Fulton Bag & Cotton Mills v. Williams

• Citation: 212 Ga. 783,95 S.E.2d 848
• Decision Date: 05 December 1956
• Docket Number: No. 19535,19535
• Court: Supreme Court of Georgia
• Parties: FULTON BAG & COTTON MILLS v. T. V. WILLIAMS, State Revenue Commissioner.

Page 848

95 S.E.2d 848

212 Ga. 783

FULTON BAG & COTTON MILLS v. T. V. WILLIAMS, State Revenue Commissioner.

No. 19535.

Supreme Court of Georgia.

Dec. 5, 1956.

Rehearing Denied Dec. 18, 1956.

Syllabus by the Court

1. A person has no vested right in statutory privileges and exemptions.

2. The legislative act permitting a taxpayer, in the computation of his State income tax liability, to include as a deduction payment of Federal income taxes, is a privilege allowed to the taxpayer as a matter of legislative grace.

3. Until final judgment upon a pending action, the repeal of the statute which gives the right of action, or upon which the suit is predicated, destroys the right of action, and the action itself abates.

4. The right of the taxpayer, in computing its net operating loss in 1952, to carry back for income tax purposes to the year 1951, as a deduction, Federal income taxes paid during 1951, being a privilege or favor granted by the legislature, the act of December 18, 1953, forbidding such deduction for all taxable years ending on or after February 15, 1952, does not violate art. 1, sec. 3, par. 2 of the Constitution of Georgia, forbidding the passage of retroactive laws.

James H. Wilson, Jr., Sutherland, Asbill & Brennan, Atlanta, for plaintiff in error.

Eugene Cook, Atty. Gen., William L. Norton, Jr., Ben F. Johnson, Jr., Asst. Attys. Gen., for defendant in error.

ALMAND, Justice.

Fulton Bag & Cotton Mills (hereinafter referred to as the taxpayer) filed its petition against T. V. Williams, in his official capacity as State Revenue Commissioner of the State of Georgia (hereinafter referred to as the revenue commissioner) seeking to recover the amount of income tax overpaid by it for the fiscal year ending November 30, 1951. The general demurrers of the revenue commissioner being sustained, the taxpayer seeks a review of the judgment dismissing its petition. This court has jurisdiction to review this order, by virtue of the taxpayer's attack on the constitutionality of an act of the General Assembly approved December 18, 1953, Ga.L.1953, Nov.-Dec.Sess., pp. 316-319.

The petition made the following case: On February 15, 1952, the taxpayer, a Georgia corporation, filed with the revenue commissioner its income tax return for its fiscal year ending November 30, 1951, and paid to the commissioner the tax of $101,378.81. At that time the taxpayer, in computing its net income, was permitted to deduct Federal income taxes paid or accrued within the taxable year. Ga.L.1937-38, Ex. Sess., pp. 150-155, Code Ann.Supp. § 92-3109(c). The act approved February 15, 1952, Ga.L.1952, pp. 405-430, amended Code § 92-3109 by adding a new subsection (m). Under this amendment, as amended by the act approved February 27, 1953, Ga.L.1953, Jan.-Feb.Sess., pp. 279-285, a taxpayer was allowed to deduct from his gross income a net operating loss carry-over or carry back. On and after the passage of this act and for any succeeding taxable year, the taxpayer was permitted to carry back the net operating loss to the next preceding taxable year and annually thereafter for a total period of five years next succeeding the year of such net operating loss, or until such net operating loss has been exhausted or absorbed by the taxable income of any succeeding year, whichever is earlier. Section 11 of the act of 1952 provided that 'the provisions of this Act shall apply to and be in full force and effect for all taxable years ending on and after the passage of this Act.' The act of 1952 made no change in the law which allowed the payment of Federal income taxes as deductions from the gross income.

The taxpayer alleged that, for its fiscal year ending November 30, 1952, it suffered a net operating loss in the amount of $1,009,587.85. After deducting $1,128,373.52 of Federal income taxes for prior years paid during the fiscal year ending November 30, 1952, and on March 25, 1953, it filed with the revenue commissioner its income tax return for its fiscal year ending November 30, 1952, claiming a deduction of Federal income taxes for its fiscal year ending November 30, 1951, and prior years which were paid during its fiscal year ending November 30, 1952. No Federal income tax for the fiscal year ending November 30, 1952, was claimed as a deduction. The taxpayer contended that under the Georgia income tax law, it was entitled to carry back as a deduction for its fiscal year ending November 30, 1951, its net operating loss to the fiscal year ending November 30, 1952, so that its amount of income tax for 1951 was only $42,769.71, and it was entitled to a refund of the amount stated in its petition. It was alleged that while its claim for refund was pending before the revenue commissioner, the legislature passed an act approved December 18, 1953, Ga.L.1953, Nov.-Dec.Sess., pp. 316-319. This act struck subparagraphs (2) and (3)(B) of subsection (m) of Code, § 92-3109, and added a new paragraph 3(F), which provided: 'Effective for all taxable years ending on or after February 15, 1952, no income taxes shall be allowed as a deduction in computing a net operating loss.' The revenue commissioner denied the petition of the taxpayer for a refund, maintaining that the act of December 18, 1953, supra, prohibited deduction of Federal income taxes in the computation of net operating loss.

The taxpayer contends that prior to the act of December 18, 1953, it had an absolute vested right under the then existing income-tax laws of Georigia to a refund; and that the 1953 amendment is void and unconstitutional as violative of art. 1, sec. 3, par. 2 of the Constitution of Georgia, which forbids the passage of retroactive laws, in that the act retroactively deprives the taxpayer of its vested right, in computing its net operating loss in 1952, to include the payment of Federal income taxes.

The controlling and decisive question is whether or not the taxpayer, by reason of the carry back provision of the acts of 1952, Ga.L.1952, pp. 405-430, and Ga.L.1953, Jan.-Feb.Sess., pp. 278-285, amending subsection (m) of Code Ann. § 92-3109, became vested with the right to reopen its tax liability for the year 1951 and carry back and deduct, against the tax paid for 1951, a loss computed on its 1952 income, by deducting Federal income taxes paid in 1952, so as to render the act of December 18, 1953, forbidding retroactively to February 15, 1952, a deduction of Federal income taxes paid in computing its net operating loss, violative of the constitutional provision against the enactment of retroactive laws.

1. A person has no vested right in statutory privileges or exemptions. Brearley School Limited, v. Ward, 201 N.Y. 358, 94 N.E. 1001(6). This court in Harris v. Glenn, 56 Ga. 94, said: 'An exemption which exists by statute may be reduced or withdrawn by statute; * * * Exemption is but a statutory or constitutional shield, which being removed, the exposure to process is the same as if it had never been interposed; [Bull v. Conroe] 13 Wis. 238; Cooley on Con.Lim., 383; [Daly v. Harris], 33 Ga.Supp. 38. So long as the law exists by which exemption is granted and secured, the right to enjoy the exemption exists and should have the same protection from judicial tribunals that is accorded any other right. But when the law is gone the right is gone.' 56 Ga. at pages 96-97.

2. The State in...