Boehme v. Comm'r of Internal Revenue
| Citation | 15 T.C. 247 |
| Decision Date | 22 September 1950 |
| Docket Number | Docket No. 20533. |
| Parties | H. O. BOEHME, INCORPORATED, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
Held, since all of the factors necessary to a determination of the amount of the credit on petitioner's franchise tax provided by applicable New York law based on its 1943 net income became known within its tax year 1944 and not prior thereto, and since it kept its books on an accrual basis, the amount of such credit was includible in its taxable income for 1944. Also held, that since all of the factors necessary to a determination of the credit or refund of New York franchise tax based on its 1944 net income became known in the year 1945 and not prior thereto, the amount of such credit or refund was properly accruable in the tax year 1945. Hugh C. Bickford, Esq., for the petitioner.
Rigmor Carlsen, Esq., for the respondent.
The respondent determined a deficiency in petitioner's excess profits tax for the calendar year 1945 in the amount of $3,666.53. Petitioner claims an overpayment of $13,318.37. The only question before us is whether a credit or refunds of New York State franchise taxes, which resulted from renegotiation of part of petitioner's 1943 and 1944 income by the Federal renegotiation officials, should be included in its income for the year 1944 or 1945.
Part of the facts are stipulated and are so found.
Petitioner is a corporation organized under the laws of the State of New York. The returns for the period here involved were filed on a calendar year basis with the collector of internal revenue for the second district of New York.
During the years involved in this proceeding, the petitioner was engaged in manufacturing mechanical and electrical equipment in the State of New York. It kept its books and prepared its income and excess profits tax returns on an accrual basis.
On March 31, 1944, the State of New York amended its franchise tax on corporations doing business in that state to provide that a franchise tax should be paid based upon a percentage of income earned within each fiscal or calendar year. Section 2 of Chapter 415, Laws of 1944, enacted and effective March 31, 1944. This statute provided that the tax should be levied
For the privilege of exercising its franchise or doing business in this State in a corporate or organized capacity for all or any part of the period beginning November first, nineteen hundred forty-four, and extending through any subsequent part of its first fiscal or calendar year ending after said date, * * *. Section 209.2.
If a corporation was doing business under this act on November 1, 1944, it became liable for an excise tax
* * * upon the basis of its entire net income, or upon such other basis as may be applicable, for each and every fiscal or calendar year or part thereof begun not earlier than August first, nineteen hundred forty-two, and ending not later than October thirty-first, nineteen hundred forty-five, during which such corporation was exercising its franchise or doing business in this State * * *. Section 209.2, supra.
The New York statute also provided, as to corporations upon a calendar year basis, that ‘such tax shall be deemed a single tax for such privilege period but shall be computed separately with respect to each such fiscal or calendar year or part thereof on a report which shall be filed on or before the fifteenth day of May next succeeding the close of each such year * * *. ‘ (Section 209.2, supra.) Separate forms were provided by the state for the calendar years 1943 and 1944.
Chapter 510, sections 1 to 3, Laws of 1944, of the State of New York enacted and effective April 1, 1944, further amended the statute. It provided as follows:
SEC. 1. In determining the net income or entire net income of a taxpayer under any article of the tax law for any period before or after the enactment of this act, no deduction shall be allowed for, or account taken of, any excessive profits which the taxpayer may have repaid or may repay, or which may have been or may be eliminated, pursuant to any renegotiation of a war contract or subcontract or the profits therefrom, under any law of the United States authorizing such renegotiation or otherwise, except to the extent that the amount of such excessive profits has been or shall be finally determined during the period on the basis of which such net income or entire net income is required to be so determined.
SEC. 2. A credit shall be allowed, without interest, against the tax (1) imposed by any article of the tax law upon any taxpayer, any war contract or subcontract of which or whom, or the profits therefrom, have been or shall be so renegotiated; and (2) computed on the basis of the income or capital for the period in which such excessive profits were or shall be finally determined. Such credit shall be in an amount equal to the excess of any tax imposed on the taxpayer by such article of the tax law and computed on the basis of the taxpayer's renegotiable net income or renegotiable entire net income, as the case may be, for the period under renegotiation over the amount of any tax for any period as an adjustment or otherwise taken into consideration on such renegotiation in determining the amount of such excessive profits, but such credit shall not in any case exceed either (1) the loss, if any, which the taxpayer establishes to the satisfaction of the tax commission that the taxpayer has sustained by reason of such excess of such tax not having been so allowed or otherwise taken into consideration, or (2) an amount equal to the tax imposed by such article of the tax law and computed on the basis of any such excessive profits for which a deduction is not allowed as provided in section one of this act, or the portion thereof allocated within the state.
SEC. 3. If the amount of any credit allowable under the preceding section exceeds the amount of tax under any article of the tax law against which such credit is allowable, a credit in an amount equal to such excess shall be allowed, without interest, against any tax imposed on the taxpayer by such article of the tax law for any subsequent year or years, or against any tax imposed by subdivision three of section two hundred nine of the tax law on the taxpayer or by section two hundred fourteen-a of the tax law on any corporation which shall have acquired or shall acquire the major portion of the actively employed assets or the franchises of the taxpayer.
In 1945 the State of New York again amended that statute by chapter 162, Laws of 1945, to provide that the reduction of franchise tax due to renegotiation of income, should be credited or refunded instead of only being credited. This act also provided:
SEC. 3. The amendments made by this Act shall apply to taxes for any year or period and to any renegotiation, whether before or after the enactment of this Act.
The amendment was made effective as of April 1, 1944.
The petitioner filed a franchise tax return with the State of New York for the year 1943, which return was due to be filed May 15, 1944. The tax thereon was due one-half on filing and one-half on November 15, 1944. Petitioner also filed a franchise tax return for the year 1944 which was due to be filed on May 15, 1945, and the tax was due one-half at the time of filing and one-half not later than January 15, 1946.
The petitioner's franchise taxes for such years were as follows:
+--------------------------------------------------------+
¦Based on 1943 net income before renegotiation¦$20,024.86¦
+---------------------------------------------+----------¦
¦Based on 1944 net income before renegotiation¦16,362.91 ¦
+--------------------------------------------------------+
On August 18, 1944, petitioner executed a renegotiation agreement with the Price Adjustment Board of the Signal Corps, agreeing to a determination of excessive profits on its war contracts in the amount of $226,673 for the year 1943. No dispute existed with the New York State tax authorities on or after August 18, 1944, as to petitioner's net income for the year 1943.
In its Federal income and excess profits tax returns for the taxable year 1944, petitioner claimed deductions for New York franchise taxes as follows:
+-----------------------------------------------------------------------------+
¦For franchise tax based on 1943 net income ¦$19,943.16¦
+------------------------------------------------------------------+----------¦
¦For franchise tax based on 1944 net...To continue reading
Request your trial
-
Budd Company v. United States
...item occurred prior to January 1, 1946, and this item could not constitute taxable income to plaintiff in 1946. See H. O. Boehme, Inc. v. Commissioner, 1950, 15 T.C. 247, Acq. 1951 C.B. p. 4. Paragraphs 4(c)(2) and 4(c)(3) of Plaintiff's Requests for Conclusions of Law. 5. If the refund of ......
-
EW Bliss Company v. United States
...relies upon cases that correctly state the law but those cases are inapplicable. Reliance is placed upon the statement in H. O. Boehme, Inc., 15 T.C. 247, 252 (1950) that: "It is now well established that if at the close of the taxable year an accrual basis taxpayer has all of the basic dat......
-
Doyle v. Comm'r of Internal Revenue
...discretion to approve refund claims, did in fact make such approval. The District Court properly distinguished H. O. Boehme, Inc. v. Commissioner, 15 T.C. 247 (1950), and Kenyon Instrument Co. v. Commissioner, 16 T.C. 732 (1951), wherein, under New York law, the right to a New York State fr......
-
Beech Aircraft Corp. v. State Commission of Revenue and Taxation
...refund because of the loss, but the 'mechanics' of the thing amounted merely to making the statutory computations. In H. O. Boehme, Inc., 1950, 15 T.C. 247, at page 252, it was said: 'It is now well established that if at the close of the taxable year an accrual basis taxpayer has all of th......