Petitioners Brief — Graham & Foster v. Goodcell

mee

ext

a

‘

"a INDEX.

Page

Opinion of the Court of Claims ................ 1

EERO. 0.456. s-b soe 6 can eee oueee e 2

gS gC eae 2

Peer ere re 3

mpeetMention of Errore uc. cscccsvcenssoecced 4

eer DOE... hanssdseessaveneee eee 5

TEETER OO ST 5

The provisions of Section 611 of the Revenue

Act of 1928 do not apply ...............4.. 6

1. The 1918 overpayment sought to be eg

covered was not covered by a claim fér,

ORE ooo i nsenscesttvabaloueee 6

2. Section 611 does not apply to a ‘‘credit’’

made after the expiration of the statu-

tory period of limitations ............. 6

3. The collection of no part of the tax for

1917 was ‘‘stayed’’ by a claim for abate-

geek on SEROROEES os 6scs iki aeawnees 9

Section 611, if construed to be applied, would

i SS . ig 5 ko dbs bee bee eenees 10

REE POR nce Sma et eed a ere Oe 10

Taste OF CasEs.

Bowers v. New York & ‘Albany Lighterage Co.,

(273 U. S. ED ctput cokedse scape anaboeves 6

Early v. Doe Ex Dem Homans, (16 How. 610) .. 7

= Free: 8: | Sererreery trees tT

Peerless Paper Box Manufacturing Co. v. Rout-

sahn, (22 Fed. (2) 459) ..............000. 7

ii Index Continued.

Page

Platt v. Union Pacific Railroad Company, (99

BR OPE a Boas Coed eee aw in ins Keck 7

Russell v. United States, (278 U. S. 181) ...... 6

United States v. Lexington Mill Elevator Co.,

CU Ss Se MR ete ee aS Sees 7

Wiborg v. United States, (163 U. S. 632) ...... 7

Wilmot v. Mudge, (103 U. S. 217) ............ 7

STATUTES

Section 3(b) of the Act of February 13,1925... 2

Section 145 of the Judicial Code ..............:. 2

seth 227(a) (2) of the Revenue Act of 1924... 6

Section 3226 of the Revised Statutes ........... 2

Section 607 of the Revenue Act of 1928 . .3-4-7-8-9-10

Section 609(a) ofthe Revenue Act of 1928 :

3-4-7-8-9-10

Section 611 of the Revenue. Act of 1928 ...3-4-5-6-8-9

IN THE

Supreme Court of the United States

Octoser Term, 1930.

No. 337.

Boston Pressep Merat Co., Petitioner,

/

v. ;

Tue Unrrep States, Respondent.

-

ee

¥

BRIEF ON BEHALF OF PETITIONER.

=

OPINION OF THE COURT BELOW.

The opinion of the Court of Claims has not been

officially reported. It was rendered by the Court be-

low on June 2, 1930, and will be found printed in the

record at pages 8 and 9.

2

I. -

_JURISDICTION.

The jurisdiction of this court is invoked under Sec-

tion 3(b) of the Act of February 13, 1925 (43 Stat.

926).

The final judgment of the Court of Claims was en-

tered on June 2, 1930 (R. 10). Application for writ

was presented August 8, 1930 (R. 1), and granted on

October 20, 1930.

The suit brought in the Court of Claims is for the

recovery of an overassessment of corporation income

and profit taxes eollected for the year 1918, illegally

retained by the defendant, jurisdiction of which is

conferred upon the Court of Claims by Section 145

of the Judicial Code and Section 3226 of the Revised

Statutes.

Ii.

SBATEMENT OF THE CASE.

The petitioner, a corporation, filed its Federal in-

come “tax return for the year 1918 and paid taxes

. Showh thereon in the amount of $30,532.77. In 1921

an additional tax of $13,299.65 was assessed against

“it. This assessment was not paid. On August 27,

1924 the Coxhmissioner of Internal Revenue allowed

anvoverasséssment to the petitioner for the year 1918.

in the amount of $22,530.M of which $13,299.65 was

applied as an abatement of, the prior assessment in

- the same amount, $5,938.11 4was credited against an

' additional tax for the year ‘1920 and the balance,

$3,844.94, the amount involved fe this proceeding, was

credited against a tax claimed to be due from the

vetitioner for the year 1917.

s

3

The return for 1917 was filed on March 30, 1918.

On January 7, 1921 the Commissioner of” Internal

Revenue made an additional assessment for the year

1917. On February 24, 1921 the petitioner filed a

claim for abatement covering this additional assess-

ment and also the additional assessment of $13,299.62,

for 1918. The 1918 assessment was later abated in

full.

The balance of the overassessment of $3,844.94 for

the year 1918 was an overpayment and was credited

against the outstanding assessment for the year 1917,

above referred to, on January 7, 1925, a date more

than five years after the filing of the return for 1917.

The petitioner filed suit in the Court of Claims

asking judgment for $3,844.94, the overpayment found

and allowed by the Commissioner of Internal Revenue

for the year 1918 on the ground that the ¢redit of

that amount against the alleged tax for the year 1917

was void because it was made after the expiration of

the statute of limitations on collection of taxes for

the year 1917.

The Court held that although the credit was made

after the statute of limitations had expired with ref-

erence to the taxes for 1917, no recovery would be

allowed because of the provisions of Section 611 of

the Revenue Act of 1928.

IV.

. STATUTES INVOLVED.

The pertinent provisions of law are Sections 607,

609(a) and 611 of ‘the Revenue Act of 1928 reading

as follows:

4

**Sec. . Any tax (or any interest, penalty,

additional amount, or addition to such tax) as-

sessed or paid (whether before or after the enact-

ment of this Act) after the expiration of the

iod of limitation properly applicable thereto

shajl be considered an overpayment and shall be

credited or refunded to the taxpayer if claim

therefor is filed within the period of limitation

for filing such claim.’’

**Sec. 609(a). Any credit against a liability in

respect of any taxable year shall be void if any

payment in respect of such liability would be con-

sidered an overpayment under Section 607.’’

**Sec. 611. If any internal-revenue tax (or any

interest, penalty, additional amoum, or addition

to such tax) w — the period of limitation

properly applicable thereto, assessed prior to

June 2, 1924, and if a claim in abatement was

filed, with or without bond, and if the collection

of any part thereof was stayed, then the payment

of such part (made before or within one year

after the enactment of this Act) shall not be con-

sidered as an overpayment under the provisions

of Section 607, relating to payments made after

the expiration ‘of the period of limitations on as-

sessment and collection.’’

vs

SPECIFICATION OF ERRORS TO BE URGED.

The errors which the petitioner urges as grounds

for the reversal of the decision of the Court of Claims

are:

1. The Court below erred in finding and holding

that Section 611 of the Revenue Act of 1928 is ap-

plicable to this case.

2. The Court below erred in holding that the col-

-Jeetion of tax was ‘‘stayed’’ within the iinile of

the Section 611 of the Revenue Act of 1928.

3. The Court below erred in failing to find and hold

that the application of Section 611 to this case will

render that Section unconstitutional.

THE ARGUMENT.

Summary of Argument.

A. The provisions of Section 611 of the Revenue

Act of 1928 do not apply to this case for the follow-

ing reasons:

covered was not coveied by a claim for abatement.

2. They are not applicable to credits. .

3. The collection of no part of the tax for 1917

was ‘‘stayed’’ by a claim for abatement or other-

wise. .

1. The 1918 waren. sought to be re-

B. The application of Section 611 of the Revenue

Act of 1928 to this case would render it unconstitu-

tional for the following reasons:

1. The power conferred on Congress “ the

Sixteenth Amendment is limited to 'the laying and

collecting of taxes on income. ‘

_ 2. The petitioner would be deprived of ite

property without due process of law and without

just compensation in violation of the Fifth —

Amendment.

~ \

6

VI.

THE ARGUMENT.

The Provisions of Section 611 of the Revenue Act of

a" 1928 do not Apply to This Case.

1. The 1918 overpayment sought to be recovered

was not covered by a claim for abatement.

The petitioner brought suit in the Court of Claims

to recéver an overpayment in the amount of $3,844.94

allowed by the Commissioner of Internal Revenue

for the year 1918. There was no claim for abatement

filed for the year 1918 which was applicable to the

amount of this overpayment. As there was no claim »

for abatement filed covering the tax sought to be re-

covered, Section 611 of the Revenue Act of 1928 can

have no effect* By its express words it relates only to

cases in which ‘‘a claim for abatement was filed

* @ @ 99

2. Section 611 does not apply to a ‘‘credit”’ made

after the expiration of the statutory period of limita-

tions.

The overpayment allowed the petitioner for the

year 1918 was not refunded to it, but was credited

against an assessment made for the year 1917. At

the time the credit was made it was too late to collect

the assessment for the year 1917 because of the provi-

sions of Section-277 (a) (2) of the Revenue Act of

19 Bowers v. New York & Albany Lighterage Co.,

(273 U. S. 346) ; Russell v. United States, (278 U. S.,

181).

The offsetting of the allowable overpayment for

-1918 against the barred assessment for 1917 did not ~

give the Government the right to retain the amount

all6wed as an overpayment. The taxpayer should be

permitted to recover the overpayment already al-

® ss

(

lowed. Peerless Paper Box Mfg. Co. v. Routzahn,

(22 Fed. (2d) 459).

In L. O. 1095 (1-I C. B. 313) the Solicitor of In-

ternal Revenue stated: -

‘‘The Government itself insists on the benefit

of the statute of limitations and holds that a re-

fund due a taxpayer cannot be applied on a later

tax when the amount refundable is barred by the

statute. It is believed both in good conscience

and by legal right the same rule must apply when

it works to the advantage of the taxpayer.’’

Thd Court below held that the ex parte withhold-

ing of an overpayment should be considered the same

as a voluntary payment by the petitioner. There is

much difference between an ex parte withholding by

the collector and a voluntary payment by the tax-

payer and the Revenue Act of 1928 treats with them

separately and differently.. If Congress hud intended

a void credit to constitute a payment as the Court

below held, there was no necessity for Section 609(a).

If the void credit was a payment it would already

have been under the express language of Section 607,

and Section 609(a) would be meaningless. Conse-

quently, to adopt the interpretation of the Court be-

low would be to impute to Congress the use of super-

* fluous language. This the Courts will not do. -

sie v. Union Pacific Railroad Co., (99 U. S.

United States v. Lexington Mill Elevator Co.,

(232 U. S. 399).

Wiborg v. United States, (163 U. S. 632).

Every word of a statute is to be given effect. Wil-

mot vy. Mudge, (103, U. S., 217); Early v. Doe ex Dem

Homans, (16 How., 610).

8

If Congress had intended void credits to have been

modified by Section 611, it would have either used the

word ‘‘credited’’ in Section 607 and omitted Section

609(a) entirely, or it would have inserted in Section

609 a qualification referring to and incorporating

therein the substance of Section 611—for example by

the use of the clause ‘‘except as provided in Section

611’’. The failure of Congress to follow either one

of these two courses is highly persuasive that the

form of the statute in this connection was deliberate

and that it was intended that Section 609(a) should

be given its literal effect and should not be modified

in any manner by Section 611. Added force is given

to this conclusion from the circumstances that Section

611 follows in order both Section 607 and Section 609.

That Congress intended to distinguish between ac-

‘tual payments by the taxpayer (covered by Sections

607 and 611) and mere ez parte credits by the Com-

missioner (covered by Section 607 and 609(a) ) may

be the more easily accepted because, it is submitted,

Congress ought to have intended this distinction. The

situation of a taxpayer who voluntarily pays a tax,

is entirely different from the situation of a taxpayer

whose money, in the hands of the Commissioner and

representing an acknowledged overpayment for one

year, is summarily applied by the Commissioner

agaimst an alleged tax liability of another year. In

the former case the taxpayer has his opportunity to

contest the correctness of the tax by an ajipeal to the

Board of Tax Appeals before paynfgnt. In the later

case the taxpayer is absolutely helpless, being without

even the opportunity to argue his case to the Commis-

sioner or to point out the illegality of the proposed

action to the Board of Tax Appeals.

9

It should be noted that the respondent must

rely not upon any express statutory provision but

upon an implication. To sustain the Court below it

must be argued that the express provision of Section

609(a) carries the implication that a credit against

a liability, payment of which would be an over-

payment under Section 607, shall not be void

and that the phrase ‘‘under Section 607’’ should

be construed as ‘‘under Section 607 as limited by

Section 611.’’ In other words, the respondent’s case

requires that the court should imply a negative provi-

sion where the statute merely expresses a positive

provision.

If Congress had intended a void eredit to fall under

the terms of Section 611 it would have done one of

two things—either added to Section 609(a) ‘‘except

as provided in Section 611’’ or have inserted the word

‘‘credited’’ in Section 607 and omitted Section 609(a)

from the law. It has done neither and we submit

that this shows a clear intent to differentiate between

payments and credits.

3. The collection of no part of the tax for 1917 was

‘‘stayed”’ by a claim for abatement or otherwise.

There was no ‘‘stay’’ of the collection of the tax

sought to be recovered. The Court below did not find

that the collection of the tax for 1918 was ‘‘stayed’’,

and erroneously considered this case as if it were a

suit to recover the 1917 tax against which the credit

was applied, but even on that theory Section 611

could have no application in this case for, while there

was a claim for abatement filed for the year 1917,

there is no finding nor any facts from which the court

could have found that ‘‘the collection of any part

thereof (1917 tax) was stayed’’. “ge

>)

’

&

10

Assuming (for the sake of argument only) Section

611 could be considered as modifying Section 609, on

the facts in this case Section 611 can not be applied

because there is neither a finding nor facts to show

that collection of -the 1917 tax was ‘‘stayed’’ by a

claim for abatement or otherwise.

SECTION 611, IF CONSTRUED TO APPLY,

WOULD BE UNCONSTITUTIONAL.

This case has been assigned to follow other cases

involved related questions, including that of the ap-

plication and constitutionality of Section 611 of the

Revenue Act of 1928. As those questions have been

comprehensively briefed in the other cases counsel

begs leave to refer to those briefs in lieu of repeating

arguments already made to this Honorable Court.

CONCLUSION.

In conclusion, it is respectfully submitted that the

decision of the Court of Claims should be reversed.

Harry FriepMaN,

Attorney for Petitioner.

Munsey Building,

Washington, D. C.

TEL Oe FOE CAPT PG, Pera Nee