RELIEF OF MADISON COUNTY, KY. FEBRUARY 5, 1909.-Committed to the Committee of the Whole House and ordered to be printed. Mr. SHACKLEFORD, from the Committee on Claims, submitted the following REPORT. [To accompany S. 5349.] The Committee on Claims, to whom was referred the bill (S. 5349) for the relief of Madison County, Ky., submit the following report: This bill, which passed the Senate March 3, 1908, authorizes and directs the Secretary of the Treasury and the Commissioner of Internal Revenue to audit and adjust the claim of Madison County, State of Kentucky, for internal-revenue taxes on dividends on shares of stock or bonds owned by said county in the Louisville and Nashville Railroad to the extent that such taxes were deducted from any dividends due and payable to said county, any statute of limitation to the contrary notwithstanding. Hon. John W. Yerkes, Commissioner of Internal Revenue, in a communication to the Secretary of the Treasury dated February 3, 1905, states that if Madison County, Ky., owned stock of the Louisville and Nashville Railroad Company and taxes were paid to the United States on the dividends declared and paid on the shares of stock so owned, such taxes were illegally collected and would be refunded. The commissioner further states that he believes the claim of Madison County, Ky., to be similar to the case of Hardin County, Ky., for whose relief the act of February 25, 1889, was passed, and to the case of the city of Louisville, for whose relief the act of June 16, 190-, was passed. It appears that between the years of 1869 and 1872, inclusive, Madison County, Ky., was the owner of stock and bonds in the Louisville and Nashville Railroad Company, which company declared cash dividends and interest. Under the internal-revenue laws then in force (sec. 122, act June 30, 1864), the railroad company paid taxes to the United States upon its gross receipts, including its undistributed surplus, the interest payable upon its bonds and its cash dividends. The taxes paid on interest and dividends were deducted from the amounts H R-60-2-Vol 1-35 due as interest and dividends, so that the interest and dividends declared and paid to Madison County were diminished to the extent of such deductions for taxes. These deductions seem to have been made under a misapprehension of the law as it applied to municipal corporations. The law was afterwards interpreted by the United States Supreme Court, and that court decided that a tax under the internal-revenue act, section 122, was a tax upon the creditor and not upon the railroad corporation paying it, and that a municipal corporation, being a part of the sovereign power of the State, was not subject to taxation by Congress upon its municipal revenues. (United States v. Baltimore and Ohio R. R. Co., 17 Wall., 322; see also Wall., 294, and 20 Wall., 232.) Similar cases have heretofore been passed for Hardin, Hart, Logan, and Simpson counties, Ky., and your committee believes that the amount taken from Madison County, Ky., was contrary to law, and recommends the passage of this bill authorizing the Secretary of the Treasury and the Commissioner of Internal Revenue to consider, adjudicate, and pay the amount due to Madison County, Ky. Appended hereto are letters from the Secretary of the Treasury and Commissioner of Internal Revenue, which were received in reply to inquiries concerning this claim. TREASURY DEPARTMENT, OFFICE OF THE SECRETARY, SIR: I have the honor to acknowledge the receipt of your letter of the 30th ultimo, inclosing Senate bill 6872, for the relief of Madison County, Ky. You request information relative to the merits of the bill. In reply, find herewith report of the Commissioner of Internal Revenue of the 3d instant. Respectfully, Hon. FRANCIS E. WARREN, Chairman Committee on Claims, United States Senate. L. M. SHAW, Secretary. TREASURY Department, Washington, February 3, 1905. SIR: I have the honor to return herewith the letter of the Hon. Francis E. Warren, chairman of the Committee on Claims, United States Senate, addressed to you under date of January 30, 1905, and by you referred to this office. Mr. Warren incloses a copy of Senate bill 6872 for the relief of Madison County, Ky., and asks that you cause to be forwarded for the use of the committee all papers or copies of same on file in the department relating to the claim, with your opinion as to its merits. The letter, with its inclosures, is referred to me for a report. Senate bill 6872 provides: "That the Court of Claims is hereby given jurisdiction to hear, try, and determine the claim of Madison County, in the State of Kentucky, against the United States for internal-revenue taxes claimed to have been paid by said county to the Government of the United States on dividends in the shares of stock of the Louisville and Nashville Railroad Company, owned by said county, including all claims for such taxes erroneously collected from said county, and also all claims for taxes erroneously collected from other persons or corporations, by appropriating therefor dividends due to said county on bonds held and owned by it; that in the adjudication of said claims the rules of pleadings, practice, and evidence prevailing in said court shall apply. The bar of the statute of limitations is hereby removed, and said court is required to determine whether under the law as it existed at the time said taxes were paid the same were illegally exacted and collected from said county, then the court shall determine the amount so collected and render judgment therefor: Provided, That the suit for the collection of said taxes shall commence within six months from the date of the passage of this act." Madison County, Ky., has presented no claim to this office for the refunding of taxes paid by it, or by the Louisville and Nashville Railroad Company, as taxes on dividends or interest on stocks or bonds, and this office has no means of knowing whether said county owned such stocks or bonds, or whether it has any claim against the United States. If Madison County, Ky., owned stock of the Louisville and Nashville Railroad Company, and taxes were paid to the United States on the dividends declared and paid on the shares of stock so owned, such taxes were illegally collected (see 17 Wallace, 294 and 322, and 20 Wallace, 323), and would be refundable but for the statute of limitation, section 3228, Revised Statutes. So far as appears to this office the case of Madison County, Ky., is similar to the case of Hardin County, Ky., for whose relief the act of February 25, 1889, was passed, and to the case of the city of Louisville, Ky., for whose relief the act of June 16, 1890, was passed. As requested, a carbon copy of this letter is also inclosed. Respectfully, The SECRETARY OF THE TREASURY. |