Untermyer v. Anderson

• Citation: 48 S.Ct. 353,276 U.S. 440,72 L.Ed. 645
• Decision Date: 09 April 1928
• Docket Number: No. 221,221
• Parties: UNTERMYER et al. v. ANDERSON, Collector of Internal Revenue
• Court: U.S. Supreme Court

276 U.S. 440

48 S.Ct. 353

72 L.Ed. 645

UNTERMYER et al.

v ANDERSON, Collector of Internal Revenue.

No. 221.

Argued Feb. 24, 27, 1928.

Decided April 9, 1928.

Mr. Louis Marshall, of New York City, for petitioners.

[Argument of Counsel from page 441 intentionally omitted] The Attorney General, and Mr. Alfred A. Wheat, of Washington, D. C., for respondent.

[Argument of Counsel from pages 442-443 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

By the original action commenced in the United States District Court, Southern District of New York, Isaac Untermyer sought to recover of the United States collector of internal revenue the tax exacted of him, under the Act of June 2, 1924, § 319 et seq. (26 USCA § 1131 et seq.; Comp. St. § 6336 4/5 § et seq.), on account of a gift which he made May 23, 1924. After his death the cause was revived in the name of the executors-petitioners herein-and was then heard upon an agreed statement of facts. Both sides moved for a directed verdict. Judgment went for the collector, and was affirmed by the Circuit Court of Appeals.

The questions now presented for consideration are similar to those involved in Boldgett v. Holden, 275 U. S. 142, 48 S. Ct. 105, 72 L. Ed. 206, decided here November 21, 1927.

The two causes differ in this: Blodgett's gifts were made during January, 1924, before the provisions for taxing such transfers were presented for the consideration of Congress; Untermyer made his gift May 23, 1924, some three months after those provisions were first presented and while the conference report upon the bill was pending. This report went to the Senate May 22, 1924, and three days thereafter the bill had finally passed both houses. The President approved it on June 2, 1924.

Unless the difference in circumstances stated is material, the same rule of law must govern both cases.

Two opinions were announced in Blodgett v. Holden. The one prepared by the present writer expressed the views of four of the eight Justices who participated in the consideration of the cause. After quoting the pertingent provisions of the statute, etc., the opinion declared:

'So far as the Revenue Act of 1924 undertakes to impose a tax because of the gifts made during January, 1924, it is arbitrary and invalid under the due process clause of the Fifth Amendment.'

We need not now further repeat what was there set out.

In the light of arguments advanced by counsel in the present cause, the matter has been considered by all members of the Court, and a majority of them are of opinion that the gift tax provisions of the act of 1924 here challenged must be construed as applicable to gifts made during the entire calendar year 1924. And, further, that so far as applicable to bona fide gifts not made in anticipation of death and fully consummated prior to June 2, 1924, those provisions are arbitrary and invalid under the due process clause of the Fifth Amendment.

The mere fact that a gift was made while the bill containing the questioned provisions was in the last stage of progress through Congress we think is not enough to differentiate this cause from the former one and to relieve the legislation of the arbitrary character there ascribed to it. To accept the contrary view would produce insuperable difficulties touching interpretation and practical application of the statute and render impossible proper understanding of the burden intended to be imposed. The taxpayer may justly demand to know when and how he becomes liable for taxes-he cannot foresee and ought not to be required to guess the outcome of pending measures. The future of every bill while before Congress is necessarily uncertain. The will of the lawmakers is not definitely expressed until final action thereon has been taken.

The judgment below must be reversed.

Mr. Justice SANFORD concurs in the result.

Mr. Justice HOLMES.

As I think the construction of the Act of June 2, 1924, c. 234, § 319 (26 USCA § 1131; Comp. St. § 6336 4/5 s), adopted by four of us in Blodgett v. Holden, 275 U. S. 142, 48 S. Ct. 105, 72 L. Ed. 206, November 21, 1927, the proper one, I shall not go into the question of constitutionality beyond saying that I find it hard to state to myself articulately the ground for denying the power of Congress to lay the tax. We all know that we shall get a tax bill every year. I suppose that the taxing act may be passed in the middle as lawfully as at the beginning of the year. A tax may be levied for past privileges and protection as well as for those to come. Wagner v. Baltimore, 239 U. S. 207, 216, 36 S. Ct. 66, 60 L. Ed. 230; Billings v. United States, 232 U. S. 261, 282, 34 S. Ct. 421, 58 L. Ed. 596; Seattle v. Kelleher, 195 U. S. 351, 25 S. Ct. 44, 49 L. Ed. 232; Stockdale v. Atlantic Insurance Co., 20 Wall. 323, 22 L. Ed. 348. I do not imagine that the authority of Congress to tax the exercise of the legal power to make a gift will be doubted any more than its authority to tax a sale. Apart from its bearing upon construction and constitutionality I am not at liberty to consider the justice of the act.

Mr. Justice BRANDEIS and Mr. Justice STONE agree with this opinion.

Mr. Justice BRANDEIS, with whom Mr. Justice HOLMES and Mr. Justice STONE concur.

To what Mr. Justice HOLMES has said, I add this.

The Court construes the act as applying to all gifts made during the calendar year. Then it holds the act void as applied to a gift made during the ten-day period between the submission of the Conference Report to Congress and the approval of the act by the President. It holds the act void because the action of the lawmaking body is, in its opinion, unreasonable. Tested by the standard of reasonableness commonly adopted by man-use and wont-that action appears to be reasonable. Tested by a still higher standard to which all Americans must bow-long-continued practice of Congress repeatedly sanctioned by this Court after full argument-its validity would have seemed unquestionable, but for views recently expressed. No other standard has been suggested.

For more than half a century it has been settled that a law of Congress imposing a tax may be retroactive in its operation. Stockdale v. Atlantic Insurance Companies, 20 Wall. 323, 331, 22 L. Ed. 348; Lake Shore & M. S. Railroad Co. v. Rose, 95 U. S. 78, 80, 24 L. Ed. 376; Western Union Railroad Co. v. United States, 101 U. S. 543, 549, 25 L. Ed. 1068; Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; Billings v. United States, 232 U. S. 261, 282, 34 S. Ct. 421, 58 L. Ed. 596; Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 20, 36 S. Ct. 236, 60 L. Ed. 493; Lynch v. Hornby, 247 U. S. 339, 343, 38 S. Ct. 543, 62 L. Ed. 1149; Hecht v. Malley, 265 U. S. 144, 164, 44 S. Ct. 462, 68 L. Ed. 949. Each of the fifteen income tax acts adopted from time to time during that last 67 years has been retroactive, in that it applied to income earned, prior to the passage of the act, during the calendar year.¹ The Act of October 3, 1913, c. 16, 38 Stat. 114, 166, which taxed all incomes received after March 1, 1913, was specifically upheld in Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 20, 36 S. Ct. 236, 60 L. Ed. 493, and in Lynch v. Hornby, 247 U. S. 339, 343, 38 S. Ct. 543, 62 L. Ed. 1149. Some of the acts have taxed income earned in an earlier year. The Joint Resolution of July 4, 1864, No. 77, 13 Stat. 417, imposed an additional tax on imcomes earned during the calendar year 1863; this additional tax being imposed after the taxes for the year had been paid. In Stockdale v. Insurance Companies, 20 Wall. 323, 331, 22 L. Ed. 348, Mr. Justice Miller said: 'No one doubted the validity of the tax or attempted to resist it.' The Act of February 24, 1919, c. 18, title 2, 40 Stat. 1057, 1058-1088 (Comp. St. § 6336 1/8 a et seq.), which taxed incomes for the calendar year 1918, was applied, without question as to its constitutionality, in United States v. Robbins, 269 U. S. 315, 46 S. Ct. 148, 70 L. Ed. 285, and numerous other cases.

The Corporation Tax Act of August 5, 1909, c. 6, § 38, 36 Stat. 11, 112 (Comp. St. § 7280), applying to all net income for the calendar year was sustained in Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. The Acts of March 3, 1917, c. 159, 39 Stat. 1000, and of October 3, 1917, c. 63, 40 Stat. 300, 302 (Comp. St. § 6336 3/8 a et seq.), imposing excess profits taxes on the profits earned during the calendar year, were so applied in La Belle Iron Works v. United States, 256 U. S. 377, 41 S. Ct. 528, 65 L. Ed. 998, in Greenport Basin & Construction Co. v. United States, 260 U. S. 512, 43 S. Ct. 183, 67 L. Ed. 370, and in other cases. The validity of the Act of February 24, 1919, c. 18, title 3, 40 Stat. 1057, 1088 (Comp. St. § 6336 7/16 a et seq.), taxing excess profits earned during the calendar year 1918, has never been questioned. Compare Willcuts v. Milton Dairy Co., 275 U. S. 215, 48 S. Ct. 71, 72 L. Ed. 247; Blair v. Oesterlein Machinery Co., 275 U. S. 220, 48 S. Ct. 87, 72 L. Ed. 249; Porto Rico Coal Co. v. Edwards (D. C.) 275 F. 104; National Paper & Type Co. v. Edwards (D. C.) 292 F. 633. The Munition Manufacturer's Tax, imposed by the Act of September 8, 1916, c. 463, title 3, 39 Stat. 756, 780 (Comp. St. § 6336 1/4 a et seq.), applied to the 12 months ending December 31, 1916. Compare Carbon Steel Co. v. Lewellyn, 251 U. S. 501, 40 S. Ct. 283, 64 L. Ed. 375; United States v. Anderson, 269 U. S. 422, 435, 46 S. Ct. 131, 70 L. Ed. 347. The Act of February 24, 1919, c. 18, 40 Stat. 1057, 1126 (Comp. St. § 5980n et seq.), which materially increased the capital stock tax, made the increase retroactive to July 1, 1918. In Hecht v. Malley, 265 U. S. 144, 164, 44 S. Ct. 462, 68 L. Ed. 949, these retroactive provisions were held to validate taxes erroneously essessed under an earlier act and paid before the passage of the act of 191...