Laguana v. Ansell, Civ. No. 31-51.

• Decision Date: 29 February 1952
• Docket Number: Civ. No. 31-51.
• Citation: 102 F. Supp. 919
• Parties: LAGUANA v. ANSELL et al.
• Court: U.S. District Court — District of Guam

102 F. Supp. 919

LAGUANA v. ANSELL et al.

Civ. No. 31-51.

District Court of Guam.

February 29, 1952.

Lyle H. Turner, Agana, Guam, Albert A. Spiegel, Santa Monica, Cal., for plaintiff.

Knight G. Aulsbrook, Atty. Gen. of Guam, Hogen J. Kallemeyn, Asst. Atty. Gen., of Guam, for defendant, Acting Tax Commissioner and Acting Treasurer.

Mastin G. White, Solicitor, Department of Interior, Irwin W. Silverman, Chief Counsel, Office of Territories, Department of Interior, Washington, D. C., Ellis N. Slack, Acting Asst. Atty. Gen., I. Henry Kutz, Sp. Asst. to Atty. Gen., James G. Mackey, U. S. Atty., for District of Guam, Agana, Guam (Shirley Ecker Boskey, Atty., Dept of Interior, Washington, D. C., of counsel), for defendant-intervener United States.

SHRIVER, Judge.

This is a test action brought by the plaintiff, hereinafter called the taxpayer, to determine what construction should be placed upon Sections 30 and 31 of the Organic Act of Guam 64 Stat. 392, 48 U.S.C.A. §§ 1421h and 1421i. The United States intervened and joined with the Government of Guam in a common defense. I shall refer to them as the governments. I have had the benefit of extended oral argument by both sides and an excellent brief by the governments. The plaintiff elected in the interest of expediting the case not to file a reply brief.

The facts are stipulated. The taxpayer is employed by a Guam corporation and all of his income was or will be earned in Guam. The corporation, in accordance with its instructions from the Acting Treasurer of Guam, withheld income-tax payments from the earnings of the taxpayer and paid them to the Acting Treasurer under protest. The taxpayer demanded their return which was refused.

The sections referred to supra provide:

Sec. 30. "All customs duties and Federal income taxes derived from Guam, the proceeds of all taxes collected under the internal-revenue laws of the United States on articles produced in Guam and transported to the United States, its Territories, or possessions, or consumed in Guam, and the proceeds of any other taxes which may be levied by the Congress on the inhabitants of Guam, and all quarantine, passport, immigration, and naturalization fees collected in Guam shall be covered into the treasury of Guam and held in account for the government of Guam, and shall be expended for the benefit and government of Guam in accordance with the annual budgets."

Sec. 31. "The income-tax laws in force in the United States of America and those which may hereafter be enacted shall be held to be likewise in force in Guam."

Sec. 31 became effective as of January 1, 1951 by provision of Ex.Ord. No. 10211, Feb. 6, 1951, 48 U.S.C.A. § 1421i note, 16 F.R.1167.

The position taken by the taxpayer is that Sec. 31 made applicable to Guam the Federal income-tax laws as such, including any provisions granting exemptions from taxation on income derived from sources within possession of the United States, 26 U.S.C.A. §§ 251 and 252.

The position taken by the governments is that the effect of Sec. 31 is to set up a separate income-tax system for Guam which is a duplicate of the Federal income-tax system; that the United States Congress in exercising its authority to legislate for the unincorporated territories and possessions has established a separate and distinct taxing jurisdiction which contemplates collection of the tax by territorial officials for the use and benefit of the inhabitants of the territory; that in the alternative the taxpayer cannot be heard to complain in the instant case as the tax was owing and reached the eventual source for which it was intended.

The history of Sec. 30 of the Organic Act of Guam indicates that it was part of the original bill which later became law and contemplated the collection by the appropriate Federal officials of those revenues, Federal in nature, and subsequent covering into the treasury of Guam. That section did not provide for the general imposition of income taxes in Guam.

Sec. 31 was introduced in the House by Congressman Miller of Nebraska, first in committee and then on the floor. Cong.Rec. May 23, 1950, Vol. 96, pp. 7673 and 7674. The Congressman stated in response to a question: "There will be no direct payment by the Treasury of this country. The amendment we have just adopted in committee provides that the income-tax laws in force in the United States of America and which may hereafter be in force will be the law over there. That will be of great help in plugging certain loopholes. The people of Guam and a large number of civilians and workers over there on construction work, as well as military personnel, pay no income tax or have no withholding tax. In fact they are paid a bonus for working there. This will plug that loophole and bring in some money to the United States Treasury." (Italics supplied.)

Immediately thereafter Congressman Scrivner stated: "In other words, I am to understand that there is sufficient property, there are sufficient sources of revenue right there on the island of Guam so that they will be able to set up a tax structure sufficient to carry their own expenses of government without asking for any contributions from the United States to help carry their government cost?" (Italics supplied.)

Congressmen Miller and Peterson replied that this was their understanding. The previous question was moved and the bill was passed.

This problem first came before me in connection with Crain v. Government of Guam, D.C., 97 F.Supp. 433 (now on appeal) in which I volunteered the statement, as the principal question was one of jurisdiction, that "It would appear to be clear that the effect of Sec. 31 is to create a tax liability on Guam, insofar as the taxpayer is concerned, on the same basis as if he were resident in the continental United States and that the Government of Guam is entitled to such tax regardless of which...