Koppers Co. v. United States, 78-52.
| Decision Date | 01 December 1953 |
| Docket Number | No. 78-52.,78-52. |
| Citation | 117 F. Supp. 181 |
| Parties | KOPPERS CO., Inc. v. UNITED STATES. |
| Court | U.S. Claims Court |
Frederick O. Graves, Miller & Chevalier, Washington, D. C., E. S. Ruffin, Jr., and C. M. Crick, Pittsburgh, Pa., were on the brief.
Elizabeth B. Davis and John E. Garvey, Washington, D. C., with whom was H. Brian Holland, Asst. Atty. Gen., for defendant.
Andrew D. Sharpe and Ellis N. Slack, Washington, D. C., were on the brief.
Before JONES, Chief Judge, and LITTLETON, WHITAKER and MADDEN, Judges.
Plaintiff sues to recover $273,143.19, plus interest, claiming that such amount represents an illegal collection and overpayment of interest on "potential" excess profits tax deficiencies of $199.854.52 and $330,981.62 for the years 1940 and 1941, respectively. These "potential" deficiencies, which, under the law and the facts of plaintiff's case for the years involved, the plaintiff was never required to pay, and which, at the time they were computed could not be legally collected, represent the amounts of excess profits tax which plaintiff would have been required to pay had it not been entitled under the facts and the law to have its excess profits tax for the years mentioned determined, computed and assessed under and in accordance with the provisions of Section 722 of the Internal Revenue Code, 26 U.S.C. § 722, 54 Stat. 986, as amended. Repealed November 8, 1945, 59 Stat. 568.
The issue presented is whether the assessment and collection of interest on such "potential" deficiencies was proper under a proper interpretation of the taxing statutes as applied to the facts of this case. These facts are not in dispute and are summarized below.
Plaintiff1 filed excess profits tax returns for the calendar years 1940 and 1941 on the dates and reflecting the computations set out in the tabulation below:
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| | | Adjusted | Excess
| Excess profits | Excess profits | excess profits | profits tax
| net income | credit | net income | liability
---------------------------------------|----------------------|----------------------|------------------|---------------
1940 return filed 9-15-41 ............ | $3,656,110.35 | $3,864,935.25 | ................ |
Amended 1940 return, filed 7-21-44 ... | 3,653,890.77 | 3,623,876.29 | $25,014.48 | $6,512.76
1941 return filed 6-15-42 ............ | 6,613,646.26 | 3,494,726.10 | 3,113,920.16 | 1,822,352.10
Amended return 1941, filed 6-20-42 ... | 6,545,206.33 | 3,494,726.10 | 3,045,480.23 | 1,781,288.14
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The tax for 1940 was paid in installments of $3,000 on March 15, 1941; $3,000 June 13, 1941, and $512.75 July 21, 1944. The tax for 1941 was paid quarterly during 1942.
On September 15, 1943, plaintiff filed, pursuant to law, applications for determination and assessment of its profits tax under the provisions of the Internal Revenue Code, claiming, at the same time, refunds of $6,000 of the excess profits tax paid for 1940, and $1,781,288.14 of such tax paid for 1941. The claim for 1940 was reduced to $22.56 by an amended application filed September 10, 1945, and the 1941 claim was lowered to $541,103.86 by an amended application of November 20, 1945. By timely consents filed, the plaintiff and the Commissioner of Internal Revenue mutually agreed that the amount of any income, excess profits, or war profits tax due by Koppers United Company, as parent of the consolidated group, for 1940 and 1941, might be assessed at any time on or before June 30, 1951.
The differences between the plaintiff and the Commissioner of Internal Revenue with respect to their respective claims were not reconciled until December 16, 1950, on which date plaintiff executed an "Agreement to Amount of Constructive Average Base Period Net Income Determined Under Section 722, Internal Revenue Code" (Form EPC-1), in which the constructive average base period net income for 1940 and 1941 was set out as $2,801,598.22 and $3,394,944.93, respectively. These amounts so determined and agreed to were approved by the Excess Profits Tax Council, Bureau of Internal Revenue, on January 10, 1951.
At various times the Internal Revenue Agent in Charge at Pittsburgh, Pennsylvania, forwarded to plaintiff copies of reports concerning examination of plaintiff's excess profits tax returns in which were proposed excess profits net income, excess profits credits and deficiencies in excess profits tax for 1940 and 1941, as follows:
1940
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| | | Proposed deficiency
| Proposed excess | Proposed excess | in
Date of transmittal letter | profits net | profits credit | excess profits
| income | | tax
---------------------------------------|---------------------|---------------------|---------------------
Sept. 23, 1946 ....................... | $4,158,504.30 | $2,612,509.89 | $710,753.85
Mar. 1, 1949 ......................... | 3,543,895.44 | 2,256,809.26 | 594,385.50
Feb. 9, 1951 ......................... | 3,280,942.26 | 2,661,518.31 | 260,554.39
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1941
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| Proposed excess | | Proposed excess
Date of transmittal letter | profits net | Proposed excess | profits tax
| income | profits credit | deficiency
---------------------------------------|---------------------|---------------------|---------------------
Apr. 29, 1949 ........................ | $6,102,978.68 | $2,576,117.11 | $272,078.42
Feb. 9, 1951 ......................... | 6,353,492.13 | 3,143,429.68 | 95,749.33
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The letters of February 9, 1951, reflected the agreement reached with respect to the determination, computation and assessment of the tax under Section 722, supra, as determined by the Excess Profits Tax Council.
Plaintiff executed and filed a waiver (Form TF 874) on February 14, 1951, consenting inter alia to the assessment and collection of deficiencies in its excess profits tax for 1940 and 1941, in the respective amounts of $260,554.39 and $95,749.33. In determining these deficiencies, the Commissioner first computed the excess profits tax for each of the years without regard to Section 722. However, at that time (February 26 and 27, 1951) a written agreement had been executed by the parties, both as to the amount of taxable net income and the amount of tax liability under Section 722. The results of the Commissioner's computations are reflected below:
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| 1940 | 1941
--------------------------------|-----------------|---------------
Excess profits tax net income | |
............................. | $3,280,942.26 | $6,353,492.13
Excess profits credit ......... | 2,261,809.26 | 2,576,117.11
Adjusted excess profits net | |
income ....................... | 1,014,133.00 | 3,772,375.02
Excess profits tax before | |
application of § 722 .... | 466,921.67 | 2,208,019.09
Excess profits tax shown | |
on return and paid ........... | 6,512.76 | 1,781,288.14
Excess profit tax before | |
determination under § | |
722, but after allowing | |
credits for payments | |
made ......................... | 460,408.91 | 426,730.95
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After the above calculations had been made, the Commissioner gave effect to the determination of the tax under Section 722 (), which made the excess profits tax liability determined and collectible those amounts rather than the computed but uncollectible amounts of $460,408.91 and $426,730.95. On March 8, 1951, the Commissioner issued his statutory notice of deficiencies, which read in part, as follows:
"You are advised that the determination of your excess profits tax liability for the years ended December 31, 1940, 1941, * * * discloses deficiencies of $260,554.39, $95,749.33 * * * respectively."
No such notice was given by the Commissioner with respect to his computation of the excess profits tax other than the above quoted deficiency notice under Section 722. However, when the Bureau of Internal Revenue came to the computation of interest, such interest was computed on an excess profits tax computed by the Bureau without regard to the facts of plaintiff's case and the provisions of Section 722....
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...recent decisions as United States v. Koppers Company, Inc.,12 1955, 348 U.S. 254 2 cases, 75 S.Ct. 268, 99 L.Ed. 302, reversing 117 F.Supp. 181, 126 Ct. Cl. 847, and affirming United States v. Premier Oil Refining Company of Texas,13 5 Cir., 209 F.2d 692; Hastings & Co., Inc., v. Smith,14 3......
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