Imhoff-Berg Silk Dyeing Co. v. United States

• Decision Date: 16 September 1930
• Citation: 43 F.2d 836
• Parties: IMHOFF-BERG SILK DYEING CO. v. UNITED STATES.
• Court: U.S. District Court — District of New Jersey

43 F.2d 836 (1930)

IMHOFF-BERG SILK DYEING CO. v. UNITED STATES.

District Court, D. New Jersey.

September 16, 1930.

Surosky & Surosky, of Paterson, N. J., for plaintiff.

Phillip Forman, U. S. Atty., of Trenton, N. J. (Anthony Giuliano, Asst. U. S. Atty., of Newark, N. J., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and J. A. Rees, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for defendant.

RUNYON, District Judge.

This action was instituted pursuant to the provisions of section 24, par. 20, of the Judicial Code, as amended (28 USCA § 41 (20), to recover the sum of $7,042.63, income and profits taxes assessed and collected for the calendar year 1918, and was tried before the court without a jury.

There is no question presented as to the legality or correctness of the assessment of this sum, and the controversy arises because said sum is alleged to have been erroneously and illegally collected and payment thereof made under protest and threat of distraint, after the expiration of the statutory period within which collection thereof might lawfully have been made.

The record shows that the plaintiff's corporation income and profits tax return for the calendar year 1918, was filed on or before June 16, 1919; further, that an assessment of additional taxes in the sum of $13,389.42 for said year was made by the Commissioner of Internal Revenue on February 27, 1920, and that on July 22, 1920, the plaintiff filed its claim for abatement of the additional taxes so assessed. This claim for abatement was later allowed in part by the Commissioner of Internal Revenue on a certificate of overassessment, dated March 8, 1922, in the amount of $7,988.55. The balance of the claims, still remaining after such partial allowance, was subsequently further considered by the Commissioner of Internal Revenue at the request of this plaintiff, but no relief for plaintiff was forthcoming as a result, and it is this balance, plus accrued interest thereon, which is sought to be recovered in this suit. During the time the above matter was being for the second time considered by the Commission of Internal Revenue, as above set out, it is conceded that no further attempt was made by the revenue collector, the official charged by law with the collection of the said assessment, to collect the same or any part thereof until June 26, 1924, at which time said balance last mentioned was collected from the plaintiff by distraint and paid under protest.

This collection, it is agreed, was made five years and ten days after plaintiff's income and profits tax return was filed, being ten days after the expiration of the statutory period of limitation in effect at the time collection was so made, that plaintiff in due form and time filed its claim for refund of said balance on June 29, 1927, and that no action thereon had been undertaken by the collector of internal revenue prior to the institution of this suit.

It is admitted that plaintiff's suit is timely and properly brought, and that, were it not for the provisions of section 611 of the Revenue Act of 1928 (26 USCA § 2611), the plaintiff's right to a return of its money would be clear under the terms of section 607 (26 USCA § 2607).

This matter in difference therefore relates solely to the construction and application of the provisions of said section 611, Revenue Act of 1928.

The statutes which are pertinent to the present discussion are sections 607 and 611 of the Revenue Act of 1928, reading as follows:

"Sec. 607. Effect of Expiration of Period of Limitation against United States.

"Any tax (or any interest, penalty, additional amount, or addition to such tax) assessed or paid (whether before or after the enactment of this Act) after the expiration of the period of limitation properly applicable thereto shall be considered an overpayment and shall be credited or refunded to the taxpayer if claim therefor is filed within the period of limitation for filing such claim."

"Sec. 611. Collection Stayed by Claim in Abatement.

"If any internal-revenue tax (or any interest, penalty, additional amount, or addition to such tax) was, within the period of limitation properly applicable thereto, assessed prior to June 2, 1924, and if a claim in abatement was filed, with or without bond, and if the collection of any part thereof was stayed, then the payment of such part (made before or within one year after the enactment of this Act) shall not be considered as an overpayment under the provisions of section 607, relating to payments made after the expiration of the period of limitation on assessment and collection."

The wording of section 611 is such that, in order that the payment of any tax, interest, etc., may come within the express provisions thereof, it must appear that (1) such tax was regularly assessed prior to June 2, 1924; (2) a claim for abatement was filed; (3) the sum in question was paid before or within one year after the enactment of the Revenue Act of 1928; and (4) that the collection thereof was stayed.

In the first three respects the conditions of this section are met, since it is admitted that the tax herein was assessed February 27, 1920, long prior to June 2, 1924, that a claim for abatement of said tax was filed July 22, 1920, and that the amount of said tax with interest thereon, being the sum for the recovery of which this suit is brought, was paid June 26, 1924, prior to the enactment of the Revenue Act of 1928, on May 29 of that year.

This being the case, the one question of fact left for decision is as follows: Was or was not the collection of this amount stayed within the meaning of section 611? Granting, as we must, that the term "stay" is susceptible of more than one interpretation; that under one interpretation of the term, a strictly legal one, there is little if any doubt that the circumstances of this case fail, so far as any stay by operation of law is concerned, to meet the requirements of such interpretation; that under another interpretation, giving a less rigorous and formal meaning to the word, an altogether different result ensues — it becomes necessary and advisable, as best we may, to learn the true intent which accompanied the enactment of the statute in question, and likewise such opinions of others who have discussed the subject as appeal most poignantly to our sense of logic, fitness, and reason.

While legislative debate, partaking of necessity very largely of impromptu statements and opinions, cannot be resorted to with any confidence as showing the true intent of Congress in the enactment of statutes, a somewhat different standard obtains with reference to the pronouncements of committees having in charge the preparation of such proposed laws. These committee announcements do not of course carry the weight of a judicial opinion, but are rightly regarded as possessing very considerable value of an explanatory nature regarding legislative intent where the meaning of a statute is obscure.

In this connection the Ways and Means Committee of the House of Representatives, in reporting the revenue bill which became the Revenue Act of 1928, made this statement concerning section 611:

"Prior to the enactment of the Revenue Act of 1924, it was the administrative practice to assess immediately additional taxes determined to be due. Upon the assessment, taxpayers were frequently permitted to file claims in abatement with the Collector and thus delay the collection until the claim in abatement could be acted upon. If this practice had not been followed, undue hardship undoubtedly would have been imposed upon the taxpayer. It was supposed that there was no limitation upon the collection by distraint of the amount ultimately determined to be due. However, the Supreme Court has recently held in a case in which the period for assessment expired prior to the enactment of the 1924 Act, that the period for collection was limited to five years from the date on which the return was filed. Decisions upon claims in abatement are being made every day. Amounts have been paid, are being paid, by the taxpayer even though the statute of limitations may have run. Exceptionally large amounts are involved. Accordingly, it is of utmost importance to provide that the payments already made should not be refunded. In order to prevent inequality, it is also provided that the amounts not yet paid may be collected within a year after the enactment of a new Act.

"Your Committee appreciates the fact that this provision will probably be subjected to severe criticism by some of the taxpayers affected. However, it must be borne in mind that the provision authorizes the retention and collection only of amounts properly due, and merely withdraws the defense of the statute of limitations. If it is determined that the amount paid is in excess of the proper tax liability, computed without regard to the statute of limitations, such excess will constitute an overpayment which may be refunded or credited as in the case of any other overpayment." (Italics added.) Report No. 2, Seventieth Congress, First Session, p. 34.

So far as the Ways and Means Committee is concerned, it is plain that in the preparation of section 611 the intent was to prevent the refunding of taxes properly due which had been collected or paid after the expiration of the statutory period for collection prior to the enactment of the Revenue Act of 1924, and to withdraw the defense of the statute of limitations, but only in cases in which claims in abatement had been filed and no action taken to enforce payment of tax pending consideration of an action upon such claims.

As defining another standard appropriate for consultation herein appears the following from the case of Edwards' Lessee v. Darby, 12 Wheat. 206, 210, 6 L. Ed. 603:

"In the construction of a doubtful and ambiguous law, the contemporaneous construction of those who were called upon to act under the law,...