Opinion
Action by Ronald L. Tree and Nancy Perkins Field Tree, his wife, against the United States to recover additional interest at the rate of 6 per cent per annum on a judgment of the Court of Claims, 55 F.Supp. 438, 102 Ct.Cl. 128, from December 1, 1941, to October 14, 1945.
Petition dismissed.
Allen H. Gardner, of Washington, D.C. (Morris Kix-Miller & Baar, of Washington, D.C., on the brief), for plaintiff.
Elizabeth B. Davis, of Washington, D.C., and Sewall Key, Acting Asst.Atty.Gen. (Robert N. Anderson and Andrew D. Sharpe, Both of Washington, D.C., on the brief), for defendant.
Before JONES, Chief Justice, and LITTLETON, WHITAKER, MADDEN, and HOWELL, Judges.
Plaintiffs brought this suit to recover additional interest at the rate of 6 percent per annum on a judgment of this court for $8,983.43 from December 1, 1941, to October 14, 1945, under Section 3771, Internal Revenue Code, 2 U.S.C.A. Int.Rev.Code, § 3771. The question presented is whether this interest is payable under Section 3804, Internal Revenue Code, Sec. 507, Revenue Act of Oct. 21, 1942, 26 U.S.C.A.Int.Rev.Code, § 3804.
Special Findings of Fact.
1. The plaintiffs, Ronald L. Tree and Nancy Perkins Field Tree, his wife, are citizens of the Kingdom of Great Britain, and reside at Ditchley, Enstone, Oxfordshire, England. Mrs. Tree acquired such citizenship in or before the year 1945. Great Britain accords to citizens of the United States the right to prosecute claims against it, the British Government, in its courts.
2. On May 20, 1932, plaintiffs filed with the collector of internal revenue for the first district of Illinois their joint Federal income tax return for the calendar year 1931, and paid income tax (partly original and partly additional) and interest for that year in the amounts and on the dates shown below:
Tax
Interest
Date of payment
$5,997.31.....
$16.25
May 20, 1932.
$14,994.20....
1,786.81
June 11, 1934.
$2,722.15.....
741.74
August 3, 1934.
$1,000.00.....
........
August 22, 1934.
3. Thereafter, the plaintiffs brought suit in this court for the recovery of a portion of the aforesaid tax and interest. The case (Ronald L. Tree and Nancy Perkins Field Tree, No. 45025) was tried and the court's findings and opinion were reported at 55 F.Supp. 438, 102 C.Cl. 128. The court on October 2, 1944, entered judgment for the plaintiffs in the amount of $8,983.43 with interest according to law on the amount of $1,000 from August 22, 1934; on the amount of $3,463.89 from August 3, 1934, and on the balance of $4,519.54 from June 11, 1934.
4. The Commissioner of Internal Revenue subsequently determined that the amount of $8,983.43 (which had been made the subject of a judgment claim filed for the plaintiffs by Hugh N. Smith acting under the powers of attorney hereinafter described) should be refunded, and that, in allowing interest on the several amounts and from the dates shown in the aforesaid judgment of the court, the interest on each such amount should be computed only to the date of December 6, 1941. Following this method of computation, the Commissioner allowed interest on the refund of $8,983.43 in a total amount of $3,992.89. Thereafter, on November 13, 1945, a check payable to the plaintiffs in the amount of $12,976.32 was drawn by the disbursing clerk of the Treasury Department. At all times during the period from December 6, 1941, to November 13, 1945, there were on file with the Commissioner of Internal Revenue powers of attorney from the plaintiffs to Hugh N. Smith, a certified public accountant with offices at 11 South La Salle Street, Chicago, Illinois, authorizing him to represent the plaintiffs in all Federal income tax matters and to receive checks in payment of Treasury refunds. Pursuant to such authorization the check in question was mailed to the plaintiffs in January 1946, c/o Hugh N. Smith, 11 South La Salle Street, Chicago 3, Illinois, and was received by Mr. Smith. No interest, other than the amount of $3,992.89 above-mentioned, has been paid to the plaintiffs in respect of the said refund of $8,983.43.
5. During the period between December 6, 1941, and November 13, 1945, Ronald L. Tree was within the United States from April 23, 1942, to July 3, 1942; September 19, 1943, to November 20, 1943; and November 6, 1945 to November 13, 1945. Nancy Perkins Field Tree was within the United States from September 1944 to February 1945.
LITTLETON, Judge.
These plaintiffs, who are citizens of Great Britain and reside at Oxfordshire, England, were before this Court in another action in which a judgment was entered in their favor on October 2, 1944, on account of an overpayment of tax in the amount of $8,983.43 with interest according to law. Tree v. United States, 55 F.Supp. 438, 102 C.Cl. 128. In determining the amount of interest due pursuant to that judgment under the statute in effect at the time it was entered, the Commissioner computed interest from the applicable dates of payment in 1934 to December 6, 1941, in the amount of $3,992.89. Thereafter, by check dated November 13, 1945, payment was made to plaintiffs of the principal amount of the judgment plus the interest as thus computed by the Commissioner.
The error assigned by plaintiffs in this suit is that interest should have been computed on the judgment in the prior proceeding to a date not more than thirty days preceding November 13, 1945, the date of the refund check, instead of to December 6, 1941, and in support thereof they rely on Section 3771(a) and (b)(2) of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 3771(a), (b)(2), which so far as here material, reads as follows:
'(a) Rate. Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the rate of 6 percentum per annum. '(b) Period. Such interest shall be allowed and paid as follows: * * * * * * '(2) Refunds. In the case of a refund, from the date of the overpayment to a date preceding the date of the refund check by not more than thirty days, such date to be determined by the Commissioner, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer. * * *'
Without more plaintiffs would, of course, be entitled to the judgment sought. However, by Section 507 of the Revenue Act of 1942, Section 3804 was added to the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 3804, which reads in part as follows:
'(2) Individuals. The period of time after December 6, 1941, during which an individual is continuously outside the Americas (if such period is longer than ninety days), and the next ninety days thereafter, shall be disregarded in determining, under the internal revenue laws, in respect of any tax liability (including any interest, penalty, additional amount, or addition to the tax) of such individual---- * * * * * * '(2) The amount of any credit or refund (including interest).'
Plaintiffs are individuals who, as shown by our findings, were continuously outside the Americas for a period of more than ninety days within the meaning of that section. It is true that they were within the United States for certain short periods during the time in question but there is no evidence that they furnished notice to the Commissioner of such entry as required by his regulations, which we think reasonable, and plaintiffs state that they are not basing their right of recovery on their presence within the United States after December 6, 1941.
Plaintiffs admit that Section 3804 would qualify the more general provisions of Section 3771 if the two sections were otherwise in conflict but urge that an interpretation can be given to Section 3804 which would make unnecessary the limitation applied by the Commissioner. We cannot agree. The statute provides that the period of time after December 6, 1941, during which individuals are continuously outside the Americas, as were plaintiffs, shall be disregarded in determining the amount of any credit or refund, including interest. The same section lists various other circumstances in connection with which under similar conditions the period of time after December 6, 1941, shall be disregarded, including the filing of various Federal tax returns, the filing of petitions with the Tax Court, the assessment and collection of taxes, the bringing of suits by taxpayers and the Commissioner with respect to any tax, and other similar acts. In general the time so disregarded does not affect the principal amount of tax liability, but rather has to do primarily with the time when certain acts shall be performed. The only provision which refers to a disregard of time in determining an 'amount' is that with which we are concerned and it reads 'The amount of any credit or refund (including interest).' The factor which would ordinarily affect the amount of any credit or refund through a disregard of time would be the amount of interest which would be added to the principal sum. We think, therefore, the statute reasonably interpreted means that in computing the amount of a credit or refund (including interest) in favor of individuals situated as were these plaintiffs, the time for which interest is allowable shall not include any period of time after December 6, 1941.
Another consideration is that the statute is not couched in discretionary language but states in unqualified terms that such period of time 'shall be disregarded.' The second portion of the same section (3804(b)) deals with situations to which the first portion is not applicable and as to those situations it is left to the Commissioner, under appropriate regulations, to determine whether it is 'impossible or impracticable to perform' the acts specified within the time required. That, however, is not true of the portion applicable to plaintiffs, without regard to whether their absence from the Americas affected their claim for refund or the outcome of this suit.
It accordingly follows that the petition must be dismissed. It is so ordered.