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legislative body feels impelled to enact laws which may require the Court to reëxamine its previous judgments or doctrine.52 The Court differs, however, from other branches of the Government in its ability to extricate itself from error. It can reconsider a matter only when it is again properly brought before it in a case or controversy; and if the case requires, as a tax case does," a statutory basis for a case, the new case must have sufficient statutory support.

And, if we were to assume Congressional "embarrassment" and take it into consideration, we would also be required to weigh the many other political factors which may have motivated the choice employed in the language of § 115 (f) (1). Those in favor of the bill may have believed that the adoption of existing decisions was the

52 Thus, O'Malley v. Woodrough, 307 U. S. 277, overruled Miles v. Graham, 268 U. S. 501, as to the constitutionality of taxation of salaries of federal judges; United States v. Darby, 312 U. S. 100, overruled Hammer v. Dagenhart, 247 U. S. 251, as to Congressional power over labor in manufacture; West Coast Hotel Co. v. Parrish, 300 U. S. 379, overruled Adkins v. Children's Hospital, 261 U. S. 525, and Morehead v. Tipaldo, 298 U. S. 587, as to power to enact minimum wage laws. Compare also Wright v. Vinton Branch, 300 U. S. 440, with Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555, as to farmer bankruptcy statutes; Labor Board v. Jones & Laughlin Corp., 301 U. S. 1, with Schechter Corp. v. United States, 295 U. S. 495, as to commerce power; and United States v. Darby, supra, and Sunshine Anthracite Coal Co. v. Adkins, 310 U. S. 381, with Carter v. Carter Coal Co., 298 U. S. 238, as to commerce power. See also, cases cited by Mr. Justice Brandeis in Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 406-408, notes 1 and 2.

53 Article I, § 8, cl. 1, of the Constitution provides that "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States . . ." Article I, § 7, cl. 1, provides that "All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

most that was politically possible; those who opposed it may have thought it desirable as matter of tax policy to defer taxation of the stock dividend until realization.54 Needless to say, speculation upon such factors has no place in the construction of Acts of Congress.

We are asked to make a retroactive holding that for some seven years past a multitude of transactions have been taxable although there was no source of law from which the most cautious taxpayer could have learned of the liability. If he consulted the decisions of this Court, he learned that no such tax could be imposed; if he read the Delphic language of the Act in connection with existing decisions, it, too, assured him there was no intent to tax; if he followed the Congressional proceedings and debates, his understanding of nontaxability would be confirmed; if he asked the tax collector himself, he was bound by the Regulations of the Treasury to advise that no such liability existed. It would be a pity if taxpayers could not rely on this concurrent assurance from all three branches of the Government. But we are asked to brush all this aside and simply to decree that these transactions are taxable anyway.

54 The considerations which underlay the decisions in Towne v. Eisner and Eisner v. Macomber may have had their influence in the judgment of Congress itself. Compare the question put by Senator Bone to Senator Black, set forth supra, p. 384. Before the decision in Eisner v. Macomber, the Supreme Judicial Court of Massachusetts had held that stock dividends could be taxed, Tax Commissioner v. Putnam, 227 Mass. 522, 116 N. E. 904 (1917); but the Massachusetts legislature had also specifically exempted them from income taxation. Mass. Stat. 1920, c. 352, now G. L. c. 62 § 1 (b). After the decision of Eisner v. Macomber, the Supreme Court of Wisconsin rejected its reasoning in State ex rel. Dulaney v. Nygaard, 174 Wis. 597, 183 N. W. 884 (1921), but since 1927 stock dividends have been exempted from income taxation. Wis. Stat. § 71.02. In 1926, the New York legislature adopted a provision retroactive to January 1, 1919, the effective date of the first state income-tax law, exempting all stock dividends. See People ex rel. Clark v. Gilchrist, 243 N. Y. 173, 153 N. E. 39.

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Nor is the effect on taxpayers the only consequence of accepting such a proposal. It would unsettle tax administration and subject the Treasury itself to many demands in ways that we cannot anticipate and provide for. Many have sold dividend stocks and paid the postponed tax at higher rates than if they had been taxed as is now proposed. Many have paid on the sale of the original stock because of allocation of part of the dividend to reduce the cost base thereof. Many corporations have been refused deductions on account of this type of stock dividend in computing their undistributed corporate earnings tax, which would become entitled to them. Overhanging the whole effort to accommodate these past transactions to a new retroactive law would be the statute of limitations barring sometimes the Government and sometimes the taxpayer with capricious effects. To rip out of the past seven years of tax administration a principle of law on which both Government and taxpayers have acted would produce readjustments and litigation so extensive we would contemplate them with anxiety. We have recently held as to another questioned decision of this Court that a long period of accommodations to an older decision sometimes requires us to adhere to an unsatisfactory rule to avoid unfortunate practical results from a change. Davis v. Department of Labor, 317 U. S. 249. We think this another example of the same principle.

The Government acknowledges the hardship which would be incident to the rule we are now asked to declare, and promises its assistance in obtaining legislative correction. It says that: "We are informed by the Treasury that it has no intention of harassing taxpayers with respect to liability for past years, and that if Eisner v. Macomber is overruled it intends immediately to recommend to Congress legislation which would relieve taxpayers of any unfair retroactive burden that might result from such overruling. . . ."

DOUGLAS, J., dissenting.

318 U.S.

Of course, if there were an adequate basis in statute and regulation for the tax in question, it is difficult to understand why its collection should be regarded as "harassing." This assurance that if we will but find that Congress has intended to lay the tax it will be asked to declare that it does not intend it to be collected is hardly reassuring that the decision contended for would be what Congress intended. Since it is acknowledged that legislation would be required to adjust equities that are beyond judicial power and to prevent our decision's being used to harass taxpayers, we may well inquire why the legislation should not precede the judicial decision. Why should we be asked to impose by interpretation a tax which the Treasury intends to ask Congress to lift?

We are unable to find that Congress intended to tax the dividends in question, and without Congressional authority we are powerless to do so. That being the case, we cannot reach the reconsideration of Eisner v. Macomber on the basis of the present legislation and Regulations. The decision below is

Affirmed.

MR. JUSTICE RUTLEDGE did not participate in the consideration or decision of this case.

MR. JUSTICE DOUGLAS, dissenting:

Eisner v. Macomber dies a slow death. It now has a new reprieve granted under circumstances which compel my dissent.

I.

In 1936, Congress provided that stock dividends were taxable as income when they constituted "income to the shareholder within the meaning of the Sixteenth Amendment to the Constitution." §115 (f) (1). That statutory

1 Sec. 115 (a) defines "dividend" as follows: "The term 'dividend' when used in this title . . . means any distribution made by a cor

...

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DOUGLAS, J., dissenting.

provision is now rewritten so as to permit stock dividends to be taxable when they constitute "income to the shareholder within the meaning of the Sixteenth Amendment to the Constitution as construed by Eisner v. Macomber." That extraordinary result is reached in the face of the plain language of the Act and in face of clear statements of its purpose made in Committee Reports. The report of the House Ways and Means Committee (H. Rep. No. 2475, 74th Cong., 2d Sess., p. 10) stated that stock dividends were to be taxable when they constituted "income to the shareholder within the meaning of the sixteenth amendment to the Constitution." The report of the Senate Finance Committee (S. Rep. No. 2156, 74th Cong., 2d Sess., p. 18) contained the unequivocal statement that "stock dividends are made taxable to the full extent permitted by the Constitution." That purpose is now thwarted. Reliance is placed on certain statements made by Mr. Vinson who managed the bill on the floor of the House. Yet the most that can be said is that his statements in explanation of the bill were ambiguous. He stated, to be sure, that the new provision was not to be poration to its shareholders, whether in money or in other property, (1) out of its earnings or profits accumulated after February 28, 1913, or (2) out of the earnings or profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made."

Sec. 115 (f) (1) is entitled "General Rule" and reads as follows: "A distribution made by a corporation to its shareholders in its stock or in rights to acquire its stock shall not be treated as a dividend to the extent that it does not constitute income to the shareholder within the meaning of the Sixteenth Amendment to the Constitution."

Sec. 115 (j) sets forth the formula for valuation of dividends other than cash dividends: "If the whole or any part of a dividend is paid to a shareholder in any medium other than money the property received other than money shall be included in gross income at its fair market value at the time as of which it becomes income to the shareholder."