mortgage, judgment, or other encumbrance”, and that in case of the forfeiture of the distillery premises, or of any part thereof, the title of the same shall vest in the United States, discharged from such mortgage, judgment, or other encumbrance. It is further provided in the same section that in certain cases where the distillery was erected prior to the twentieth of July, eighteen hundred and sixty-eight, "the collector may at the discretion of the Commissioner, be authorized to accept, in lieu of the said written consent of the owner of the fee, the bond of such distiller, in such form as the Commissioner may prescribe, with not less than two sureties, conditioned that in case the distillery, distilling apparatus, or any part thereof, shall by final judgment be forfeited for the violation of any of the provisions of law, the obligors shall pay the amount stated in said bond."

A case sometimes arises where a distiller operating a distillery erected prior to July 20, 1868, finds it desirable to enlarge the distillery premises. This is occasionally especially desirable, since the passage of the joint resolution of March 28, 1878, entitled "Joint resolution to prescribe the time for the payment of the tax on distilled spirits, and for other purposes," for it often becomes necessary for the distiller to enlarge his distillery warehouse to avail himself of the privileges conferred by that resolution. In some instances the distiller finds it impossible to obtain the written consent of the owner of the adjoining land which it is necessary to include as part of the distillery premises. The present statute makes no provision for a case of that character.

I recommend such an amendment of the law as will in such a case authorize the acceptance of a bond in lieu of the written consent of the

owner.

REVENUE AGENTS.

Since my last report the number of internal revenue agents has been increased by law from twenty-five to thirty-five. The force is now distributed as follows:

One in charge of the division of revenue agents at this office.
Four to the examination of the accounts of collectors.

Twenty-four to divisions of collection districts.

Six assistants in the more important divisions.

This corps is of great importance in aiding in the enforcement of the laws and in promoting the efficiency of the public service. I earnestly recommend that the increase from twenty-five to thirty-five revenue agents be maintained.

EXAMINATION OF COLLECTORS' OFFICES,

I have made provision for the careful quarterly examination of the offices and accounts of collectors by skilled accountants, so as to have exact information as to the manner in which the business of the office is conducted and the public money accounted for. These examinations have had the effect of creating a spirit of emulation among officers of the different districts, and it affords me great pleasure to report that, with very rare exceptions, it was found that the business of the offices had been conducted in a careful and efficient manner, the records properly kept and written up to date, and the public funds faithfully accounted for.

INSPECTION OF OFFICERS.

In my last report I had the honor of calling attention to the fact that I had organized a system of inspecting the officers of the Internal Revenue Service, and I then expressed an opinion that important and favorable results would accrue from such inspections. Since that report the system of inspections has been very much enlarged upon, so that now the inquiry involves an examination into the character and standing of the officers and their moral fitness for their positions, and also into their knowledge of the internal revenue laws and regulations and the practical operations of these laws and regulations in respect to distilleries, breweries, rectifying establishments, wholesale and retail liquor dealers, tobacco and cigar manufacturers, and other manufactories and employments coming under the provisions of the internal revenue tax system. The object has been to make the inspections a kind of school for the officers.

In connection with these inspections, the revenue agent, who is the inspecting officer, visits with the officers inspected the various establishments for the manufacture and sale of taxable articles, with a view of seeing that the laws are properly complied with and enforced, and also with the view of enlightening the manufacturer or tax-payer upon any point of law or regulations upon which he may seem to need information. To make these inspections more thorough, I have pursued the policy of transferring the agents from time to time, so as to have the reports of different revenue agents upon the same officers and districts. The reports of the inspecting officers have in the main been very full and complete. Taken in conjunction with the reports of the agents assigned to the examination of collectors' offices, they give this office a correct statement of the condition of the force in all the collection districts, and they have had the effect of increasing the knowledge, diligence, and efficiency of the great majority of the officers, so that at this time the officers of the internal revenue force, taken as a whole, comprise a body of men of whose intelligence, integrity, and fidelity to duty the people of the United States may well be proud.

AMOUNTS COLLECTED AND ACCOUNTED FOR, BY DISTRICTS.

Subjoined is a statement of the collections of internal revenue tax, by districts, for the fiscal year ended June 30, 1878, giving the name of each collector, the amount of money collected and paid into the United States Treasury, and the amount collected and unaccounted for. It will be seen therefrom that the sum of $110,654,163.37 was collected and accounted for during the past fiscal year, and that the sum of $9,705.55 remains unaccounted for. During the fiscal year ended June 30, 1877, the internal revenue collections, as shown in my last report, were $118,995,184.25. There remains unaccounted for for that period the sum of $1,900. It thus appears that during the last two fiscal years the sum of $229,649,347.62 has been collected and accounted for, and the sum of $11,605.55 has been collected and not accounted for. Each item making up this last amount has been reported to the honorable First Comptroller for suit.

I am assured that the amounts due will be paid during the present year, the sureties on the collectors' bonds being entirely good, so that there will be no actual loss to the United States. The defaulting collectors have been removed from office.

It is proper to state that the deficiency that occurred in the accounts

of Collector Fannin, of Georgia, was occasioned by the dishonesty of his cashier. The two other deficiencies were referred to in my last annual report. Statement showing the aggregate collections made and reported to the Commissioner of Internal Revenue by the collectors of the several collection districts, together with the amount of collections made and unaccounted for, during the fiscal year ended June 30, 1878.

Collection districts.

Names of collectors.

Aggregate col-
lections.

Moneys received and unaccounted for.

$67,967 87
70, 001 70
20, 371 01
62, 128 89
53,606 88
1,844, 481 07
302,308 39
83, 507 90
299, 882 69
280,452 90
29,954 20
480,937 00
183, 823 38
236,482 94
42, 298 33
54,738 63
19, 777 61
8, 185, 225 67
220, 756 51
857, 227 95
1, 105, 926 97
6,594, 669 22
52, 428 08
2,029, 688 18
622,868 74
158, 055 67
2,731, 073 57
683,874 96
1,914, 333 86
143,586 19
79, 913 31
182,075 17
326,682 60
192, 427 33
257, 666 03
74,515 86
78, 841 64
317,080 88
254, 409 55
2,723, 643 07
2,495, 496 23
823,474 52
158, 125 16
108,384 74
850,641 46
70, 695 78
2, 210, 127 29
110,667 95
1,249, 066 42
863, 940 71
311, 356 64
1, 181, 405 38
195, 383 22
98,822 73
127, 192 01
99,569 03
175, 433 72
86,824 03
4,338, 756 96

55, 056 05
314,274 08
113, 138 12
250,008 21
27, 103 88
699,821 37
59, 017 46
228, 188 11
223, 590 291

358, 587 75

*$5,057 03

C. Barcalow.

R. B. Hathorn...

4, 513, 147 15

*The sum of $4,665.20 has been deposited on account of this deficiency since this report was put in

type.

Statement showing the aggregate collections, &c.—Continued.

Cash deposited for purchase of adhesive stamps
Total receipts from all sources

COST OF COLLECTION.

The total cost of collecting internal revenue in the United States for the fiscal year ended June 30, 1878, was as follows:

For salaries and expenses of collectors, including pay of deputy collect-
ors, clerks, &e

For salaries and expenses of revenue agents, surveyors of distilleries,
gaugers, storekeepers, and miscellaneous expenses.
For dies, paper, and stamps

$1,810, 000 00

For salaries of officers, clerks, and employés in the office of Commissioner of Internal Revenue.

1,466, 000 00 452, 000 00

253,410 00

$75,000 00

4,056, 410 00

Detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws..

Total.....

Being less than three and three-quarters per cent. upon the whole amount collected. A final adjustment of the accounts may change the foregoing figures in some regard, but not to any material extent.

ESTIMATED RECEIPTS FOR THE CURRENT FISCAL YEAR.

There has been an increase in the receipts from internal revenue up to this date (November 25th), as compared with the same period of last year, of a little over a million of dollars, and as the information from various points seems to indicate a favorable reaction in the general business of the country, I am strongly inclined to the opinion that the internal revenue receipts will sympathize largely with the improved condition of affairs. It will be seen from the comparative tables of receipts that the decrease in last year's revenue commenced in November and continued during the balance of the fiscal year. I am well satisfied that this decrease was mainly attributable to the threatened change in the tax on spirits and tobacco. It will be observed that during the past four months the receipts compare favorably with those of the two preceding years, and it would seem probable that the receipts for the balance of this fiscal year will be maintained equal to those of the fiscal year 1877, unless the causes which produced the decrease of last year again prevail. In any event, it appears to me entirely safe, if the rate of taxation is not disturbed, to estimate that the revenues for the present fiscal year will not fall short of $115,000,000.

ESTIMATED EXPENSES FOR NEXT FISCAL YEAR.

I estimate the expenses of the internal revenue service for the fiscal year ending June 30, 1880, as follows:

For salaries and expenses of collectors..

For salaries and expenses of thirty-five revenue agents, for surveyors, for fees and expenses of gaugers, for salaries of storekeepers, and for miscellaneous expenses

For dies, paper, and stamps.

For detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws, including payment for information and detection....

$1,900,000

1,500,000 375,000

100,000

ORGANIZATION OF THE BUREAU.

I have the honor to recommend that Congress appropriate for the fiscal year ending June 30, 1880, the sum of $254,330, as salaries for the following number of officers, clerks, and employés in this bureau:

One Commissioner, at....

One deputy commissioner, at

Two heads of division, at

Five heads of division, at

$6,000

3,200

2,500

2,250