Helvering v. Therrell
| Citation | 303 U.S. 218,82 L.Ed. 758,58 S.Ct. 539 |
| Decision Date | 28 February 1938 |
| Docket Number | 287,Nos. 128,129,597,s. 128 |
| Parties | HELVERING, Commissioner of Internal Revenue, v. THERRELL and three other cases. * |
| Court | United States Supreme Court |
Messrs. Stanley F. Reed, Sol. Gen., and Homer S. Cummings, Atty. Gen., for Commissioner of Internal Revenue.
Mr. Harry M. Voorhis, of Orlando, Fla., for respondents Therrell and Tunnicliffe.
Mr. Bernhard Knollenberg, of New York City, for petitioner McLoughlin.
Mr. John W. Townsend, of Washington, D.C., for respondent Freedman.
Has the federal government power to tax compensation paid to attorneys and others out of corporate assets for necessary services rendered about the liquidation of an insolvent corporation by a state officer proceeding as required by her statutes?
The opinions below, Therrell v. Com'r of Internal Revenue, 5 Cir., 88 F.2d 869; Tunnicliffe v. Com'r of Internal Revenue, 5 Cir., 88 F.2d 873; McLoughlin v. Com'r of Internal Revenue, 2 Cir., 89 F.2d 699; Freedman v. Com'r of Internal Revenue, 3 Cir., 92 F.2d 150, state the essential facts—not in dispute; make adequate references to the relevant statutory provisions; and cite numerous authorities.
Under Florida statutes, Com.Gen.Laws Supp.Fla. §§ 6102, 6105, when a bank becomes insolvent, 'The State Comptroller may * * * appoint a liquidator (subject to dismissal) to take charge of the assets and affairs of such bank * * * (who,) under the direction and supervision of the Comptroller, shall take possession of the books, records and assets of every description * * * and in his name shall sue for and collect all debts, dues and claims belonging to it, and upon the order of a court of competent jurisdiction may sell or compound all bad or doubtful debts, and, on a like order, may sell all the real and personal property * * * and * * * sue for and enforce the individual liability of the stockholders.' He shall 'pay all money received by him to the State Treasurer to be held as a special deposit * * * shall also make quarterly reports to or when called upon, to the Comptroller.' The appointment must follow notice and be confirmed by the Circuit Court. Liquidation expenses are payable out of the corporate funds held by the Treasurer. 'The compensation of the liquidator shall be fixed by the Comptroller, and shall be based upon the amount of work actually necessary and performed, and shall in no case exceed five per cent. of the cash collections.'
Respondent Therrell, liquidator for several banks, devoted substantially all his time to the work. He held no commission from the Governor, took no oath of office, but was formally appointed by the Comptroller and gave bond. His compensation, for 1931 and 1932, paid from corporate assets, was assessed by the Commissioner for federal income taxes. The Board of Tax Appeals approved; but the Circuit Court of Appeals, Therrell v. Com'r of Internal Revenue, 5 Cir., 88 F.2d 869, found immun- ity under the Federal Constitution.
Respondent Tunnicliffe, liquidator of insolvent banks appointed by the Comptroller of Florida, was assessed for federal income taxes upon the sums received for services during 1931 and 1932. The Board of Tax Appeals approved; the Circuit Court of Appeals, Tunnicliffe v. Com'r of Internal Revenue, 5 Cir., 88 F.2d 873, ruled otherwise upon its opinion in No. 128. Both causes present the same points.
Petitioner McLoughlin was employed by the Insurance Department of New York as legal counsel in the Liquidation Bureau and received for services during 1932, $5,125. This bureau is in charge of a Deputy Superintendent of Insurance, a civil service employe whose salary is paid by the state. It employs many persons superintendents, attorneys, bookkeepers, stenographers, adjusters, accountants, etc.
Under the statutes the superintendent may apply to the court for an order to take over the assets of an insolvent insurance company and liquidate its affairs. When this issues, the corporate charter is dissolved and the superintendent must proceed to collect assets, adjust claims, etc. He determined petitioner's compensation and caused it to be paid from assets of the several companies in liquidation according to the time devoted to each.
The Commissioner assessed this compensation for federal income tax; the Board of Tax Appeals approved. The Circuit Court of Appeals, McLoughlin v. Com'r of Internal Revenue, 2 Cir., 89 F.2d 699, affirmed, and definitely held it was not exempted by the Federal Constitution.
Freedman, employed as an attorney in Pennsylvania's Department of Justice, received annual salary of $3,000. The Attorney General has power to appoint attorneys to represent any department, board or commission of the state and fix their compensation. The Secretary of Banking has broad powers over banks. When one becomes unsound, he may, after notice and hearing and with the Attorney General's consent, take possession and wind up its affairs. All necessary expenses, including compensation of attorneys, special deputies, assistants, and others employed about the proceedings, are paid from funds of the corporation.
During 1932 the respondent was assigned for legal work relating to closed banks and was paid by the Secretary of Banking out of their funds. The Commissioner assessed the sum so received for federal income tax. The Board of Tax Appeals approved; the Circuit Court of Appeals, Freedman v. Com'r of Internal Revenue, 3 Cir., 92 F.2d 150, declared the salary exempt.
What limitations does the Federal Constitution impose upon the United States in respect of taxing instrumentalities and agencies employed by a state and, conversely, how far does it inhibit the states from taxing instrumentalities and agencies utilized by the United States, are questions often considered here. McCulloch v. Maryland, 1819, 4 Wheat. 316, 4 L.Ed. 579; Weston v. City of Charleston 1829, 2 Pet. 449, 7 L.Ed. 481; Dobbins v. Commissioners of Erie, 16 Pet. 435, 10 L.Ed. 1022; Lane County v. Oregon, 7 Wall. 71, 19 L.Ed. 101; Veazie Bank v. Fenno, 8 Wall. 533, 556, 19 L.Ed. 482; South Carolina v. United States, 199 U.S. 437, 457, 26 S.Ct. 110, 115, 50 L.Ed. 261; Metcalf & Eddy v. Mitchell, 269 U.S. 514, 46 S.Ct. 172, 70 L.Ed. 384; Indian Motocycle Co. v. United States, 283 U.S. 570, 51 S.Ct. 601, 75 L.Ed. 1277; Burnet v. A. T. Jergins Trust, 288 U.S. 508, 516, 53 S.Ct. 439, 441, 77 L.Ed. 925; Ohio v. Helvering, 292 U.S. 360, 368, 54 S.Ct. 725, 726, 78 L.Ed. 1307; Helvering v. Powers, 293 U.S. 214, 55 S.Ct. 171, 173, 79 L.Ed. 291; New York ex rel. Rogers v. Graves, 299 U.S. 401, 57 S.Ct. 269, 81 L.Ed. 306; Brush v. Commissioner, 300 U.S. 352, 57 S.Ct. 495, 81 L.Ed. 691, 108 A.L.R. 1428.
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