United States v. Koppers Company Premier Oil Refining Company of Texas v. United States

• Decision Date: 31 January 1955
• Docket Number: 41,Nos. 29,s. 29
• Parties: The UNITED STATES, Petitioner, v. KOPPERS COMPANY, Inc., Successor on Merger to Koppers United Company and Subsidiaries. PREMIER OIL REFINING COMPANY OF TEXAS, Petitioner, v. UNITED STATES of America
• Court: U.S. Supreme Court

348 U.S. 254

75 S.Ct. 268

99 L.Ed. 302

The UNITED STATES, Petitioner,

v KOPPERS COMPANY, Inc., Successor on Merger to Koppers

United Company and Subsidiaries.

PREMIER OIL REFINING COMPANY OF TEXAS, Petitioner,

v. UNITED STATES of America.

Nos. 29, 41.

Argued Nov. 10, and 12, 1954.

Decided Jan. 31, 1955.

Rehearing Denied March 14, 1955.

See 348 U.S. 965, 75 S.Ct. 521 Mr.Hilbert P. Zarky, Washington, D.C., for the United States.

Mr. Wm. A. Sutherland, Washington, D.C., for petitioner, Premier Oil Refining Co. of Texas.

Mr. David W. Richmond, Washington-D.C., for respondent Koppers Company, Inc.

Mr. Justice BURTON delivered the opinion of the Court.

The issue in these cases is whether, for the years 1940 through 1945, abatements of federal excess profits taxes, through application of I.R.C. § 722,¹ are retroactive. For the reasons hereafter stated, we hold that they are not and that they relieve taxpayers from the payment of interest on deficiencies in such taxes from the time of the abatements, rather than from the original due dates of the taxes abated.

In No. 29, United States v. Koppers Co., the taxpayer, respondent therein, ² reported and paid excess profits taxes of $6,512.76 for 1940, and $1,781,288.14 for 1941.³ In computing these taxes, it used excess profits credits based upon invested capital.⁴ In 1943 and 1945, it applied under § 722 for relief from all or part of these taxes, claiming that they were 'excessive and discriminatory'.⁵ In accordance with the usual administrative practice, the Commissioner determined the amount of the excess profits taxes due without regard to the application for relief under § 722. In doing so, he found it necessary to proceed under I.R.C. § 713, using excess profits credits based upon the taxpayer's income, rather than upon its invested capital. As a result he found that the above taxes, as returned and paid by the taxpayer without reference to § 722, had been understated and that the following deficiencies existed as of their original due dates, March 15, 1941, and 1942:

1940 1941

Excess profits tax under §§ 710(a) and 713 $466,921.67 $2,208,019.09

Payments........___6,512.76._1,781,288.14

Deficiencies.... 460,408.91. 426,730.95

The Commissioner computed interest at 6%, on the above deficiencies, amounting to $217,376.07 for 1940, and $230,504.86 for 1941.⁶

After extended investigations and negotiations conducted under authority of § 722, the Commissioner and the taxpayer agreed upon a 'constructive average base period net income' which fixed the excess profits credits for the years in question and, as a result, the relief available under § 722. After this agreement was approved by the Excess Profits Tax Council of the Bureau of Internal Revenue, the Commissioner determined that the above-stated deficiencies, with the benefit of § 722, should be reduced to $260,554.39 for 1940, and to $95,749.33 for 1941. The taxpayer consented to the assessment of these deficiencies, with interest as provided by law. Whereupon, the Commissioner issued a formal determination of them and assessed them against the taxpayer. He also assessed the above-stated interest charges, based upon the full amount of the original deficiencies.

The taxpayer paid the deficiencies and interest so assessed but claimed refunds of $94,358.71 for 1940, and $178,784.48 for 1941. Those sums represented the interest on the abatements in its excess profits taxes made under § 722. When the Commissioner disallowed the claims, the taxpayers sued in the Court of Claims to recover their amounts. With one judge dissenting, that court deducted a setoff and rendered judgment in favor of the taxpayer for $270,216.34. 126 Ct.Cl. 847, 117 F.Supp. 181. To resolve the resulting conflict with United States v. Premier Oil Refining Co., 5 Cir., 209 F.2d 692, we granted certiorari, 347 U.S. 965, 74 S.Ct. 775, 98 L.Ed. 1122.

In No. 41, Premier Oil Co. v. United States, the taxpayer, petitioner therein, paid the excess profits taxes shown on its original returns in the following amounts: for 1943, $564,167.70 (adjusted to $560,484.84); for 1944, $353,292.15 (adjusted to $313,639.13); and for 1945, $45,679.67. Thereafter, several deductions which the taxpayer had made from its income were disallowed, resulting, in 1948, in the following deficiencies in its payment of its excess profits and income taxes as of their original due dates:

DEFICIENCIES WITHOUT THE APPLICATION OF § 722.

1943 1944 1945

Deficiencies in excess profits tax,

under §§ 710(a) and 713. $78,359.80 $55,529.92 $190,785.32

Deficiencies in income tax.___9,060.07 __9,178.01 ____(90.00)

Total deficiencies. 87,419.87. 64,707.93 190,695.32

The Commissioner computed interest, at 6%, on the above excess profits tax deficiencies as follows:

For 1943—on $78,359.80, March 15, 1944, to

June 23, 1948................ $20,084.79

For 1944—on $55,529.92, March 15, 1945, to

June 23, 1948................. 10,901.36

For 1945—on $190,785.32, March 15, 1946, to

June 19, 1948................._25,869.26

Total.......................... 56,855.41

In the meantime, the taxpayer had applied for relief under § 722, seeking acceptance of a 'constructive average base period net income' of $357,000 for each of the years at issue. The Excess Profits Tax Council approved that figure as a credit in lieu of $93,150.36 for each of the years 1943 and 1944, and of $116,437.95 for 1945. This credit so far reduced the taxpayer's taxable excess profits as to abate its excess profits tax deficiencies for 1943 and 1944 entirely, and that for 1945 to $366.52.⁷ Accordingly, the Commissioner's assessment of the remainder of the taxpayer's deficiencies in excess profits taxes was for only $366.52. However, as in the Koppers case, supra, he assessed against the taxpayer the full amount of the interest charges based upon the original deficiencies.

The taxpayer paid the deficiency and interest so assessed but claimed refunds totaling $56,855.41. That sum represented the interest on the abatements in its excess profits taxes made under § 722. When the Commissioner disallowed those claims, the taxpayer brought the instant action to recover their amounts, in the United States District Court for the Northern District of Texas, under 28 U.S.C. § 1346(a)(1), 28 U.S.C.A. § 1346(a)(1). That court rendered judgment for the taxpayer.⁸ 107 F.Supp. 837. The Court of Appeals reversed. 5 Cir., 209 F.2d 692. We granted certiorari to resolve the conflict with United States v. Koppers Co., supra. 347 U.S. 987, 74 S.Ct. 851, 98 L.Ed. 1107.⁹

As the underlying issue is the same in each case and for each year, we shall discuss it in relation to the 1940 taxes in the Koppers case. There, the taxpayer, under the usual procedure, computed and paid the excess profits tax of $6,512.76 shown on its return for 1940. In due course the Commissioner, without the application of § 722, determined that the payment should have been $466,921.67 and, therefore, that a deficiency of $460,408.91 was due the United States, with interest from March 15, 1941. I.R.C. §§ 53(a), 56(a). If the taxpayer had made no application for relief under § 722, there is no doubt that such interest would have remained due the United States until paid and that, when paid, it would not have been refundable. The same would have been true if the taxpayer's application for relief under § 722 had been finally denied. The taxpayer contends, however, that, because the Commissioner has abated the taxpayer's deficiency from $460,408.91 to $260,554.39 under § 722, such reduction is necessarily retroactive to March 15, 1941, and that the taxpayer, accordingly, is entitled to a refund of the interest on the sum abated. The Commissioner, on the other hand, contends that the determination under § 722 is not retroactive but is a current abatement effective when made.

Congress could have prescribed either treatment but did not expressly specify either. Our answer is determined from our consideration of the statutory scheme as a whole the related provisions of the statute, the legislative history of § 722 and the administrative interpretation that has been given the statute.

1. The statutory scheme as a whole.

The excess profits tax was a device initiated by Congress, late in 1940, in great part for the quick collection of large sums needed by the Government in a national emergency. Congress sought to obtain those funds from abnormally high corporate profits while such profits were available. To that end, it proscribed computations of unusual profits and required prompt payment of the taxes on them.¹⁰

From the beginning, the statute also provided, in § 722, a means of subsequent adjustment of the tax in special instances where the normal computation of the tax was found to result in inequity. The adjustment could be made only after administrative action and, pending its consideration, it did not eliminate the tax return or the tax payment otherwise required. Until 1942, it did not permit even the postponement of the payment of any part of the standard tax. Indeed, the full payment of that tax soon was made an express condition of the application for adjustment. I.R.C. § 722(d). In 1943, Congress stated that if overpayments for either of the taxable years 1940 or 1941 were found to be attributable to § 722, no interest on such overpayments was to be paid the taxpayer.¹¹ At least to that extent, Congress expressly recognized that the funds paid as excess profits taxes, when due and without the benefit of § 722, were funds owed to and usable by the Government.

The significance of this statutory scheme further appears when it is applied to the instant case. If the instant taxpayer had paid its required tax in 1941, the Government would have received an additional $460,408.91 at that time. Accordingly, it would have had the use of that money, without charge, during the crucial war years. Correspondingly, the taxpayer would have been without that...