American Printing Co. v. Commonwealth

• Decision Date: 29 October 1918
• Citation: 120 N.E. 686,231 Mass. 237
• Parties: AMERICAN PRINTING CO. v. COMMONWEALTH. P. J. HARNEY SHOE CO. v. SAME. BUTCHER POLISH CO. v. SAME.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

231 Mass. 237

120 N.E. 686

AMERICAN PRINTING CO.

v.COMMONWEALTH.

P. J. HARNEY SHOE CO.

v.SAME.

BUTCHER POLISH CO.

v.SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

Oct. 29, 1918.

Case Reserved from Supreme Judicial Court, Suffolk County.

Petitions for abatement of income tax by the American Printing Company, by the P. J. Harney Shoe Company, and by the Butcher Polish Company against the Commonwealth of Massachusetts; the cases being consolidated. On reservation by a single justice of the Supreme Judicial Court for the determination of the full court. Decree of abatement of part of tax in each case ordered.

Jas. F. Jackson and Charles F. Rowley, both of Boston, for petitioner American Printing Co.

Warren, Garfield, Whiteside & Lamson and Clement R. Lamson, all of Boston, and G. E. Holmes, of New York City, for petitioner P. J. Harney Shoe Co.

Ropes, Gray, Boyden & Perkins and Clifford H. Walker, all of Boston, for petitioner Butcher Polish Co.

Henry C. Attwill, Atty. Gen., and Wm. Harold Hitchcock, Asst. Atty. Gen., for the Commonwealth.

RUGG, C. J.

It is provided by St. 1918, c. 255, § 1, that--

‘Every corporation incorporated under the laws of this commonwealth and doing business for profit shall pay a tax to the commonwealth computed upon the net income for its fiscal or calendar year next preceding, as hereinafter provided, upon which income such corporation is required to pay a tax to the United States.’

The controversy relates to the true meaning of the words ‘upon which income such corporation is required to pay a tax to the United States.’ Considered solely as matter of statutory construction these words present no difficulty. They do not define net income. No other part of the act defines net income. Ordinarily an income tax act would give such a definition. But this act does not either in the operative words which have been quoted or in its other provisions contain any detailed specifications of the subjects of taxation. It simply refers, for a description of what is made liable to taxation, to the laws of the United States. The general court found at hand already in operation an elaborate system of income taxation for corporations. Instead of multiplying requirements for returns, it adopted for the basis for its tax that system. In selecting the subject for its taxation, the general court used a carefully phrased, easily ascertained and unambiguous amount of income, namely, the net income upon which the corporation is required to pay a tax to the United States. It did not use the net income as established by any statute or by abstract definition, but only that income actually taxed by the United States and for the which the corporation is under obligation to make payment.

The act took effect on May 29, 1918. It is agreed by all parties to these proceedings that when this act took effect such corporationswere required to pay to the United States three several taxes upon income or upon profits: One, for convenience designated the income tax, levied under the income tax law of September 8, 1916 (39 U. S. Stat. at Large, 756, c. 463), as amended; a second, termed the war income tax; and a third, called the war excess profits tax-the last two being levied under the War Revenue Act of October 3, 1917 (40 Stat. 300, c. 63). The income tax law of September 8, 1916, provided in detail for the ascertainment of ‘the total net income.’ The War Revenue Act of October 3, 1917, made no change in this method of ascertainment of ‘the total net income,’ but adopted it as the basis upon which the war income tax and the excess war profits tax were to be reckoned.

The form for the corporation income tax return issued by the United States Internal Revenue Department has been presented to us. It is conceded that it shows correctly according to the United States laws in force on May 29, 1918, the method for determining the three several federal taxes to which allusion has been made. It is required by section 1 of the Massachusetts act now to be interpreted that every corpoation shall render to the tax commissioner--

‘a true copy of the last return made to the collector of internal revenue of the annual net income * * * and * * * such other information as may be requested by the United States Treasury Department for the purpose of ascertaining the total amount of new income taxable under the United States Income Tax Act; the net income of such corporation after making the deductions authorized. * * *’

It is manifest that the Massachusetts act refers to the federal return as a basis for information. It is plain from that return, and from an examination of the statutes of the United States, that no corporation on May 29, 1918, was required to pay a tax upon the entire ‘net income’ as defined in acts of Congress and disclosed on the return, except such as were not liable to the war excess profits tax. The federal income tax law of September 8, 1916, as originally enacted, provided in section 10 (U. S. Comp. St. 1916, § 6336j) that there should be assessed a tax of 2 per centum upon the total net income. But that law was...