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House of Representatives,
Committee on Ways and Means,
Washington, D.C.

The committee met at 10:30 a.m., Hon. Robert L. Doughton (chairman) presiding.

The Chairman: The committee will be in order.

This is a continuation of the hearing on the bill H.R. 6385. After the adjournment of the committee in yesterday, I suggested to Mr. Hester, who has been representing the Treasury Department in the presentation of this bill, that he have a conference with some of those who have appeared in opposition to certain provisions of the bill to see if it were possible to iron out the differences and reach an agreement as to the points on which they were in disagreement.

If Mr. Hester is present we will receive his report.

Do you have something to report Mr. Hester?


Mr. Hester: Yes, Mr. Chairman; I have. Pursuant to your request yesterday afternoon we conferred with Judge Lozier and Mr. Williamson, and also with Mr. MacDonald, Mr. Gordon, and Mr. Conners, and as a result of our conference, those gentlemen, who represent importers of the seeds and those who crush the seeds for the purpose of making oil and using the residue of the seeds for making meal and cake, have expressed the view that they are willing to pay the occupational tax which is provided in this bill if the definition of marihuana is amended so as to eliminate oil made from the seeds, and the meal and cake which are made from the seeds, as well as any compounds or manufactures of either oil, meal, or cake.

The position they take is that under the bill at the present time those who sell oil for the manufacture of varnish and paints would have to pay the occupational tax, even though they would not have to pay the transfer tax or make the transfers on the order forms. They also take the position that under the bill, as now drawn, they could not sell this residue from the seeds, or the meal and cake, to cattlemen, because of the fact that the cattlemen could not register under the bill, and that, therefore, they would have to pay a prohibitive tax.

I will say this, that I have never come up here in connection with any legislation where the Ways and Means Committee has not found it necessary to make some changes. We always expect that when we appear before the Ways and Means Committee, because of the fine consideration the committee gives to all legislation. If the committee should ask the Secretary of the Treasury for his recommendation with respect to the proposals made by these gentlemen representing this legitimate industry, I will say very frankly to the Secretary that I see no objection to amending the definition of marihuana so as to eliminate oil, meal, cake, and the manufactured compounds of those materials.

The Chairman: Why not make that request now, and later on we can have the report of the Secretary?

Mr. Hester: That is agreeable to us.

The Chairman: That will save time.

Mr. Reed: Are these the only objections that have been raised so far, or are these the only requests that have been made to amend the bill?

The Chairman: The chairman was not here yesterday, but I understand there is one more witness to appear in opposition to the bill.

Mr. Reed: I was wondering whether this agreement would clear the atmosphere so we could go ahead, or whether there are other witnesses who may raise other points in opposition to the bill. Has there been any indication of that?

The Chairman: My understanding is that this clear the atmosphere so far as this provision of the bill is concerned. There may be opposition to other provisions in the bill. However, this agreement will clear the atmosphere considerably.

Mr. Reed: Have you had notice of any other opposition to the bill?

The Chairman: I am informed that the American Medical Association has a representative here to make some statement in regard to the bill, and, perhaps, in opposition to certain features of it. I am not informed as to the particulars of their position.

Mr. Buck: I was going to ask Mr. Hester whether he has prepared any suggested amendments to the bill.

Mr. Hester: Yes, sir. There was one other point raised that I omitted to State. I refer you to page 4 of the bill, line 19. These gentlemen point out that marihuana is shipped in railroad cars at times, and that under the language of the bill, commencing in line 19, page 4, the Secretary of the Treasury would require an exact inventory. They say that even on account of wind a bushel or two might be removed from a railroad car. We have considered the matter overnight, and we feel that their objection is meritorious. Therefore, it is agreeable to us to strike out that entire sentence, commencing in line 19, page 4, with the words, "At the time of such registry." It will be agreeable to us to strike out that entire sentence.

Mr. Reed: You would strike out the whole sentence.

Mr. Hester: Yes, sir.

Section 10 (a), page 13, gives us ample authority to prescribe the regulations requiring reasonable inventories. That section reads as follows:

Every person liable to any tax imposed by this act shall keep such books and records, render under oath such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.

That will give us ample authority.

I have a copy of the amendments here, which are agreeable to these gentlemen. Do you want me to read them?

Mr. Cooper: Of course, we will take up the question of amendments in executive session.

Mr. Hester: Then, I will insert them in the record.

The Chairman: You may hand them to the reporter for insertion in the record.

(Said amendments are as follows:)

Amendments To H.R. 6358

Hempseed oil, hempseed cake, hempseed meal, and all products manufactured from the above may be eliminated from the purview of the bill by amending section 1 (b), which contains the definition of marihuana, to read as follows:

The term :"marihuana" includes all parts of the plant Cannabis sativa. L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin; but shall not include the mature stalks of such plant, oil or cake made from seeds, and any compound manufacture, salt derivative, mixture, or preparation of such mature stalks, oil or cake.

In order to render the remainder of the bill consistent with this amendment, section 3 (c) should be eliminated from the bill. This section provides that the occupational excise tax and registry provisions of the bill shall not apply to dealers in paints and varnishes. Since the definition of marihuana, as above amended, would not include paints and varnishes, this section is no longer necessary.

Section 6 (b) (5) and (6) may be eliminated from the bill because they merely except from the transfer tax and order-form provisions of the bill a transfer of paints or varnishes, of which marihuana is an ingredient, and a transfer of seeds or oil to a manufacturer of paint. since paints, varnishes, and hempseed oil, under the definition as amended, will not be included within the term "marihuana", it is no longer necessary to exempt these products from the transfer tax.

Since hempseeds will, even under the amended definition, be subject to the provisions of the bill, it is necessary to amend section 6 (b) (6), which exempts from the transfer tax and order form provisions a transfer of seeds for the further production of the plant or for use in the manufacture of oil, so as to permit a transfer of seeds for the manufacture of hempseed cake and meal. That section is, therefore, amended to read as follows:

"To a transfer of any seeds of the plant Cannabis sativa. to a person, registered as a producer under section 2, for use by such person for the further production of such plant, or to a person registered under section 2 as a manufacturer, importer, or compounder, for use by such person for the manufacture of seed oil, seed cake, or any compound, manufacture, salt, derivative, mixture, or preparation of such oil or meal."

Section 2 (d) provides at the time of registry and payment of the occupational tax a taxpayer must file an inventory of the exact amount of marihuana on hand. Manufacturers of hempseed oil, cake, and meal will be occupational taxpayers, and, as such, would have to file an inventory of the exact amount of seeds on hand at the time of registry. Representatives of industry State that it would be very difficult for them to file such an inventory due to the required exactness. This difficulty might be eliminated without jeopardizing the enforcement of the measure by striking out the second sentence of section 2 (d) which requires the inventory. With that sentence eliminated the Secretary of the Treasury could make such inventory requirements as are appropriate to the particular case under section 10 (a) of the bill which gives the Secretary authority to require taxpayers under the act to render under oath statements, make returns, and comply with rules and regulation.

Mr. Lamneck: Are there any harmful ingredients in the so-called meal?

Mr. Hester: I would rather have Dr. Wollner answer that.

Dr. Wollner: There are not.

Mr. Hester: Dr. Woolner, the consulting chemist in the Office of the Secretary of the Treasury, says there are not.

Mr. Lamneck: I would like to inquire whether all importation of hempseed are of this variety, or whether there are other varieties that are not harmful.

Mr. Hester: My understanding is that all hempseeds contain marihuana unless the liquid has been completely dried out of the seed.

Mr. Lamneck: The testimony the other day showed that there was a great amount of these seeds imported, and that all of them contained these harmful ingredients we are talking about.

Mr. Hester: Yes, sir; that is right. I want to make this clear: Am I correct, Mr. Wollner, in saying that when the seeds are dry marihuana is not contained in them?

Dr. Wollner: That is right.

Mr. Hester: As I see it, the enforcement problem is to see that the seeds cannot get out of the hands of the importers for use in growing marihuana in this country.

Mr. Buck: Your proposed amendments, as I understand it, will only permit the use of hulls or the seeds after they have been cracked or crushed so they cannot be used for germination purposes?

Mr. Hester: That is right.

The Chairman: Judge Lozier, do you wish to make a further statement?

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