Allen v. Regents of University System of Georgia

• Decision Date: 23 May 1938
• Docket Number: No. 882,882
• Parties: ALLEN, Collector of Internal Revenue for the District of Georgia, v. REGENTS OF UNIVERSITY SYSTEM OF GEORGIA. *
• Court: U.S. Supreme Court

304 U.S. 439

58 S.Ct. 980

82 L.Ed. 1448

ALLEN, Collector of Internal Revenue for the District of Georgia,

v REGENTS OF UNIVERSITY SYSTEM OF GEORGIA.^*

No. 882.

Argued April 28, 29, 1938.

Decided May 23, 1938.

Messrs. Homer S. Cummings, Atty. Gen., and J. Louis Monarch, of Washington, D.C., for petitioner.

Mr. Marion Smith, of Atlanta, Ga., for respondent.

[Argument of Counsel from Page 440 intentionally omitted] Mr. Justice ROBERTS delivered the opinion of the Court.

The question on the merits is whether the exaction of the federal admissions tax, in respect of athletic contests in which teams representing colleges conducted by the respondent participate, unconstitutionally burdens a governmental function of the State of Georgia. The petition also challenges the respondent's ability to maintain a suit to enjoin the collection of the tax and to substitute as defendant the successor in office of the Collector originally impleaded. The court below decided all the ques- tions involved against the petitioner.¹ Because of their importance we granted certiorari. 303 U.S. 634, 58 S.Ct. 831, 82 L.Ed. —-.

Section 500(a)(1) of the Revenue Act of 1926,² as amended by section 711 of the Revenue Act of 1932³ imposes 'a tax of 1 cent for each 10 cents or fraction thereof of the amount paid for admission to any place, * * * to be paid by the person paying for such admission * * *.'⁴ Subsection (d) commands that the price (exclusive of the tax to be paid by the person paying for admission) at which every admission ticket is sold shall be conspicuously printed, stamped, or written on the face or back of that portion of the ticket which is to be taken up by the management and imposes a penalty for failure to comply with its terms. Section 502, 26 U.S.C.A. §§ 955, 956, requires the person receiving payments for admissions to collect the tax and make return in such form as the Commissioner of Internal Revenue may prescribe by regulation. Section 1102(a)⁵ imposes the duty on persons who collect the tax to keep records and render statements, under oath, and to make returns as required by the Secretary of the Treasury. Section 1114(b) and (d)⁶ fixes penalties for failure to collect or pay over and subsection (e), 26 U.S.C.A. § 1610(a, b), provides for the personal liability of one collecting the admission charge and for distraint by the Collector of Internal Revenue for taxes and penalties. Section 607 of the Revenue Act of 1934⁷ requires the person charged with the collection of the tax to hold the amount collected as a special fund in trust for the United States, confers the right to assess him with the amount so collected and withheld, including penalties, and, in connection with Rev.St. § 3187,⁸ authorizes the Collector of Internal Revenue to distrain therefor.

The respondent is a public corporation, created by Georgia as an instrumentality of the State, having control and management of the University of Georgia and the Georgia School of Technology. Athletics at these institutions are conducted under the respondent's authority by two corporations, the University of Georgia Athletic Association and the Georgia Tech. Athletic Association. The expense of physical education and athletic programs at each school is defrayed almost entirely from the admission charges to athletic contests and students' athletic fees collected for the purpose. During September and October, 1934, football games were played at the institutions, for which admissions were charged and collected by the associations. Each ticket showed on its face the admission price, the amount of the tax, and the total of the two, and also carried the following printed notice:

'The University of Georgia (or Georgia School of Technology) being an instrumentality of the government of the State of Georgia, contends that it is not liable for any admission tax. The amount stated as a tax is so stated because the University is required to do so by Treasury regulations pending a decision as to its liability in this respect. This amount is collected by the University as a part of the admission and will be retained as such unless it is finally determined that the University is itself liable for the tax.'

Each association deposited the total collected as the disputed tax in a separate bank account, apart from its other funds, but made no return thereof. The Collector prepared returns for the amounts. In consequence of the associations' neglect to pay the amounts so returned, the Commissioner assessed each association in the amount shown by return made for it and certified the assessments to the Collector who made demands for payment. These were ignored and the Collector filed liens, issued warrants, and levied upon the deposit accounts. The respondent then brought suit in which it prayed a decree that, as an agency of the State performing an essential governmental function in the conduct of the games, it was immune from the tax, and sought injunctions, temporary and permanent, to restrain the Collector from proceeding further to collect the sums demanded. From a decree awarding a final injunction the Collector appealed but, pending appeal, resigned and, before the hearing, died. Over objection the Circuit Court of Appeals ordered the petitioner substituted as appellant and affirmed the decree. We are of opinion that the court below rightly decided the procedural questions but erred as to the merits.

First. If the suit was maintainable against his predecessor in office the substitution of petitioner was lawful. We are not unmindful of the principle that suits against officers to restrain action in excess of their authority or in violation of statutory or constitutional provisions are in thei n ature personal and that a successor in office is not privy to his predecessor in respect of the alleged wrongful conduct.⁹ As a result of the inconvenience resulting from the lack of power to substitute one who succeeded to the office of an alleged offending official, to which this court has called attention, ¹⁰ Congress adopted the Act of February 13, 1925,¹¹ which provides:

'* * * Where, during the pendency of an action, suit, or other proceeding brought by or against an officer of the United States, * * * and relating to the present or future discharge of his official duties, such officer dies, resigns, or otherwise ceases to hold such office, it shall be competent for the court wherein the action, suit, or proceeding is pending, whether the court be one of first instance or an appellate tribunal, to permit the cause to be continued and maintained by or against the successor in office of such officer * * *.'

The motion to substitute the petitioner asserted that, unless restrained, he would continue in the course pursued by his predecessor. The answer did not deny this allegation but relied upon the claim that the present Collector is not privy to the acts of the former one. In Ex parte La Prade, 289 U.S. 444, 53 S.Ct. 682, 77 L.Ed. 1311, this Court reserved the question whether in such a situation the successor might be substituted. As the present case is within the letter of the act and within the inconvenience intended to be obviated by its adoption, the substitution was properly permitted.

Second. If the tax, the collection of which was threatened, constituted an inadmissible burden upon a governmental activity of the State, the circumstances disclosed render the cause one of equitable cognizance and take it out of the prohibition of Rev.St. § 3224.¹² The respondent has long been of opinion that exaction of the tax in respect of games played under the auspices of the University of Georgia and the Georgia School of Technology constitutes an unconstitutional burden upon an essential governmental activity of Georgia. At first the respondent collected the tax as required by the act, paid it over to the Treasury, and made claim for refund. The claim was rejected on the ground that the tax was paid by the patron of the game, and that the athletic associations and the respondent were mere collecting agents having no interest in the fund which would justify repayment to them if it had been illegally collected. Believing the basis of the Commissioner's refusal to refund was sound,¹³ the respondent then resorted to the expedient of collecting the amount of the tax under the reservation printed upon the tickets.

The bill, after reciting the facts as above summarized, alleges that the statute imposes a tax upon the individuals who purchase tickets, but, properly construed, is inapplicable to those purchasing tickets to the football games in question. If further asserts that, in respect of those games, neither the respondent nor the athletic associations collected any tax from purchasers of admissions; that if the statute be construed to justify the Collector in seeking to force respondent to pay sums representng alleged taxes due from numerous individuals it is unconstitutional as an attempt to interfere with and control and to burden the State's educational activities and unlawfully to impose on the State government the duty of collecting taxes for the federal government; that the action of the petitioner in issuing warrants of distraint is either an attempt to collect from respondent taxes alleged to be due from various individuals, or to impose upon the respondent penalties, criminal and punitive in nature.

The petitioner insists the bill shows the tax was in fact collected from the patrons of the games, and the allega- tion that no tax was collected is a mere conclusion of law which the court should ignore; that the trial court was without jurisdiction to determine in this suit for injunction whether or not taxes had been collected by respondent; that the Revenue Act imposes no liability for the tax upon the vendor of the tickets who fails to collect, although it does impose a penalty for wilful failure to collect the tax and other penalties; that, as the respondent collected...