Koehring Company v. United States
| Decision Date | 20 February 1970 |
| Docket Number | No. 34-66.,34-66. |
| Citation | 190 Ct. Cl. 898,421 F.2d 715 |
| Parties | KOEHRING COMPANY v. The UNITED STATES. |
| Court | U.S. Claims Court |
Don S. Harnack, attorney of record, for plaintiff. Lawrence Gerber and McDermott, Will & Emery, Chicago, Ill., of counsel.
Jane C. Bergner, Washington, D. C., with whom was Asst. Atty. Gen. Johnnie M. Walters, for defendant. Phillip R. Miller and Joseph Kovner, Washington, D. C., of counsel.
Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON, and NICHOLS, Judges.
This case was referred to Trial Commissioner Mastin G. White with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 57 (a) since September 1, 1969, Rule 134 (h). The commissioner has done so in an opinion and report filed on December 5, 1968. Exceptions to the commissioner's findings and recommended conclusion of law were filed by plaintiff. Defendant requested that the court adopt the commissioner's findings and recommended conclusion of law. The case has been submitted to the court on the briefs of the parties and oral argument of counsel.
In addition to the matters discussed by the trial commissioner, the court notes that, in the circumstances found here, the taxpayer impermissibly changed the accrual of its state property taxes for income tax purposes without obtaining the consent of the Internal Revenue Service. Treas.Reg. 118, § 39.41-2(c); Hackensack Water Co. v. United States, 352 F.2d 807, 173 Ct.Cl. 606 (1965).
Since the court agrees with the commissioner's opinion, findings and recommended conclusion of law, with minor modifications in the findings, it hereby adopts the same, as hereinafter set forth, and the foregoing paragraph, as the basis for its judgment in this case.* Therefore, plaintiff is not entitled to recover and the petition is dismissed.
WHITE, Commissioner:
This is a tax refund case growing out of income tax deficiencies that were assessed against, and collected from, the plaintiff for its fiscal years 1953 and 1954.
It is my opinion that the plaintiff is not entitled to recover.
The plaintiff is a Wisconsin corporation, and maintains its principal office and place of business in Milwaukee, Wisconsin. It manufactures and markets heavy construction machinery, general construction machinery, industrial equipment, and material handling equipment.
At all times material to this case, the plaintiff kept its books and records, and filed its income tax returns, on the accrual basis of accounting and on the basis of a fiscal year ending November 30.
One of the principal issues in this case is whether the real estate and personal property taxes which the County and City of Milwaukee, Wisconsin, imposed on the plaintiff for the calendar years 1953 and 1954 constituted proper income tax deductions for the plaintiff's fiscal years 1953 and 1954, as claimed by the plaintiff, or for the plaintiff's fiscal years 1954 and 1955, respectively as determined (in effect) by the Internal Revenue Service.
During each of the calendar years 1953 and 1954, as well as during years prior to 1953 and subsequent to 1954, the plaintiff owned real estate and personal property located in the County and City of Milwaukee, and it was required to pay real estate and personal property taxes to the County and City of Milwaukee on account of the ownership of such property.
The Wisconsin statutes require the assessment (valuation) of a taxpayer's property, both real and personal, to be made on May 1 of each year. The assessed value so determined is subject to protest until the third Monday in July. If written objections to such valuation are not filed with the Tax Commissioner on or before the third Monday in July, the valuation becomes final.
In November of each year, the local taxing body is required to adopt a budget, which it files in the office of the City Comptroller. The City Comptroller thereafter calculates the necessary taxes to be levied, and certifies them to the Tax Commissioner. The Tax Commissioner then determines the tax rate and the liability of each taxpayer, and prepares the tax roll. Following such determination and the completion of the tax roll, the Tax Commissioner delivers the tax roll, together with his warrant for collection, to the City Treasurer. The tax roll must be delivered not later than the third Monday in December. Upon receiving the tax roll, the City Treasurer publishes a public notice of its receipt. This notice informs taxpayers of the time and manner for the making of their tax payments.
The payment of the taxes, in accordance with the tax roll and the City Treasurer's notice, is due in January of the ensuing year, except that, at the option of a taxpayer, the taxes may be paid in 10 equal monthly installments during the ensuing year. There is a statutory provision authorizing the payment of taxes before they become due, but such payments in advance are regarded as deposits and are declared to be trust funds, no part of which is available for expenditure by the taxing authority until the taxes become due.
For the calendar year 1952, the tax roll and warrant for collection, showing the real estate and personal property taxes due the County and City of Milwaukee, were received by the City Treasurer on December 22, 1952. All taxpayers owing property taxes to the County and City of Milwaukee were then officially notified of the delivery of the tax roll, and of the time and manner for the making of their tax payments, by the daily publication of a notice to that effect or 7 days in a local newspaper.
It will be noted that the tax notice for the calendar year 1952 was published by the City Treasurer during the plaintiff's fiscal year 1953, which began on December 1, 1952. Accordingly, the plaintiff entered its 1952 local property taxes, in the amount of $241,837.39, on its books of account in the fiscal year 1953. This was in accordance with the plaintiff's prior practice of entering its local property taxes for a particular calendar year on its books of account after the publication by the City Treasurer of a public notice relative to the receipt of the tax roll for such year. The plaintiff's Milwaukee County and City real estate and personal property taxes for the calendar year 1952 were paid by the plaintiff in the calendar year 1953, when they were due.
Commencing with the calendar year 1953 and continuing until the present time, the plaintiff has made arrangements with the office of the Milwaukee Tax Commissioner whereby that office, in November of each year, sends a letter to the plaintiff regarding the amount of its Milwaukee County and City real estate and personal property taxes for the then-current calendar year. Pursuant to such arrangements, the plaintiff was notified in writing by the office of the Tax Commissioner on November 27, 1953 that the plaintiff's real estate and personal property taxes for the calendar year 1953 amounted to $221,186.59. The plaintiff thereupon delivered to the City Treasurer on November 27, 1953 a check in the amount of $221,186.59. The check was cashed by the City Treasurer, and it cleared the plaintiff's bank account on November 30, 1953. The plaintiff entered its 1953 real estate and personal property taxes on its book of account in November 1953 (i. e., during the plaintiff's fiscal year 1953).
Thus, the plaintiff entered on its books of account during the fiscal year 1953 the Milwaukee County and City real estate and personal property taxes for both the calendar year 1952 and the calendar year 1953.
It should be mentioned at this point that the tax roll and warrant for collection respecting the Milwaukee County and City real estate and personal property taxes owing for the calendar year 1953 were received by the City Treasurer on December 21, 1953 (i. e., during the plaintiff's fiscal year 1954), and that the customary tax notice was published by the City Treasurer thereafter.
In its Federal income tax return for the fiscal year 1953, the plaintiff deducted Milwaukee County and City real estate and personal property taxes totaling $463,023.98. That sum represented local property taxes for the calendar year 1952 in the amount of $241,837.39 and for the calendar year 1953 in the amount of $221,186.59.
In accordance with the practice that had been instituted in 1953, the office of the Tax Commissioner notified the plaintiff by means of a letter on November 23, 1954 that the total amount of its Milwaukee County and City real estate and personal property taxes for the calendar year 1954 was $264,446.93. The plaintiff thereupon delivered a check in the amount of $264,446.93 to the City Treasurer on November 29, 1954. The check was cashed, and it cleared the plaintiff's bank account on November 30, 1954. The plaintiff entered its 1954 local property taxes on its books of account in November 1954 (i. e., during its fiscal year 1954).
The tax roll and warrant for collection respecting the Milwaukee County and City real estate and personal property taxes owing for the calendar year 1954 were received by the City Treasurer on December 20, 1954 (i. e., during the plaintiff's fiscal year 1955), and the customary tax notice was subsequently published by the City Treasurer.
In its Federal income tax return for the fiscal year 1954, the plaintiff deducted Milwaukee County and City real estate and personal property taxes in the amount of $264,446.93.
After auditing the plaintiff's income tax returns for the fiscal years 1953 and 1954, the Internal Revenue Service disallowed $221,186.59 of the $463,023.98 deduction which the plaintiff had taken in its return for the fiscal year 1953 on account of real estate and personal property taxes, the disallowed $221,186.59 representing local property taxes owing for the calendar year 1953. Also, the Internal Revenue Service partially...
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