Summary
In Cuban-American Sugar Company v. United States, (27 F.Supp. 307, 89 Ct.Cl. 215; 309 U.S. 681) arising under the 1917 Act, and in Michigan Iron & Land Co. v. United States, 10 F.Supp. 563, 81 HCt.Cl. 330, and in other cases arising under the 1918 Act, we held, that, since the taxpayer had requested and insisted upon assessment under the relief sections, it could not complain because its request had been granted.
Summary of this case from Monarch Mills v. United StatesOpinion
No. 43206.
May 1, 1939.
David A. Buckley, Jr., of Washington, D.C. (Harvey L. Rabbitt, Arthur L. Quinn, and Loring M. Black, all of Washington, D.C., on the brief), for plaintiff.
J.W. Hussey, of Washington, D.C., and James W. Morris, Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Suit by the Cuban-American Sugar Company, Inc., against the United States to recover $790,115.87, profits tax for the fiscal year ended September 30, 1917.
Petition dismissed.
This suit was instituted to recover $790,115.87, profits tax for the fiscal year ending September 30, 1917. Plaintiff bases its claimed right to recover the alleged overpayment on the ground that, although the Commissioner of Internal Revenue determined and computed the profits tax under the special assessment provisions of section 210 of the Revenue Act of 1917, 40 Stat. 307, the taxpayer is entitled to have its profits tax for that year determined and computed on the basis of a statutory invested capital under the provisions of section 201 of the Revenue Act of 1917 and to include in such statutory invested capital an amount of $11,000,000 in excess of an invested capital of $28,848,530.85 reported in the return and corrected by the Commissioner in an audit letter mailed to plaintiff on January 3, 1921. After receipt of that letter plaintiff filed an original and amended application for special assessment and the computation of its profits tax for 1917 under the special assessment provisions of section 210 of the Revenue Act of 1917. In his final determination the Commissioner allowed the application and so determined and computed the profits tax, and that determination has never been changed by the Commissioner.
The case is submitted upon the defendant's special answer and plea to jurisdiction in which dismissal of the petition is asked on the grounds (1) that the court is without jurisdiction to inquire into or change the Commissioner's determination based on special assessment, and (2) that, in any event, the suit was barred at the time the petition was filed for the reason that the claim for refund on which it is based was not filed within the time required by law for the filing of such claims.
Special Findings of Fact.
1. Plaintiff filed an original and amended excess profits tax return for the fiscal year ending September 30, 1917, hereinafter referred to as the year 1917. The original return showed a statutory invested capital of $26,774,367.90 and the amended return an invested capital of $27,314,160.57. The original income and profits tax return showed a total tax of $2,306,928.74 of which $1,975,180.94 represented the profits tax for nine months of the calendar year 1917. The amended return showed a profits tax for this period of $1,949,577.21. With the amended return plaintiff filed on January 8, 1920, a claim for refund of $24,058.88 representing the difference between the total tax of $2,206,853.84, the amount shown to be due on the original return, less certain abatement claims, and $2,182,794.96, the total amount shown to be due on the amended returns, less certain abatement claims. This claim for refund is in evidence as joint exhibit 7 and is made a part hereof by reference. On June 12, 1918, plaintiff paid $2,206,853.84 of the total income and profits tax of $2,306,928.74 shown on the original income and profits tax return and filed its claim for abatement of the balance and, later, in January 1920, a claim for refund of $24,058.88, as stated above. On August 15, 1922, plaintiff paid a further amount of tax of $133.40. Subsequently, as will be hereinafter stated, the Commissioner in his final determination in 1923 denied the claims in abatement and the claim for refund of January 8, 1920, and determined, on the basis of special assessment, a net additional tax of $20,577.52 in excess of the income and profits tax shown upon the original returns. As a result, plaintiff, on October 31, 1923, paid the net additional tax of $20,577.52 and, on December 27, 1923, paid the balance of the original tax of $99,941.50, making the total income and profits tax paid for the fiscal year 1917 $2,327,506.26.
2. After the filing by plaintiff of the original and amended income and profits tax return for 1917, the claims for abatement, and the claim for refund of January 8, 1920, the Commissioner on January 3, 1921, audited the returns for 1917 in connection with the claims for abatement and the claim for refund on a statutory invested capital basis under section 201 of the Revenue Act of 1917, the basis on which the returns had been filed, and made certain changes, increasing the invested capital for 1917 over the amount which the taxpayer had been previously advised in an audit letter of May 29, 1920. In the audit of January 3, 1921, the Commissioner determined an invested capital on the statutory basis of $28,848,530.85, which was an increase of $5,451,555.54 over the invested capital of $23,396,975.31 of which the plaintiff had been previously advised in the audit letter of May 29, 1920. As a result the Commissioner, in this audit, determined a consolidated net taxable income of $9,614,131.52 and an income tax of $345,657.78, an invested capital of $28,848,530.85, and an excess profits tax for the nine months of the calendar year 1917 of $1,729,541.41, or a total income and profits tax of $2,075,199.19. This amount was $231,729.55 less than the total income and profits tax shown to be due and assessed upon the original income and profits tax return for 1917. And in this audit letter the Commissioner showed the last-mentioned amount as a proposed overassessment.
Thereupon, plaintiff protested this determination and filed an application requesting the Commissioner to determine and compute its profits tax for the period ending September 30, 1917, under the special assessment provisions of section 210, Revenue Act of 1917, and on March 8, 1922, plaintiff filed an amended detailed application and claim for special assessment. This amended application is in evidence as joint exhibit 9 and is made a part hereof by reference. Thereupon the Commissioner entered upon consideration of the plaintiff's application and claim for special assessment and, on May 10, 1923, made a decision and determination with respect to the fiscal year ending September 30, 1917, in which he allowed plaintiff's application for special assessment under section 210 and determined and computed the profits tax for the nine months of the calendar year 1917 under and in accordance with special assessment section 210 of the Revenue Act of 1917. In this determination the Commissioner determined a consolidated net income of plaintiff and its seven affiliated corporations for income-tax purposes of $9,716,786.22 and a consolidated net income for excess profits tax purposes of $9,638,360.61. In applying the special assessment provisions of section 210 of the Revenue Act of 1917, the Commissioner determined a total excess profits tax of $1,190,803.38 for the nine months of the fiscal taxable year falling within the calendar year 1917. In this decision and determination the Commissioner advised plaintiff in part as follows: "Reference is made to your income and excess profits-tax returns * * * for the fiscal year ended September 30, 1917, and your appeal for assessment of the excess-profits tax under the provisions of section 210 of the Revenue Act of October 3, 1917. You are advised that the excess-profits tax for the above-named year has been redetermined under the provisions of section 210 of the Revenue Act of October 3, 1917, in accordance with Articles 18, 24, and 52 of Regulations 41, and the application of the entire excess-profits tax has been computed in connection with the net income of the parent company."
As a result of this decision and determination the Commissioner determined an additional tax of $17,894.36 with respect to plaintiff and certain further additional taxes with respect to certain of the affiliated corporations, and over-assessments as to two of the affiliates. The total net additional tax was $20,577.52 for the group.
Notice of the details of this determination was mailed to plaintiff by registered mail on May 10, 1923, and permitted plaintiff to appeal to the Commissioner, or such agency as he might designate, under the provisions of section 250(d) of the Revenue Act of 1921, 42 Stat. 265. An appeal was taken and after consideration thereof the Commissioner on August 16, 1923, made a final determination in which the prior audit and decision, notice of which had been mailed to plaintiff on May 10, 1923, were sustained and the additional income and profits tax of $20,577.52 so determined was assessed. The audits and decisions of the Commissioner of May 10, 1923, and August 16, 1923, are in evidence as joint exhibits 10 and 11, respectively, and are made a part hereof by reference. These decisions of the Commissioner effectively and completely disposed of and rejected plaintiff's abatement claims and the claim for refund filed January 8, 1920.
The additional tax of $20,577.52 was paid on October 31, 1923, as hereinbefore mentioned, and, on December 27, 1923, plaintiff also paid the balance of the outstanding original assessment due of $99,941.50.
3. Subsequent to the aforementioned final determination of the Commissioner, the plaintiff, on December 23, 1927, filed a claim for refund for 1917 for "$1.00 and all other amounts refundable." This claim stated two grounds: First, that a refund of $26,417.44 should be made for the reason that under Treasury Decision 3981, promulgated February 23, 1927, in computing income tax for the nine months falling in 1917 there should be credited the entire amount of excess profits tax instead of nine-twelfths thereof; the second ground of this claim for refund was that the Commissioner in computing the profits tax under the special assessment provisions of section 210 in accordance with plaintiff's application had used comparatives not representative of the industry to establish the rate of excess profits tax; plaintiff asked further consideration of the matter of the comparative corporations to be selected and used in the determination of the excess profits tax and that a lower profits tax rate be determined and that refund be made accordingly. On August 14, 1928, the Commissioner made a decision upon the claim for refund and advised plaintiff thereof, in part, as follows:
"Your contention that improper comparatives were used in the determination of your profits-tax liability under Section 210 is denied for the reason that the evidence furnished is not considered sufficient to reconsider the previous determination of your excess-profits-tax liability as shown by Bureau letter dated August 16, 1923.
"So much of your claim as pertains to the recomputation under Treasury Decision 3981 is allowed and your tax liability has been redetermined as outlined and explained below. * * *.
"In accordance with the above conclusions, your claim for the refund of $1.00 and such other amounts refundable, will be allowed for $19,908.03."
This decision of the Commissioner is in evidence as exhibit 18 and is made a part hereof by reference.
A certificate of overassessment for the $19,908.03 above mentioned was prepared by the Commissioner for abatement, refund, or credit in accordance with the statute but due to various written protests filed by plaintiff between October 3, 1928, and February 1, 1930, with reference to the comparatives used in determining the profits tax under section 210 of the Revenue Act of 1917 the certificate of overassessment was not mailed to plaintiff until March 15, 1933, on which date a formal schedule rejecting the claim for refund of December 23, 1927, for all amounts in excess of $19,908.03 was issued and signed.
4. Prior to July 6, 1928, the Commissioner had under consideration the matter of the tax liability for the plaintiff for the fiscal years 1918, 1919, and 1920 with respect to which plaintiff had also made application for assessment of its profits tax under the provisions of the special assessment sections 327 and 328 of the Revenue Act of 1918, 40 Stat. 1093. In a preliminary audit letter dated July 6, 1928, the Commissioner advised plaintiff of his determination in respect of those years, in which determination he applied the special assessment provisions and computed the profits taxes for the years 1918 to 1920, inclusive, under the special assessment provisions. Thereafter plaintiff filed a protest with reference to the determination for these years and hearings were had thereon. Thereafter the Commissioner on February 14, 1930, by a registered notice of his final determination, reversed his earlier action with respect to the years 1918 to 1920, inclusive, and denied plaintiff's application for special assessment and declined to compute the profits tax for these years under the relief provisions of the Revenue Act of 1918 "for the reason that no abnormality in either capital or income has been established as a fact which would justify the Bureau in giving consideration to your application for assessment of your profits tax under the provisions of the above-mentioned acts."
From this 60-day deficiency notice the plaintiff, on February 24, 1930, filed a petition with the United States Board of Tax Appeals for a redetermination of the Commissioner's decision in respect of the years 1918 to 1920, inclusive, assigning as error, among others, the failure of the Commissioner to allow the application for special assessment and to compute the excess profits tax under the relief provisions of the Revenue Act of 1918.
Before the proceedings with respect to the years 1918 to 1920, inclusive, were reached for trial, conferences were held by plaintiff's representatives with the Special Advisory Committee of the Bureau of Internal Revenue looking to a possible agreement and settlement of the matters in controversy with respect to those years then pending before the Board of Tax Appeals, one of which questions was the matter of special assessment. As a result of these negotiations and conferences which related only to the years 1918, 1919, and 1920, and at no time included any consideration of the fiscal year 1917 as that year was not before the Board or Special Advisory Committee, an agreement to stipulate as to the controversies involved in the proceedings before the Board of Tax Appeals was arrived at. This agreement to stipulate provided, among other things, that — "The undersigned petitioners hereby agree that they will stipulate with the General Counsel for the Bureau of Internal Revenue to the entry of an order by the United States Board of Tax Appeals redetermining deficiencies in the above-entitled cases on the following basis of settlement: That there be added to invested capital in each of the taxable years [1918, 1919, 1920] the lump sum of $11,000,000, and that no part of such sum be subject to depreciation deductions against gross income in any of the taxable years."
The other item to which the agreement to stipulate related, and which had no reference to the case at bar, concerned inventories of refined sugar as at September 30, 1920. Computations of plaintiff's tax liability for the years 1918, 1919, and 1920 were thereafter made in accordance with the plaintiff's proposed agreement to stipulate and settle all the controversies pending before the Board of Tax Appeals. Decisions were subsequently entered by the Board of Tax Appeals for those years in accordance with the stipulated computations filed with the Board by plaintiff and the General Counsel of the Bureau of Internal Revenue. Thereafter, on April 4, 1933, plaintiff filed with the Commissioner a claim for refund for "$1.00 and such greater amount as is legally refundable" for the fiscal year ending September 30, 1917, on the ground that its income and profits tax liability for the fiscal year 1917 should be determined and computed on the basis of a statutory invested capital rather than under the special assessment provisions of section 210 of the Revenue Act of 1917 by including in its statutory invested capital, as disclosed in its original and amended returns filed and as corrected in the Commissioner's audit letter of January 3, 1921, the additional sum of $11,000,000 agreed to and included in the invested capital for the fiscal years 1918, 1919, and 1920 in the settlement of the controversies pending in those cases before the Board of Tax Appeals.
5. On June 8, 1933, the Commissioner advised the plaintiff that consideration of the claim was precluded by the statute of limitation for the reason that it was filed subsequent to the date on which final action had been taken on the prior claim for refund involving error in the selection of comparatives under section 210 and subsequent to the expiration of the period of limitation for filing valid claims for refund as prescribed by section 284 of the Revenue Act of 1926, 44 Stat. 66. The taxpayer protested, and, on June 16, 1933, the Commissioner again advised plaintiff that inasmuch as final action had been taken and final decision made on the prior claim for refund and that since the 1927 claim had been formally rejected on March 15, 1933, the claim of April 4, 1933, could not in any manner be considered as an amendment of the prior rejected claim of December 23, 1927, and that registered notice of the disallowance would, accordingly, be issued. Formal notice of the rejection of the claim for refund filed April 4, 1933, was issued and mailed by the Commissioner by registered mail on December 29, 1933.
Upon the facts disclosed by the record it is clear that the plea in bar must be sustained and the petition dismissed. Plaintiff made application for the determination and computation of its profits tax for 1917 under the special assessment provisions of section 210 of the Revenue Act of 1917. The Commissioner allowed the application, computed the tax accordingly, and made a final determination in respect of that year. Thereafter, in 1927, plaintiff filed a claim for refund which, so far as it was rejected, related entirely to the matter of special assessment and the selection of comparatives used in determining the profits tax for 1917; that claim was formally rejected by the Commissioner on a rejection schedule signed and issued March 15, 1933. Plaintiff endeavors to make some point of the fact that it had filed a claim for refund on January 8, 1920, which had never been formally rejected. But that claim for refund was filed with the amended return before the decision of the Commissioner on special assessment and in connection with certain claims in abatement which were then pending. The final decision of the Commissioner on plaintiff's application for special assessment effectively and completely disposed of and denied that claim for refund and the abatement claim. United States v. Bertelsen Petersen Engineering Co., 59 S.Ct. 541, 83 L.Ed. ___, decided February 27, 1939. In any event, the refund claim of January 8, 1920, was not such a claim as would be susceptible of amendment by the claim filed April 4, 1933, upon which this suit is based. United States v. Andrews, 302 U.S. 517, 58 S.Ct. 315, 82 L.Ed. 398. In addition, plaintiff also contends that before the Commissioner on March 15, 1933, formally rejected the refund claim of December 23, 1927, it had pending in the Bureau a protest against previous notices of the Commissioner that no change in the comparatives used for 1917 was justified or would be made, and that the claim for refund on that ground would be rejected; and, in addition, a representative of plaintiff had on March 18, 1930, written a letter addressed to the Commissioner purporting to confirm a conversation of that date with a Mr. Mancil of the Income Tax Unit that further conferences and consideration in connection with the protest against the action on the 1927 claim for refund for 1917 would be postponed until disposition of the question of special assessment with reference to the years 1918, 1919, and 1920, then pending before the Board. The Commissioner never agreed to or acknowledged the purported arrangement between the plaintiff and the employee of the Income Tax Unit. The Commissioner's official action rejecting the 1927 claim for refund on March 15, 1933, was an effective and final disposition thereof and of all protests previously made or then pending before the Bureau. Even if the refund claim of 1927, which related entirely to the comparatives selected by the Commissioner in the determination of the profits tax under the special assessment provisions of the 1917 Act, was susceptible of amendment by the refund claim of April 4, 1933, based entirely upon a claim for computation of the profits tax for 1917 on the basis of a statutory invested capital, the attempted amendment came too late. A claim for refund cannot be amended after it has been rejected. Sugar Land Railway Co. v. United States, 48 F.2d 973, 71 Ct.Cl. 628. For these reasons this suit cannot be maintained upon the claim for refund of April 4, 1933, even if plaintiff could otherwise maintain the suit upon the ground set forth in the petition, namely, that its profits tax for 1917 should be determined on the basis of statutory invested capital.
Inasmuch as the suit is one to overturn the final decision of the Commissioner of Internal Revenue determining and computing the profits tax for 1917, under the special assessment provisions of the Revenue Act of 1917, it is clear from the decided cases that this court is without jurisdiction. Heiner v. Diamond Alkali Co., 288 U.S. 502, 53 S.Ct. 413, 77 L.Ed. 921; Welch v. Obispo Oil Co., 301 U.S. 190, 57 S.Ct. 684, 81 L.Ed. 1033; Central Iron Steel Co. v. United States, 4 F. Supp. 113, 6 F. Supp. 115, 79 Ct.Cl. 56; Bradford Co. v. United States, 6 F. Supp. 117, 79 Ct. Cl. 89; Michigan Iron Land Co. v. United States, 10 F. Supp. 563, 81 Ct.Cl. 330; Roby-Somers Coal Co. v. Routzahn, 6 Cir., 100 F.2d 228. The fact that the Commissioner in determining plaintiff's tax liability for the years 1918 to 1920, inclusive, denied special assessment and later, in order to adjust and settle all controversies pending before the Board of Tax Appeals in respect to those years, included in invested capital for those years an additional lump sum of $11,000,000 did not change or destroy the conclusive character of his final decision and determination with respect to the year 1917 nor does the action taken with respect to the subsequent years constitute conclusive proof as to 1917, or confer upon this court jurisdiction to inquire into, modify, or change the final determination and computation of the tax for 1917. Compare Western Wheeled Scraper Co. v. United States, 13 F. Supp. 762, 82 Ct.Cl. 646. The petition must be dismissed, and it is so ordered.