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28, 1906, Judge Lowell rendered an opinion holding against the contention that section 3228 prevented the allowance of claims for the refunding of taxes paid upon contingent beneficial interests filed more than two years after the date of the payment of the tax. (Copy of this opinion appended.)

The refunding provided for by the act of June 27, 1902, was a free gift upon the part of Congress. No reason can be suggested why any rule other than an uniform rule should apply to its several sections, and yet it has never been suggested that the statute of limtations applied to claims under section 1, and it was decided by the Comptroller of the Treasury on February 8, 1905, that it did not apply to claims under section 2. The purpose of this legislation is to make sure that it shall not apply to claims under section 3.

With respect to section 2 of this bill, attention is called to the prdvisions of section 2 of the refunding act. It reads as follows:

Sec. 2. That the Secretary of the Treasury, under rules and regulations to be prescribed by bim, be, and is hereby, authorized and directed to refund, out of any money in the Treasury not otherwise appropriated, sums paid for documentary stamps used on export bills of lading, such stamps representing taxes which were illegally assessed and collected.

It will be observed that the same law that imposed taxes upon export bills of lading, also imposed taxes on manifests for the clearance of cargoes exported from the United States to foreign ports. And yet, section 2 of the refunding act, while it provided for the refund of taxes on export bills of lading did not provide for a refund of taxes on export manifests. The Supreme Court of the United States in the case of Fairbanks v. United States (181 U. S., 283), held that taxes on export bills of lading were unconstitutional as imposing a tax on exports; and the same court held, in the case of New York and Cuba Mail Steamship, Company v. United States (200 U. S., 488), that for the same reason taxes on export manifests were unconstitutional, but held also, that they could

not be recovered except where they had been paid under protest. The Commissioner of Internal Revenue acting upon the opinion of the Attorney-General thereupon denied all applications to refund similar duties collected on export manifests except where they had been paid under protest. The same reasons that actuated Congress in providing for a refund of taxes upon export bills of lading are applicable to the refund of taxes on export manifests. The equities in both cases are the same. Hence, your committee have inserted the second section of this bill.

TREASURY DEPARTMENT,

Washington, January 12, 1907. Sir: In response to your communication of the 9th instant, inclosing copy of H. R. 20246, a bill to amend "An act to provide for refunding taxes paid upon certain legacies,” etc., approved June 27, 1902, with the request that I give such information as I may possess to the Committee on Ways and Means as to the effect of the said bill, and my recommendation as to its passage or otherwise, I have the honor to state that an examination of the records discloses the fact that 152 claims, aggregating $652,666.43, rejected and unrejected, in the files of this Department would be affected by and paid under the provisions of the amending clause of the bill should it become a law.

It can not be definitely stated that this amount includes all of the taxes that would be refundable under the act, but it is believed that only a small

per cent of the taxes paid on unvested, contingent beneficial interests remains unclaimed.

The proposed amendment has no further effect than to remove the bar of the statute of limitation on the claims aforesaid, and as many claims filed within the time prescribed by the statute of limitation have been paid, I am of the opinion that the amendment will promote the ends of justice by enabling taxpayers, most of whom were delayed in filing claims without fault on their part, to recover taxes collected under a departinental construction of the law held erroneous by the Supreme Court. I recommend the passage of the bill. Respectfully,

L. M. SHAW,

Secretary. Hon. SERENO E, PAYNE, Chairman Committee on Ways and Means,

House of Representatives.

TREASURY DEPARTMENT,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, January 17, 1907. MY DEAR MR. DALZELL: I have the honor to make response to your verbal inquiry of this morning, asking upon what grounds I held section 3228, Revised Statutes, applicable to section 3 of the refunding act of June 27, 1902, and not applicable to the other sections of that act.

While the ruling referred to was made by the Comptroller of the Treasury and not by myself, your question can be more fully and satisfactorily answered by calling your attention to several sections of the Revised Statutes and comparing them with the act of June 27, 1902.

Section 3220, Revised Statutes, places in the hands of the Commissioner of Internal Revenue the authority and makes it his duty to “remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected,” etc.

That this authority rests exclusively in the hands of the Commissioner is recognized also by sections 3226 and 3228, Revised Statutes, the latter providing that no claim shall be allowed unless it be presented within two years next after the cause of action accrues.

Section 3426, Revised Statutes, gave like exclusive authority to the Commissioner of Internal Revenue to make allowance for and redeem stamps that had been spoiled, destroyed, or rendered useless or unfit for the purpose intended, or for which the owner might have no use, or which through mistake might have been improperly or unnecessarily used. In this section no time was mentioned within which the stamps should be presented.

The Attorney-General on January 16, 1878, held that the bar of section 3228 did not apply to stamps filed for allowance or redemption under section 3426.

On May 12, 1900, the Congress amended section 3426 by providing a limit of two years after the purchase of the stamps within which they might be presented for redemption or allowance. This latter act was further amended by the act of June 30, 1902, allowing claims for documentary and proprietary stamps issued under the act of June 13, 1898, to be presented to this office at any time prior to the 1st day of July, 1904.

Now, the act of June 27, 1902, as you will observe, constitutes the Secretary of the Treasury the administrative officer charged with the duty of making the allowances provided for therein.

But as claims for refunding under the three sections of that act were filed in the Internal Revenue Bureau-where claims for the refunding of internalrevenue taxes are invariably filed—and following the desire of the Secretary of the Treasury all such claims were prepared in this Bureau in the usual manner, except that I forwarded them to the Secretary for his action with my recommendation thereon.

Thus, in passing upon claims coming under the provisions of section 3 of the act of June 27, 1902, I held that the time limitation contained in section 3228 was not applicable. But when those claims which had been recommended by me to the Secretary of the Treasury for allowance were transmitted to the Auditor for the Treasury Department, the latter raised the question of the bar of section 3228 upon one claim and referred the matter to the Comptroller of the Treasury, who rendered a decision under date of June 30, 1905, overruling my view and holding that taxes refundable under section 3 of the act of June 27, 1902, if filed more than two years after the payment of the tax, were barred by section 3228.

No contention has ever been made that section 3228 applied to claims filed uniler section 1 of the act of June 27, 1902.

However, the question of the bar contained in the act of May 12, 1900, as amended by the act of June 30, 1902, was raised in connection with a claim filed under section 2 of the act of June 27, 1902. This question was referred to the Comptroller, who decided in an opinion rendered February 18, 1905, that the bar of the statute did not apply to claims filed under that section.

It will be seen, therefore, that there was no difference between the Comptroller of the Treasury and myself regarding the payment of claims under the act of June 27, 1902, except as to those filed under the third section of that act, my position being that the power to refund having been placed in the hands of another administrative officer, the bar upon claims upon which the Commissioner of Internal Revenue had the exclusive power to act could not apply, and for the reason that the taxes mentioned in section 3 were not illegally collected, but were made refundable as a free gift by the act of Congress.

In the absence of any time limitation in the act of June 27, 1902, I could not conceive that the free bounty of the Government, given to a whole class alike, should depend upon the time of filing the refunding claim, inasmuch, also, as at the time the act of June 27, 1902, was passed, some of the claimants thereunder were already barred if section 3228 were held to apply.

Why the apparently contradictory rulings were made on sections 2 and 3 of the act of June 27, 1902, I am unable to say. These rulings were made by the Comptroller of the Treasury and are found in Volume XI of the Decisions of the Comptroller of the Treasury, pages 472 and 772.

So far as this question is concerned, there appears to be no difference in the wording of the three sections of the act to which reference is herein made.

The question as to whether the bar of limitation contained in section 3228 applies to section 3 of the act of June 27, 1902, was raised in the circuit conrt of the United States for the district of Massachusetts in the case of Thomas C. Thacher et al. v. United States. On December 28, 1906, Judge Lowell gave an opinion holding against the contention that section 3228 prevented the allowance of claims for the refunding of taxes paid upon contingent beneficial interests filed more than two years after the date of the payment of the tax.

I inclose herewith copy of the opinion of the court, which I will ask you to kindly return to me as it is one of the files of this office. I am, very truly, yours,

JOHN W. YERKES, Commissioner. Hon. John DALZELL,

House of Representatives.

(Circuit court of the United States, district of Massachusetts. No. 158, law docket.

Thomas C. Thacher et al., executors, petitioners, v. United States. ]

Opinion of the court, December 29, 1906.

LOWELL, J.: On June 7, 1901, the petitioners in this case, being the executors of Henry C. Thacher, paid to the collector of internal revenue, without protest, an inheritance tax on account of contingent beneficial interests. This tax they seek to recover under the provisions of the act of June 27, 1902 (32 Stat. L., 406). On March 15, 1904, their claim was filed with the collector in due form. The contingent estates were not vested in possession or enjoyment before July 1, 1902.

The United States has demurred to the petition. It contends that the tax thus paid was illegally collected (Vanderbilt v. Eidman, 196 U. S., 480); that, in order to recover back the tax thus collected, the claim must be filed with the collector within two years after payment of the tax (sec. 3228, Rev. Stat.), and that, inasmuch as the claim in this case was filed more than two years after payment of the tax, the petitioners can not recover.

The answer to the contention of the United States is simple. The petition before the court is not based upon the illegality of the tax, which it powhere asserts. It seeks only the free bounty of the Government, given by the act of 1902, which reads as follows:

" That in all cases where an executor, administrator, or trustee shall have paid, or shall hereafter pay, any tax upon any legacy or distributive share of personal property under the provisions of the act approved June thirteenth, eighteen hundred and ninety-eight, entitled 'An act to provide ways and means to meet war expenditures, and for other purposes,' and amendments thereof, the Secretary of the Treasury be, and he is hereby, authorized and directed to refund, out of any money in the Treasury not otherwise appropriated, upon proper application being made to the Commissioner of Internal Revenue, under such rules and regulations as may be prescribed, so much of said tax as may have been collected on contingent beneficial interests which shall not have become vested prior to July first, nineteen hundred and two. And no tax shall hereafter be assessed or imposed under said act approved June thirteenth, eighteen hundred and ninety-eight, upon or in respect of any contingent beneficial interests which shall not become absolutely vested in possession or enjoyment prior to said July first, nineteen hundred and two."

The petitioners could not at any time have maintained suit to recover the tax as having been illegally collected. They had paid it voluntarily, not under protest. Their claim to a refund, if they had any, was moral only and not legal. It appealed only to the Government's sense of fairness, and could be satisfied only by the bounty of the United States given upon such terms as Congress saw fit to impose. That a free gift of Congress, like that here in question, may be sued upon after it has been voted by Congress was decided in U. S. v. Jordan (96 U. S. 418), U. S. v. Louisville (169 U. S., 249). The act of 1902 fixes no time within which the claim for a refund must be filed with the collector, and no departmental regulation has been called to the attention of the court. Even if the limit fixed by section 3228, Revised Statutes, be applicable here by analogy, yet the two years therein mentioned must run, if they run at all, not from payment of the tax, which was effective to create the claim here in suit, but from the passage of the act providing the bounty which the petitioners seek to obtain. That the tax paid by the petitioners in 1901 was illegally collected is irrelevant to the issues raised by this petition.

Demurrer overruled.

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