Opinion
No. 42824.
February 5, 1940.
James Gillin, of New York City (Henry W. Baird, of New York City, on the brief), for plaintiff.
George H. Foster, of Washington, D.C., and Samuel O. Clark, Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, Sp. Assts. to Atty. Gen., on the brief), for defendant.
Before WHALEY, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHITAKER, Judges.
Action by the Staten Island Shipbuilding Company against the United States for refund of income taxes.
Petition dismissed.
This case having been heard by the Court of Claims, the court, upon the evidence adduced and the report of a commissioner, makes the following special findings of fact:
1. Plaintiff, a corporation organized under the laws of the State of New York, was engaged during the years 1918, 1919, and 1920 in the construction of ships for the United States Shipping Board Emergency Fleet Corporation. Pursuant to a ruling of the Labor Adjustment Board it paid a certain amount during the years 1918 and 1919 in increased wages to its employees engaged in such work. In 1920 the United States Shipping Board Emergency Fleet Corporation refunded to it on this account the sum of $299,722.79.
2. In its income tax return for 1920 the plaintiff included this amount in its gross income. The tax shown to be due in said return was $63,877.62, which amount was assessed against it by the Commissioner on October 10, 1921. On March 16, 1921, and June 15, 1921, the plaintiff made payments of $15,970 each on account of this assessment, but on July 10, 1921, it filed a claim for abatement in the amount of $53,009.62, and made no further payments on account thereof.
3. On July 24, 1922, the Commissioner of Internal Revenue wrote plaintiff a letter stating in part that an audit of its returns indicated an additional income tax liability of $121,818.94 for 1918, an overassessment of $39,760.19 for 1919, and of $54,662.68 for 1920. In this letter the Commissioner took the position that the Shipping Board wage reimbursement, referred to above, should have been included in 1918 and 1919 income instead of 1920 income.
4. No final action, however, was taken by the Commissioner with respect to any of these years until July 31, 1928, when the Commissioner wrote the plaintiff stating that the determination of its tax liability for the year 1920 disclosed that the total income and excess profits tax due for the year 1920 was $101,589.30, leaving a deficiency of $37,711.68, after deduction of the tax previously assessed of $63,877.62. In this letter the Commissioner took the position that the Shipping Board wage reimbursement was 1920 income, but should be taxed at 1918 rates.
In this letter plaintiff was notified of its right to appeal to the United States Board of Tax Appeals.
5. Plaintiff duly took such an appeal, alleging that there was no deficiency in tax, but that, on the contrary, it had overpaid its tax for that year in the amount of $63,877.62, and that this amount should be refunded to it. Subsequently, the parties entered into a stipulation agreeing "that there is no deficiency in Federal income tax due from, or overpayment due to, this petitioner for the taxable year 1920." Upon the basis of this stipulation the Board entered an order on February 15, 1934, ordering and deciding "that there is no deficiency or overpayment for the year 1920."
6. In the meantime, the Commissioner on October 6, 1928, had rejected plaintiff's claim for abatement of 1920 taxes, and on October 8, 1928, the Commissioner had issued certificates of overassessment for the years 1918 and 1919 certifying that there had been an overassessment for 1918 in the amount of $50,093.85, and an overassessment for 1919 in the amount of $116,294.56.
$15,575.52 of the overassessment for 1918 and $16,362.10 of the overassessment for 1919 was credited to the unpaid balance of the 1920 assessment.
7. On February 7, 1930, plaintiff filed a claim for refund of $31,937.62, on the ground that the said portion of the 1918 and 1919 overassessments had been credited against the 1920 assessment after the statutory period for the collection of that assessment had expired.
As stated in the findings of fact, the claim for refund, forming the basis of this suit, was on the ground that a portion of the 1918 and 1919 overpayments had been applied toward the satisfaction of the 1920 assessment after the statutory period for the collection of the 1920 tax had expired. This suit is predicated on the proposition that at the time a portion of the 1918 and 1919 overassessments was credited against the 1920 assessment there was no tax due from the plaintiff for the year 1920. It seems manifest that neither of the two propositions is well taken.
On July 10, 1921, plaintiff filed a claim for abatement of more than the amount of the unpaid assessment for 1920, which claim for abatement was not rejected until October 6, 1928. (This stopped the running of the statute. Section 611 of the Revenue Act of 1928, 45 Stat. 875.) The credit of the 1918 and 1919 overassessments against this 1920 assessment was made two days later and, therefore, within the statutory period.
At the time a portion of the 1918 and 1919 overassessments was credited against the 1920 tax liability, there was an outstanding assessment of taxes for that year in the amount of the credits. It cannot, therefore, be said that there was then no tax due from the plaintiff for the year 1920.
The plaintiff made its return for 1920 treating the amount received from the United States Shipping Board Emergency Fleet Corporation as 1920 income. Upon this basis the assessment of $63,877.62 for this year was made. The Commissioner's letter of July 24, 1922, treated this payment as 1918 and 1919 income, and it was upon this assumption that he stated that an audit of their returns indicated an overassessment for 1920. Later, in July 1928, he finally came to the conclusion that this was not 1918 and 1919 income but 1920 income, but that it should be taxed, not at 1920 rates, as the taxpayer had done in its return, but at 1918 rates. For this reason he asserted a deficiency against the taxpayer, from which action the taxpayer took an appeal to the Board of Tax Appeals.
After this case had been pending there some time the parties entered into a stipulation that there was no deficiency due the Government for this year and that there was no overpayment due the taxpayer. An order was entered by the Board accordingly. This was an agreement on the part of the Commissioner that this refund from the Shipping Board should not be taxed at 1918 rates, and an agreement on the part of the plaintiff that it was 1920 income, as it had treated it in its return, upon the basis of which the assessment was made. If it was 1920 income, then there was a tax due in fact from the plaintiff for the year 1920 at the time the credits were made, because the plaintiff had only paid $31,937.62 on an assessment of $63,877.62, which assessment was based upon the inclusion of this refund from the Shipping Board in 1920 income.
Furthermore, plaintiff took an appeal to the Board of Tax Appeals from the Commissioner's action proposing a deficiency in 1920 taxes. In the proceedings before the Board the taxpayer had the right to show that it had overpaid its taxes as it claims in this suit. This court, therefore, has no jurisdiction of this suit under the provisions of section 284(d) of the Revenue Act of 1926, 44 Stat. 67, which provides: "If the Commissioner has mailed to the taxpayer a notice of deficiency under subdivision (a) of section 274 and if the taxpayer after the enactment of this Act files a petition with the Board of Tax Appeals within the time prescribed in such subdivision, no * * * suit by the taxpayer for the recovery of any part of such tax shall be instituted in any court * *."
It results that plaintiff's petition must be dismissed. It is so ordered.