Opinion
No. L-242.
May 31, 1932.
Suit by the Parks Woolson Machine Company against the United States.
Petition dismissed.
Plaintiff instituted this suit to recover $4,528.68, income and profits tax for 1917 alleged to have been illegally collected by credit of an overpayment for the fiscal period January 1 to June 30, 1918, after the expiration of the period of limitation within which the 1917 tax could be legally collected.
Plaintiff bases its claim for recovery on section 250(d) of the Revenue Acts of 1918 and 1921 ( 40 Stat. 1083, 42 Stat. 265). Bowers v. New York Albany Lighterage Co., 273 U.S. 346, 47 S. Ct. 389, 71 L. Ed. 676; Russell et al. v. United States, 278 U.S. 181, 49 S. Ct. 121, 73 L. Ed. 255; Graham Foster v. Goodcell, 282 U.S. 409, 51 S. Ct. 186, 75 L. Ed. 415, and section 607 of the Revenue Act of 1928 (26 USCA § 2607).
The defendant insists that the credit of the 1918 overpayment against the 1917 deficiency was void under section 607 of the Revenue Act of 1928, and that, therefore, there has been no payment of the additional tax for 1917 for which the plaintiff sues.
Special Findings of Fact.1. At all times hereinafter mentioned, plaintiff, Parks Woolson Machine Company, was and now is a corporation organized and existing under and by virtue of the laws of the state of Vermont, with its principal place of business at Springfield.
2. March 29, 1918, plaintiff filed with the collector of internal revenue for the district of New Hampshire its corporation income and excess profits tax return for the calendar year 1917, disclosing a net income of $4,494.51 and a tax of $269.67, which was voluntarily paid without protest on June 12, 1918.
3. The Commissioner of Internal Revenue caused an examination to be made of the return for 1917 and determined an additional tax of $92.27, which was assessed on the October, 1920, assessment list. On November 15, 1920, plaintiff filed a claim for abatement of said additional tax of $92.27, which was allowed in full on Schedule IT-A-7288, dated October 23, 1923.
4. November 2, 1920, plaintiff filed an amended corporation income and excess profits tax return for the calendar year 1917, disclosing a net income of $26,749.58 and a tax of $4,154.16.
5. March 5, 1923, it executed and on March 10, 1923, filed with the Commissioner an income and profits tax waiver, consenting to the assessment and collection of any tax due for the year 1917 within one year from the date such waiver was signed by the plaintiff.
6. The Commissioner made an examination of the original and amended income and excess profits tax returns, and the books of account and records for 1917, and determined a deficiency in tax for said year 1917 of $4,629.95 of which plaintiff was notified by letter dated January 9, 1923. This deficiency was assessed by the commissioner on March 20, 1923.
7. April 15, 1923, plaintiff filed a claim for credit of $4,629.95 and refund of $3,430.20, or a total of $8,060.15 for the year 1917. The Commissioner made a further examination and audit of the returns for 1917 in connection with said claim for credit and refund, and determined that plaintiff had been overassessed in the sum of $101.27. Accordingly, $101.27 of said deficiency in tax of $4,629.95 for 1917 was abated on March 24, 1924, on Schedule IT-A-8903, and the unpaid balance thereof was settled by crediting $4,528.68 of the overpayment for the period ending June 30, 1918, against said deficiency in tax for the year 1917, as more fully set forth in findings 11 and 12.
8. April 23, 1919, plaintiff filed its corporation income and profits tax return for the calendar year 1918, disclosing a tax of $9,302.14, which was assessed on the annual 1919 assessment list for the district of New Hampshire, account No. 40374. Payments on this account were voluntarily made as follows:
March 13, 1919 ................. $2,000.00 May 14, 1919 ................... 1,000.00 June 16, 1919 .................. 1,651.07
The balance of said outstanding tax for the year 1918 of $4,651.07 was transferred to the district of Vermont for collection and was voluntarily paid to the collector for that district on January 9, 1920.
9. November 2, 1920, plaintiff filed with the collector for the district of Vermont an amended return for the period January 1, 1918, to June 30, 1918, in order to comply with the requirement that its net income be computed upon the basis of its annual accounting period in accordance with the method of accounting regularly employed in keeping its books of account and records, which was on a fiscal year basis ending on June 30th of each year.
10. The Commissioner made an examination and audit of the accounts and records, and its income and profits tax return for the period January 1 to June 30, 1918, and determined that plaintiff had no tax liability for the period January 1 to June 30, 1918. Plaintiff was notified of such determination by letter dated December 5, 1923, and was advised that the overassessment of $9,302.14 for the period January 1 to June 30, 1918, would be made the subject of a certificate of overassessment which would reach plaintiff through the office of the collector of internal revenue for its district and be applied by that official in accordance with section 252 of the Revenue Act of 1921 ( 42 Stat. 265).
11. March 5, 1924, the Commissioner signed form 7805, being a "Schedule for overassessment," for the district of Vermont, which schedule showed overassessments of income and profits taxes in favor of plaintiff for the calendar year 1917 and the period January 1 to June 30, 1918, of $101.27 and $9,302.14, respectively. The Commissioner instructed the collector that, "if any part of any such item is found to be an overpayment, you will examine all accounts of the taxpayer for other periods and apply the overpayment as a credit against the taxes due, if any, making the appropriate entries in your accounts. * * * Such credits will be entered in column 9 and placed in column 5 of a subsidiary Schedule of Refunds and Credits. (Form 7805-A.)" The collector made the entries in columns 8 to 11, inclusive, appearing in the "Schedule of overassessments," signed the "Certificate of collector" thereon on March 24, 1924, and returned the schedule so filled out to the Commissioner. This schedule shows that $101.27 of the additional tax for the year 1917 was abated, and that $4,528.68 of the overpayment for the period January 1 to June 30, 1918, was applied against the balance of the unpaid additional tax for the year 1917.
12. At the same time that the collector signed the certificate of collector on the schedule of overassessments, and, pursuant to the instructions thereon, he made out a "Schedule of refunds and credits," form 7805 — A, the "Certificate of collector" on the last-mentioned schedule being also dated March 24, 1924. The collector forwarded the schedule of refunds and credits to the Commissioner of Internal Revenue along with the "Schedule of overassessments." The Commissioner signed the "Authorization of commissioner to the disbursing clerk, Treasury Department," appearing on this schedule, on April 24, 1924. Plaintiff was not shown thereon to be entitled to any refund.
13. The Commissioner prepared certificates of overassessments of $101.27 for 1917 and $9,302.14 for the period January 1 to June 30, 1918. Pursuant to his instructions, the collector forwarded certificates of overassessments to plaintiff on March 24, 1924.
14. May 14, 1927, plaintiff filed a claim for the refund of $4,528.68, income and excess profits tax for the calendar year 1917. The basis of the claim was as follows: "The credit available to the taxpayer on its 1917 tax from the 1918 overassessment was actually made or applied after the statutory period for collection had expired."
15. In letter dated December 1, 1928, plaintiff was advised that the claim for refund for 1917 in the amount of $4,528.68 was disallowed by the Commissioner on rejection schedule dated September 28, 1928.
Frank J. Albus, of Washington, D.C., for plaintiff.
Charles B. Rugg, Asst. Atty. Gen. (Charles R. Pollard and H.C. Clark, both of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and LITTLETON, WHALEY, WILLIAMS, and GREEN, Judges.
This suit is for the recovery of a tax for 1917 alleged to have been collected by credit at a time when collection was barred by the statute of limitation. Plaintiff claims that an overpayment of tax for 1918 applied on April 24, 1924, as a credit to an additional tax for 1917 assessed in March, 1923, was a collection of the 1917 deficiency out of time; that, the Commissioner having disallowed its claim for refund of the 1917 deficiency, it should have judgment for the principal of the tax so collected by credit, with interest.
The defendant insists that there was no collection of the 1917 deficiency, either by cash or credit, for the reason that the credit, by which the Commissioner attempted to collect the 1917 deficiency, was void under section 609 of the Revenue Act of 1928 (26 USCA § 2609). When the commissioner signed the schedule of overassessments March 5, 1924, for 1918, he believed that his action was a lawful collection by credit of the 1917 deficiency. This action was timely. The Commissioner, however, did not sign the schedule of refunds and credits until April 24, 1924. Since the credit in this case was taken April 24, 1924, the action was not timely. United States v. Swift Co., 282 U.S. 468, 51 S. Ct. 202, 75 L. Ed. 464; United States v. Boston Buick Co., 282 U.S. 476, 51 S. Ct. 206, 75 L. Ed. 470. The attempted collection of the 1917 tax by credit was void and of no effect under section 609 of the Revenue Act of 1928, which provides:
"(a) Credit against Barred Deficiency. Any credit against a liability in respect of any taxable year shall be void if any payment in respect of such liability would be considered an overpayment under section 2607. * * *.
"(c) Application of Section. The provisions of this section shall apply to any credit made before or after May 29, 1928 [the enactment of this act]."
Section 607 (26 USCA § 2607) referred to in section 609, provides that "any tax * * * assessed or paid (whether before or after May 29, 1928 [the enactment of this act]) after the expiration of the period of limitation properly applicable thereto shall be considered an overpayment and shall be credited or refunded to the taxpayer if claim therefor is filed within the period of limitation for filing such claim." See, also, Report No. 2, pages 33 and 34, Ways and Means Committee, 70th Congress, 1st Session, and Report No. 960, pages 41 and 42, Senate Committee on Finance, 70th Congress, 1st Session. In view of the provisions of section 609, supra, the plaintiff may not recover.
Before suit can be maintained, it must appear that there has been a payment of the amount of the 1917 tax for which suit is brought. Since the credit involved in this case is void by legislative direction, it is of no effect whatsoever. It is a nullity and is as if it had not been attempted. United States Refractories Corp. v. Com'r of Internal Revenue, 23 B.T.A. 872.
In view of the provisions of section 609, Revenue Act of 1928, the cases relied upon by plaintiff are not controlling. That section was not applicable to the facts in Boston Pressed Metal Co. v. United States, 282 U.S. 409, 51 S. Ct. 186, 75 L. Ed. 415, relied upon by the plaintiff. In that case recovery was denied under the provisions of section 611 of the 1928 Act ( 26 USCA § 2611). The credit involved in that case was not void. Here the credit was against a barred deficiency and has been made void by special congressional enactment.
The certificate of overassessment for the fiscal period January 1 to June 30, 1918, was issued March 24, 1924. The issuance of this certificate created an account stated in favor of the plaintiff and against the United States. Bonwit Teller Co. v. United States, 283 U.S. 258, 51 S. Ct. 395, 75 L. Ed. 1018. The period of limitation within which suit could have been instituted upon the certificate of overassessment to recover the overpayment for 1918 expired March 24, 1930. This suit was not instituted until June 17, 1930, more than six years after the accrual of a cause of action to recover the overpayment for 1918. Recovery of the overpayment was barred when the suit was instituted, even if it had been grounded upon an account stated.
The petition must be dismissed. It is so ordered.