Opinion
This case having been heard by the Court of Claims, the court, upon the stipulations, makes the following special findings of fact:
1. December 15, 1919, plaintiff duly filed its income and profits return for the fiscal year ended June 30, 1919, disclosing a tax liability of $862,120.55, of which amount $775,557.04 was duly paid in installments. June 15, 1920, an amended return was filed for the same year showing a tax liability of $775,557.04 and at the same time an abatement claim was filed for $86,563.51, the difference between the tax liability shown on the original and amended returns. The abatement claim was rejected May 9, 1924, and collection enforced September 2, 1925. Thereafter suit was brought for its recovery, but recovery was denied in Routzahn v. Petroleum Iron Works (C.C.A.) 56 F. (2d) 938.
2. March 3, 1924, the Commissioner of Internal Revenue advised plaintiff of a determination of a total tax liability of $889,951.19 for the fiscal year ended June 30, 1919, and accordingly of a proposed additional assessment of $27,830.64--the difference between the tax liability thus shown and the tax liability shown on the original return. The letter contained the following statements:
"In accordance with the provisions of section 250(d) of the Revenue Act of 1921 (42 Stat. 264), you are granted thirty days within which to file an appeal and to show cause or reason why this tax or deficiency should not be paid. The appeal, if filed, must be addressed to the commissioner of Internal Revenue, Washington, D.C., for the specific attention of IT:CR:B:-- AHB:App.
"Treasury Decision No. 3492, setting forth the privileges of taxpayers in cases of appeal, is attached for your information and guidance.
"Where a taxpayer has been given an opportunity to appeal and has not done so, as set forth above, and an assessment has been made, or where a taxpayer has appealed and an assessment in accordance with the final decision on such appeal has been made, no claim in abatement of the assessment will be entertained."
3. April 14, 1924, plaintiff filed an appeal from the letter referred to in finding 2, and April 24, 1924, the Commissioner advised plaintiff as follows:
"Reference is made to your appeal under date of April 14, 1924, from the findings of the Income Tax Unit disclosing an additional tax liability of $27,830.64, as outlined in Bureau letter dated March 3, 1924.
"You are advised that inasmuch as your appeal was not filed within the thirty days allowed by section 250(d) of the Revenue Act of 1921, the additional tax mentioned above was assessed and the matter is now in the hands of the collector of internal revenue for your district."
4. May 19, 1924, the additional tax of $27,830.64 (referred to in finding 2) was assessed, and May 24, 1924, the collector served notice and demand upon plaintiff for its payment.
5. On or about June 3, 1924, a conference was held between representatives of plaintiff and the Commissioner, at which time plaintiff's appeal (referred in Finding 3) was considered and plaintiff's representative requested that its case be given consideration under the relief provisions of the Revenue Act of 1918. October 10, 1924, plaintiff filed a formal application for the benefit of the relief provisions of the Revenue Act of 1918. November 12, 1924, plaintiff advised the collector as follows:
"Your letter dated November 6, 1924, addressed to the Petroleum Iron Works Company of Ohio, Sharon, Pennsylvania, was forwarded to the writer, and received by him November 8th.
"Inasmuch as it was our understanding that acceptance of our appeal which was filed April 15, 1924 (copy of which is enclosed with claim for abatement), would defer collection of the amount in question until the appeal is finally disposed of, the matter was at once (November 10th and 11th) taken up with the Commissioner's office in Washington.
"Conference was had with Mr. S.J. Melick, conferee in the office of Mr. I.T. Enes, chief of section. Mr. Melick agreed to wire you yesterday (November 11th) and then write you more fully, and advised, further, that we should file claim for abatement with you.
"We desire that collection of this item be withheld until final determination of the tax is had and trust, therefore, that you will kindly accept this claim for abatement without bond. To this end we shall be very glad to furnish you any information you may wish as to the financial responsibility of the company and its ability and willingness to pay whatever tax is finally determined."
6. November 15,1924, plaintiff filed a claim in abatement for $27,830.64 (the additional tax referred to in findings 2 and 4) and set out the basis therefor as follows:
"1. An appeal from the proposed assessment of this amount was filed with the Commissioner of Internal Revenue April 15, 1924 (copy of appeal is attached).
"2. An oral conference on this appeal was had in the Bureau of Internal Revenue June 3, 1924, at which time an agreement was reached on the various matters incorporated in the appeal. However, inasmuch as consideration under sections 327 and 328 of the 1918 Revenue Act (40 Stat. 1093) had been requested in the original return the case was referred to the special assessment section. Formal application for such consideration, in conformity with article 901, regulations 45, was made October 8, 1924.
"3. The case is now with the special assessment section, and request is made that the above amount be abated and collection withheld until final determination is had on the above appeal."
The collector withheld collection until after the claim in abatement was rejected as shown below.
7. February 26, 1925, plaintiff was advised that its total tax liability for the fiscal year ended June 30, 1919 was $915,177.57, that is, $25,226.38 in excess of the total of $889,951.19 previously assessed, but that such additional amount was barred by the statute of limitations, and no attempt has been made to collect such additional amount.
8. April 13, 1925, plaintiff was advised that its claim in abatement of $27,830.64 (referred to in finding 6) was rejected. May 29, 1926, pursuant to notice and demand by the collector, plaintiff paid under protest the amount of the abatement claim, $27,830.64, plus interest, $6,818.35; that is, a total of $34,648.99.
9. August 28, 1928, plaintiff filed a claim for refund of $34,648.99 (the payment referred to in finding 8), and February 15, 1929, the Commissioner rejected such claim. Louis A. Spiess, of Washington, D.C. (John Walsh, of Washington, D.C., on the brief), for plaintiff.
George H. Foster, of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
WHALEY, Judge.
This is a 611 case.
The special findings of fact are taken from the stipulations of the parties and are, therefore, not in dispute.
The plaintiff on December 15, 1919, filed its income and profits tax return for the fiscal year ended June 30, 1919, showing a total tax liability of $862,120.55, of which amount $775,557.04 was duly paid in installments. On June 15, 1920, plaintiff filed an amended return showing a tax liability of $775,557.04 and at the same time filed a claim in abatement for $86,563.51; this amount being difference between the tax liability as shown on the original and amended returns. The claim in abatement was rejected on May 9, 1924; the amount involved was thereafter paid on September 2, 1925, after seizure of plaintiff's property, and suit was subsequently brought for its recovery.
In Routzahn, collector, v. Petroleum Iron Works, 56 F. (2d) 938, the Circuit Court of Appeals (Sixth Circuit) held that section 611 of the Revenue Act 1928 (16 USCA § 2611), was applicable and recovery was denied. While the facts relating to the foregoing suit are set out in the stipulations they are not repeated in detail in the findings of this suit for the reason that the aforesaid suit was against the collector and for an entirely different amount than that involved in this suit and are unnecessary for a disposition of the issues in this case. See Sage v. United States, 250 U.S. 33, 39 S.Ct. 415, 63 L.Ed. 828.
On March 3, 1924, the Commissioner notified plaintiff of a proposed assessment of $27,830.64 in addition to all amounts theretofore assessed and on May 19, 1924, duly assessed this additional tax. After notice and demand by the collector and after conferences between the plaintiff and the Commissioner, the plaintiff filed on November 15, 1924, a claim in abatement of the additional assessment of $27,830.64, and the collection of the tax was stayed until the claim in abatement was rejected on April 13, 1925.
The plaintiff paid the additional tax with interest on May 29, 1926, and, after a claim for its refund was rejected, brought this suit for its recovery.
This case falls squarely within the provisions of section 611 of the Revenue Act of 1928 and accordingly recovery is barred.
Section 611 provides: "If any internal-revenue tax (or any interest, penalty, additional amount, or addition to such tax) was, within 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 [May 29, 1928] the enactment of this act) shall not be considered as an over-payment under the provisions of section 607 [2607] relating to payments made after the expiration of the period of limitation on assessment and collection."
In the case of Graham v. Goodcell, 282 U.S. 409, 416, 51 S.Ct. 186, 189, 75 L.Ed. 415, the court in construing section 611 said: " As to the construction of the statute: Section 607 [26 USCA § 2607] provides that a tax assessed or paid after the expiration of the period of limitation applicable thereto shall be considered an 'overpayment' and shall be credited or refunded to the taxpayer, if claim therefor is duly filed. Section 611 enacts a qualification by providing that in stated circumstances the payment of the tax shall not be considered an overpayment under the provisions of section 607. These circumstances are (a) an assessment of the tax within the time applicable thereto and before June 2, 1924, (b) the filing of a claim in abatement, (c) the stay of the collection of any part of the tax, and (d) the payment of such part of the tax before, or within one year after, the enactment of the act of 1928."
The plaintiff's return for the fiscal year ended June 30, 1919, was filed December 15, 1919. Under section 250(d) of the Revenue Act of 1921 the Commissioner had five years from that date in which to assess the tax, therefore the period for assessment expired on December 15, 1924. The additional tax of $27,830.64 having been assessed on May 19, 1924, was seasonable and likewise was prior to the date of June 2, 1924, named in the statute. A claim in abatement was filed November 15, 1924, the collection of the tax was stayed until after the rejection of the claim in abatement and the tax was collected May 29, 1926, which was prior to the enactment of the act of 1928. At that time the statutory period for collection had expired under section 250(d) supra; and therefore but for section 611 the payment would have been refundable under section 607 of the Revenue Act of 1928 (26 USCA § 2607). It is readily apparent that all requirements of the statute have been satisfied.
The plaintiff, however, contends that section 611 is not applicable because the claim in abatement was filed after the period mentioned in section 250(d) in which appeals are allowed and therefore was a nullity.
We find little merit in this contention. It is based on a narrow technicality. It is sufficient to say the permission to file the claim in abatement was granted at the earnest entreaty of the plaintiff; it was carefully considered and the taxpayer benefited thereby. It is only necessary to say that on October 10, 1924, the plaintiff made a formal application for the benefit of special assessment and on November 15, 1924, filed the abatement claim. It must be borne in mind that up to that time the statutory period for collection had not expired, and it is a fair assumption that the delay in collection up to that time was due to the earnest entreaties of the plaintiff and the delay was beneficial to the plaintiff.
As the court said in Magee v. United States, 282 U.S. 432, 434, 51 S.Ct. 195, 196, 75 L.Ed. 442, decided at the same time as Graham v. Goodcell, supra, "The taxpayer benefited by the claim and is not in a position to contest its legality."
The plaintiff is not entitled to recover, and the petition is therefore dismissed. It is so ordered.