Florsheim Brothers Drygoods Co. v. United States, 280 U.S. 453 (1930)
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U.S. Supreme Court FLORSHEIM BROS. DRYGOODS CO. v. UNITED STATES, 280 U.S. 453 (1930)
[Page 280 U.S. 453, 455]
for the United States and white.
Mr. Justice BRANDEIS delivered the opinion of the Court.
These cases, which were argued together, present the same questions. In each case, the taxpayer seeks to recover with interest an amount assessed and collected, after March 15, 1925, as an additional income and excess-profits tax for 1918 under the Revenue Act of 1918 (40 Stat. 1057). In each, the claim is that both the assessment and the collection were made after the expiration of the time allowed therefor. In a long line of cases arising out of similar facts, the Board of Tax Appeals has held consistently that neither the assessment nor the collection was made too late. [Footnote 1] In No. 414 the action was brought in the federal court for Massachusetts against the collector to recover $39,043.99. The District Court, without passing on the timeliness of the assessment, held that the collection was barred and entered judgment for the plaintiff, 28 F.(2d) 54. The Circuit Court of Appeals for the First Circuit affirmed the judgment on the ground that the assessment was barred, and expressed no opinion on the question decided by the District Court, 33 F.(2d) 739. In No. 118, the action was brought in the federal court for western Louisiana against the United States to recover $11,282.15.
[Page 280 U.S. 453, 456]
That court, deciding both questions in favor of the Government, entered a judgment for the defendant, 26 F.(2d) 505, which was affirmed, on both grounds, by the Circuit Court of Appeals for the Fifth Circuit, 29 F.(2d) 895. In other federal courts, also, there has been diversity of opinion. [Footnote 2] This court granted writs of certiorari, 280 U.S. 539, 50 S. Ct. 17, 74 L. Ed. -.
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after that date. The statement continued: 'Provision for systematically handling this new feature will be made in the construction of the new return blanks ... embodied in which is a detachable letter of remittance. Any corporation which finds that, for sufficient reasons, it cannot complete its return by March 15, may detach and fill out the letter of remittance, and forward same to the collector on or before March 15, together with a check ... for the tax due on that date. ... A statement in writing of the reasons why it is impossible for the corporation to complete the return by the specified date must accompany every such remittance.' [Footnote 4] The device was modified by a further statement on February 27, 1919. A separate blank, known as Form 1031T, and entitled 'Tentative Return and Estimate of Corporation Income and Profits Taxes and Request for Extension of Time for Filing Return,' was to be used instead of the detachable letter of remittance. This blank was in the form of a letter to the collector and contained, besides instructions and the oath of the president and treasurer, only a statement that one-fourth of the estimated amount of taxes was remitted therewith and that an extension of time to file the complete return was requested for the reasons stated.
[Page 280 U.S. 453, 459]
Form 1120, on June 16, 1919; the Hood Company, on July 14, 1919. Section 250(d) of the Revenue Act of 1918 (40 Stat. 1083) provided that 'the amount of tax due under any return shall be determined and assessed by the Commissioner within five years after the return was due or was made ....' This period was extended under the Revenue Act of 1921, November 23, 1921, c. 136, 250(d), 42 Stat. 227, 265, 266, which provided that the amount of the tax under the 1918 Act should be 'determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of the tax.' [Footnote 5] In each of the cases at bar, the Commissioner and the taxpayers executed, prior to March 15, 1924, an instrument called 'Income and Profits Tax Waiver.' The waivers stated that 'In pursuance of the provisions of subdivision (d) of section 250 of the revenue act of 1921,' the Commissioner and the taxpayer 'consent to a determination, assessment, and collection of the amount of income, excess-profits, or war- profits taxes due under any return made. ... This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitation. ...' In each case, the assessment was made more than six years after March 15, 1919, but within six years after the filing of the completed return on Form 1120. If Form 1031T was 'the return' within the meaning of the above provisions as to limitation, then the assessments were made too late.
[Page 280 U.S. 453, 462]
the act. The mere fact that Form 1031T was a formal document prescribed by the Commissioner and termed a 'return' does not identify it as the return required by the act. The word 'return' is not a technical word of art. It may be true that the filing of a return which is defective or incomplete under section 239 is sufficient to start the running of the period of limitation; and that the filing of an amended return does not toll the period. [Footnote 6] But the defective or incomplete return purports to be a specific statement of the items of income, deductions, and credits in compliance with section 239. And, to have that effect, it must honestly and reasonably be intended as such. There is not a pretense of such purpose with respect to Form 1031T. Nor is it the purpose of Form 1120 to supply or correct something omitted or misstated in Form 1031T. The latter was neither defective nor incomplete. The extension of time for the payment of the first installment was prevented, not because Form 1031T was considered a return in compliance with the statute, but because the Commissioner exacted payment as a condition for the requested extension of time to file the return. The penalties were to be imposed for the failure to file, or the late filing, of the detailed return above described. And the penalties were avoided, not by the filing of Form 1031T as a substantial compliance with the requirement of a return, but, as expressly stated in that form, by the extension of time to file which was granted 'in consideration of the filing of this tentative return and the payment of not less than one- fourth of the estimated amount of the tax, and for the reasons stated.' Obviously, without the payment of the first installment
[Page 280 U.S. 453, 463]
and the consequent grant of an extension of time, the mere filing of Form 1031T would not have avoided the penalties prescribed for the late filing of the return required by the act. [Footnote 7] Nor would the penalties have been avoided by the filing of that form, if the complete return were not filed within the extended time.
The contention that because Form 1031T was sufficient as a notice and demand under section 250(e), it was a sufficient return to start the period of limitation, is equally unsound. That section did not prescribe the exclusive mode for the notice and demand for payment of the first installment. Any instrument containing the notice and demand would be as efficacious for that purpose as the return required by the statute. Finally, the argument that Form 1031T was a sufficient return to furnish the basis for assessment lacks significance, whether or not it is sound. [Footnote 8] The Commissioner is not confined to the taxpayer's return for the basis of his assessment. He may secure additional information; and he may assess the tax even if the taxpayer files no return. Rev. Stat. 3176,
[Page 280 U.S. 453, 468]
or collections already barred before the passage of that act and (2) assessments made and proceedings begun prior to that time. Neither of the cases at bar falls within those exceptions. Since, in both cases, assessment and collection were not barred on the enactment of the 1924 Act, and were made after that date, the section is applicable. Compare Russell v. United States, 278 U.S. 181, 49 S. Ct. 121.
It is urged that this construction of the acts causes discrimination against taxpayers who obligingly consented to additional time for assessment and collection, and in favor of those who obdurately refused such consent or whose returns were not audited, prior to the bar of the statute, for the purpose of assessing deficiencies. That taxpayers whose returns led to no suspicion of inaccuracy prior to the expiration of the statutory period are in a preferable position is due, not to any unjust discrimination contained in the 1924 or 1926 Acts, but to the quality of their returns and to propitious circumstances. For the disobliging taxpayers, the acts provided an alternative remedy in the so-called jeopardy assessment and demand; 1924, 274(d), 43 Stat. 297, 26 USCA 1051 note; 1926, 279, 44 Stat. 59 (26 USCA 1051). It is urged also that the Government may not properly and consistently accept the consent contained in the 'Waivers' and not be bound by the limitation. But the limitation was only on the corporations' consent; and the Government was bound thereby. The instruments contained nothing, however, which could restrict the Government's power to enlarge the statutory provisions as to limitation. The timeliness of the collection is based, not upon the waivers, but upon the statutes. No. 118, affirmed.
No. 414, reversed. Footnotes
Footnote 1 Appeal of Dallas Brass & Copper Co., 3 B. T. A. 856, 863; Appeal of Boston Hide & Leather Co., 5 B. T. A. 617; Pilliod Lumber Co. v. Commissioner, 7 B. T. A. 591, 593; Corona Coal & Coke Co. v. Commissioner, 11 B. T. A. 240; Ramsey v. Commissioner, 11 B. T. A. 345; Floyd v. Commissioner, 11 B. T. A. 903, 905; David Rodefer Oil Co. v. Commissioner, 11 B. T. A. 782; L. Loewy & Son, Inc., v. Commissioner, 11 B. T. A. 596; Peck, Stow & Wilcox Co. v. Commissioner, 12 B. T. A. 569; Lamborn v. Commissioner, 13 B. T. A. 177, 189; Kaufman v. Commissioner, 14 B. T. A. 602.
Footnote 2 In Brandon Corporation v. Jones, 33 F.(2d) 969 (D. C. E. D. S. Car .), it was held that both assessment and collection were barred. And see Rasmussen v. Brownfield-Canty Carpet Co. (C. C. A.) 31 F.(2d) 89. In the following cases it was held that collection was not barred; the timeliness of the assessment was not questioned: Bank of Commerce v. Rose, 26 F.(2d) 365 (D. C. N. D. Ga.); Loewer Realty Co. v. Anderson, 31 F.(2d) 268 (C. C. A. 2nd); L. Loewy & Son, Inc., v. Commissioner, 31 F.(2d) 652 (C. C. A. 2nd).
Footnote 3 The form described is known as Form 1120, 'Corporation Income and Profits Tax Return For Calendar Year 1918,' and is a combined return of income, excess-profits and war-profits under the Revenue Act of 1918. Statutes imposing direct taxes have always required taxpayers to file 'lists' or 'schedules' or 'statements' or 'returns' specifying in detail the information requisite for an assessment of the tax. The word 'return' has not always been used. Sometimes it has been used as a synonym for 'list,' 'schedule,' or 'statement.' The specification in the statutes of the prescribed contents of such lists or returns has varied in its detail. But always definite statements of facts were required, from which the tax could be computed. Act of July 9, 1798, c. 70, 9, 1 Stat. 580, 585, 586; Act of July 1, 1862, c. 119, 6, 93, 12 Stat. 432, 434 475; Act of June 30, 1864, c. 173, 11, 82, 98, 102, 109, etc., 13 Stat. 223, 225, 258- 286; Act of August 5, 1909, c. 6, 38, 36 Stat. 11, 114; Rev. St. 3173, U. S. C., tit. 26, 93 (26 USCA 93).
Footnote 4 This action was taken pursuant to section 1309 (40 Stat. 1143), which authorized the Commissioner, with the approval of the Secretary, 'to make all needful rules and regulations for the enforcement of the provisions of this Act.' These public letters from the Commissioner to the Collectors 'and others concerned' were issued February 13, 1919; February 27, 1919. See, also, letters of April 14, 1919, October 3, 1919 and March 17, 1920; and Manual (1920) for the information and guidance of Collectors , 627, 628.
Footnote 5 This period of limitation on assessments of taxes under the 1918 Act was continued in the later Revenue Acts. June 2, 1924, c. 234, 277( a)(2), 278(c), 43 Stat. 253, 299, 300 (26 USCA 1057 note, 1060); February 26, 1926, c. 27, 277(a), (3), 278(c), 44 Stat. 9, 58, 59 (26 USCA 1057, 1060).
Footnote 6 See Appeal of National Refining Co., 1 B. T. A. 236; Appeal of Mabel Elevator Co., 2 B. T. A. 517; United States v. National Refining Co. ( D. C.) 21 F.(2d) 464; United States v. Mabel Elevator Co. (D. C.) 17 F.(2d) 109; Union Pac. R. Co. v. Bowers (C. C. A.) 24 F.(2d) 788; National Tank & Export Co. v. United States (D. C.) 35 F.(2d) 381.
Footnote 7 Attention is called to article 407 of Internal Revenue Regulations 45, which provided that: 'In lack of a prescribed form a statement made by a taxpayer disclosing his gross income and the deductions therefrom may be accepted as a tentative return, and if filed within the prescribed time, a return so made will relieve the taxpayer from liability to penalties, provided that without unnecessary delay such a tentative return is replaced by a return made on the proper form.' But obviously Form 1031T was not a tentative return within the meaning of this article. It did not even purport to be a 'statement disclosing gross income and the deductions therefrom.'
Footnote 8 To sustain the argument that assessment could be made on the basis of Form 1031T, counsel cited only Matteawan Mfg. Co. v. Commissioner, 14 B. T. A. 789 and Lamborn v. Commissioner, 13 B. T. A. 177, 187. But it is not clear that in either of these cases, the assessment was in fact made on the basis of that form. In both cases there were other bases; and in both cases the Board of Tax Appeals expressly refused to comment on the propriety of assessment based on Form 1031T. See Appeal of Matteawan Mfg. Co., 4 B. T. A. 953, 956.
Footnote 9 277(a)(3) of the 1926 Act (26 USCA 1057).
Footnote 10 278(c) of the 1926 Act (26 USCA 1060).
Footnote 11 278(d) of the 1926 Act (26 USCA 1061 note).
Footnote 12 278(e) of the 1926 Act (26 USCA 1062 note). This section eliminated the second exception in 278(e) of the 1924 Act, stated in the text. The fact that, in the Hood Case, where collection was made after the enactment of the 1926 Act, the assessment had been made previous to that time, is therefore, immaterial.
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