Opinion
No. J-87.
October 20, 1931.
Suit by the American Exchange Irving Trust Company against the United States.
Judgment for plaintiff.
This suit was brought to recover $77,429.61, additional interest alleged to be due on overpayments of income and profits tax for 1918 and 1919 credited to an additional assessment of tax for 1920 and to an unpaid portion of the original tax for 1921.
Plaintiff contends (1) that the additional assessment for 1920, made May 19, 1926, was an assessment made under the Revenue Act of 1926 within the meaning of section 1116 of that act ( 26 USCA § 153 note), and therefore it is entitled to interest from the date of the overpayments to the date of the additional assessment, and (2) that, if it is not entitled to interest to the date of the additional assessment, it is entitled to interest under section 1116 of the Revenue Act of 1926 from the date of the overpayment of the tax credited to the dates on which the installments of the tax for 1920 were due and were paid.
The defendant, on the other hand, contends: (1) That the additional assessment for 1920 was made under the Revenue Act of 1918 within the meaning of section 1116 of the Revenue Act of 1926, and that interest was payable on the overpayments credited to 1920 only to the due date of the 1920 tax; and (2) that the due date of the additional tax assessed for 1920 was March 15, 1921, and not the dates on which the installments of the original tax for that year were due and were paid.
Special Findings of Fact.1. Plaintiff, a New York corporation, duly filed returns for 1918, 1919, 1920, and 1921. A certain amount of tax was paid upon each of these returns, and a claim for credit was filed asking that $8,934.92 of the tax shown on an amended return for 1920 be credited to that amount on the original tax due for 1921. May 3, 1924, plaintiff paid the balance of the original tax shown on its return for 1919 in the amount of $8,962.21, for which a claim in abatement had theretofore been filed. December 10, 1923, the Commissioner made an additional assessment of $8,618.44 for 1918 and of $13,494.89 for 1919, which amounts were paid December 20, 1923.
2. Plaintiff duly filed a claim for refund for 1918 and for 1919. After an examination and an audit of the returns for 1918 to 1920, inclusive, the Commissioner of Internal Revenue on March 18, 1926, notified plaintiff that he had determined overassessments of $115,057.90 for 1918 and $109,127.51 for 1919, and that he had determined that an additional tax of $302,594.90 was due for 1920.
3. March 29, 1926, plaintiff filed with the Commissioner a written waiver of its right to file a petition with the United States Board of Tax Appeals with reference to the 1920 deficiency and consented to an immediate assessment and collection thereof. May 19, 1926, the commissioner made an additional assessment of the deficiency of $302,594.90 for 1920, together with interest thereon of $3,005.22.
4. The entire overpayment for 1918, with the exception of $8,934.92, was credited to the additional tax for 1920, the said amount of $8,934.92 being credited to the unpaid original tax for 1921. The entire overpayment for 1919 was also credited to the additional tax for 1920.
The Commissioner allowed no interest on $8,618.44 of the overpayment for 1918 made December 20, 1923, credited to the 1920 additional tax, for the reason that the date of payment of this amount was subsequent to the due date of the 1920 tax. On the overpayment of $8,934.92 of the 1918 tax credited to the amount of the unpaid original tax for 1921, the Commissioner allowed and paid interest from December 17, 1919, the date of payment of the amount so credited, to the due date of the 1921 installment on December 15, 1922. On the balance of the overpayment for 1918, amounting to $97,504.54, made December 17, 1919, and credited to the 1920 additional tax, the Commissioner allowed interest from the date of this overpayment to March 15, 1921, the due date of the first installment of the 1920 tax.
5. With reference to the overpayment for 1919 credited to the 1920 additional tax, the Commissioner allowed no interest on $13,494.89 and $8,962.21 of such overpayment, for the reason that the first amount mentioned was paid December 20, 1923, and the second amount mentioned was paid May 3, 1924, both of which dates were subsequent to the due date of the 1920 tax.
On the balance of the overpayment for 1919 of $86,670.41, made December 16, 1920, and credited to the 1920 additional tax, the Commissioner allowed interest only to March 15, 1921.
After making the credits aforesaid, there remained a balance of $90,349.63 on the assessment of the additional tax and interest for 1920, which amount was paid by the plaintiff August 10, 1926.
Paul L. Peyton, of Bronxville, N.Y. (William C. Breed, Albert S. Rockwood, and Breed, Abbott Morgan, on the brief), for plaintiff.
D. Louis Bergeron and Charles R. Pollard, both of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and LITTLETON, WHALEY, WILLIAMS, and GREEN, Judges.
The first claim urged by the plaintiff that the additional assessment for 1920 was made under the Revenue Act of 1926, and that it is therefore entitled to interest on the overpayments for 1918 and 1919 from the date on which such tax was paid to the date of the additional assessment, is controlled by the decision of this court in Riverside Dan River Cotton Mills, Inc., v. United States, 37 F.2d 965, 968, 69 Ct. Cl. 70. Upon the authority of that case, it is held that plaintiff is entitled to interest on the overpayments only to the due date of the tax to which they were credited.
The next question is whether the due date of the additional tax assessed for 1920 was March 15, 1921, as determined by the Commissioner, or the dates on which the quarterly installments of the tax for 1920 were due and were paid during 1921. This question is also controlled by the decision in Riverside Dan River Cotton Mills, Inc., v. United States, supra, in which we held "that the words `due date' used in the section [section 1116 of the Revenue Act of 1926] mean the date fixed by the statute for the payment of the tax, or the several installments thereof; that is, that the due date of a tax is not changed because there is an additional assessment, that the due date here referred to is the same as that of the original assessment, namely, March 15, 1919, the date fixed by law for filing of a calendar year return, or, if paid in installments, then the date provided for the payment of the installments."
Section 250 of the Revenue Act of 1918, 40 Stat. 1057, 1082, provides for the payment of the tax in installments; the due date of the first installment being at the time fixed by law for filing the return, and the due date of the remaining three installments being the fifteenth day of the third, sixth, and ninth months thereafter. Plaintiff paid its tax for 1920 in installments. Section 250(b) of the Revenue Act of 1918 further provides that: "As soon as practicable after the return is filed, the Commissioner shall examine it. If it then appears that the correct amount of the tax is greater or less than that shown in the return the installments shall be recomputed. If the amount already paid exceeds that which should have been paid on the basis of the installments as recomputed, the excess so paid shall be credited against the subsequent installments; and if the amount already paid exceeds the correct amount of the tax, the excess shall be credited or refunded to the taxpayer in accordance with the provisions of section 252. If the amount already paid is less than that which should have been paid, the difference shall, to the extent not covered by any credits then due to the taxpayer under section 252, be paid upon notice and demand by the collector." See, also, section 274(i) of the Revenue Act of 1926 ( 26 USCA § 1052).
We are of opinion that the purpose of section 1116 of the Revenue Act of 1926 ( 26 USCA § 153 note) is to provide for the payment of interest to the due date of the installments. There is nothing in the section to indicate that for the purpose of payment of interest on credits the due date of the tax otherwise fixed by the statute should be changed. That Congress intended the term "due date" used in section 1116 of the Revenue Act of 1926 to mean the date on which the several installments of the tax were due if paid in installments is evidenced by the fact that this very matter was considered in connection with section 274(j) of the same act ( 26 USCA § 1053), in which it was provided that interest at 6 per cent. per annum should be assessed and collected on deficiencies from the date prescribed for the payment of the tax, or, if paid in installments, from the date prescribed for the payment of the first installment to the date of assessment. In other words, Congress recognized that, in the absence of a provision to the contrary, the due date of a deficiency in tax would be the dates on which the installments were due. See Ways and Means Committee Report No. 1, page 11, 69th Congress, and the Finance Committee Report No. 52, page 28, 69th Congress, on the revenue bill of 1926. Defendant relies upon Blair v. United States ex. rel. Birkenstock, 271 U.S. 348, 46 S. Ct. 506, 70 L. Ed. 983. That case involved the question of when an overpayment had been made, and is not in point here.
The following tabulation shows the total of the deficiency in each installment of tax for 1920:
=============================================================== | Payments of | | | installments | Corrected | Installment | of total tax | installments | deficiency | shown on | | | original 1920 | | | return | | ------------------|----------------|--------------|------------ March 15, 1921 | $139,795.78 | $215,444.50 | $75,648.72 June 15, 1921 .. | 139,795.78 | 215,444.50 | 75,648.72 Sept. 15, 1921 .. | 139,795.78 | 215,444.51 | 75,648.73 Dec. 15, 1921 .. | 139,795.78 | 215,444.51 | 75,648.73 |----------------|--------------|------------ | 559,183.12 | 861,778.02 | 302,594.90 ---------------------------------------------------------------
Inasmuch as no interest was payable on the overpayments for 1918 and 1919 in the amounts of $8,618.44, $13,494.89, and $8,962.21 credited to the 1920 tax, these amounts, together with the net deficiency of $87,344.41 applied in reduction of the installment deficiencies, show installment deficiencies of $46,043.74, as follows:
============================================================== | | Amounts | | | credited | Balance of | | without | installment | Installment | interest | deficiencies | deficiency | and net | | | deficiency | | | collected | | | with interest | ------------------|-------------|---------------|------------- March 15, 1921 | $75,648.72 | $29,604.98 | $46,043.74 June 15, 1921 .. | 75,648.72 | 29,604.99 | 46,043.73 Sept. 15, 1921 .. | 75,648.73 | 29,604.99 | 46,043.74 Dec. 15, 1921 .. | 75,648.73 | 29,604.99 | 46,043.74 |-------------|---------------|------------- | 302,594.90 | 118,419.95 | 184,174.95 --------------------------------------------------------------
The total of the last-mentioned installment deficiencies, i.e., $184,174.95, equals the sum of $97,504.54 of the 1918 overpayment and $86,670.41 of the 1919 overpayment credited to the 1920 tax upon which credits the Commissioner allowed interest only to the due date of the first installments, to wit, March 15, 1921. Plaintiff is therefore entitled to additional interest of $4,143.90 upon the last three installments, as follows:
On $46,043.73 from 3/15/21 to 6/15/21 ..... $ 690.65 On $46,043.74 from 3/15/21 to 9/15/21 ..... 1,381.30 On $46,043.74 from 3/15/21 to 12/15/21 .... 2,071.95
Judgment will be entered in favor of the plaintiff for $4,143.90. It is so ordered.