*835 1. STATUTE OF LIMITATIONS - NECESSITY FOR RETURN WHERE EXEMPT RULING WAS ERRONEOUS. - The statute of limitations did not start to run, since the petitioner never filed returns but relied for many years upon an erroneous ruling of the Commissioner that it was exempt from tax.
2. COMMISSIONER REVERSES RULING OF PREDECESSOR. - The Commissioner had a right in 1937 to reverse a ruling of his predecessor made in 1924 and hold that the petitioner was not exempt but owed taxes for all years as to which the statutes of limitation had not run.
*549 The Commissioner has determined deficiencies in the petitioner's income and profits taxes, and penalties for failure to file returns as follows:
| Income taxes | Excess profits tax | |||
| Calendar year | Deficiency | Penalty | Deficiency | Penalty |
| 1921 | $794.48 | $198.62 | $1,736.21 | $434.05 |
| 1922 | 1,895.39 | 473.85 | ||
| 1923 | 2,473.24 | 618.31 | ||
| 1924 | 1,602.57 | 400.64 | ||
| 1925 | 1,505.05 | 376.26 | ||
| 1926 | 2,014.43 | 503.61 | ||
| 1927 | 1,884.01 | 471.00 | ||
| 1928 | 2,141.11 | 535.28 | ||
| 1929 | 1,431.54 | 357.88 | ||
| 1930 | 1,878.87 | 469.72 | ||
| 1931 | 1,156.07 | 289.02 | ||
| 1932 | 861.88 | 215.47 | ||
| 1933 | 305.38 | 76.35 | 111.05 | 27.76 |
| 1934 | 904.52 | 226.13 | 328.92 | 82.23 |
| 1935 | 1,920.86 | 480.22 | 698.49 | 174.62 |
| Total | 22,769.40 | 5,692.36 | 2,874.67 | 718.66 |
*836 *550 The petitioner by its pleadings contests the action of the Commissioner upon two grounds only. The first is that the statutes of limitation bar assessment and collection of all of the deficiencies except those for 1934 and 1935. The second is that the Commissioner may not reverse his ruling of January 18, 1924, in which he held that the petitioner was exempt from tax, because such a reversal would be arbitrary, inequitable, without warrant of law, and unconstitutional.
FINDINGS OF FACT.
The petitioner is a corporation, organized under the laws of Maryland in 1905. It has been engaged since that time in conducting an annual fair and race meet at Upper Marlboro, Maryland. It had income in each of the years 1921 to 1935, inclusive, and the Commissioner has correctly computed the amount of the tax for each year. It was not exempt from tax.
The petitioner filed returns for 1918 and 1919 showing tax due for 1918 but none for 1919, a year in which no fair or race meet was held. It has not filed returns for any of the years 1921 to 1935, inclusive.
The Commissioner ruled on January 18, 1924, that the petitioner was exempt from tax under section 231(1) of the*837 Revenue Act of 1921 as an agricultural or horticultural organization. The petitioner believed that the ruling relieved it from the duty of filing returns and, for that reason, did not file any returns for the years 1923 to 1935, inclusive. The record does not show why the petitioner did not file returns for 1921 and 1922. The ruling was erroneous.
The Commissioner, on March 6, 1937, reversed his ruling of January 18, 1924, and held that the petitioner was not and never had been exempt as an agricultural or horticultural organization under section 101(1) of the Revenue Acts of 1934 and 1936, corresponding provisions of earlier acts, article 101(1)-1 of Regulations 86, or corresponding provisions of earlier regulations, since at all times the income of the petitioner had inured to the benefit of its stockholders. The petitioner was notified of the new ruling on April 23, 1937.
The petitioner filed a return for 1937 showing tax due.
The Commissioner, in the notice of deficiency, explained his retroactive application of the new ruling in part as follows:
* * * The officers of your corporation since 1921 have been making distributions to stockholders contrary to the basis*838 on which the exemption was predicated, and must reasonably have known that the ruling of January 18, 1924 was not based upon a full knowledge of the facts.
OPINION.
MURDOCK: The Commissioner has determined that the petitioner had certain income, is liable for certain deficiencies and penalties, and *551 was not exempt from tax as an agricultural or horticultural organization, 1 during the years 1921 to 1935, inclusive. The petitioner does not contest the correctness of the amount of income determined or the correctness of the computation of the tax and penalty for any year. It does not contend that it was in fact and in law exempt from tax as an agricultural organization or otherwise. Therefore, the Board must assume that the income, deficiencies, and penalties determined are correct in amount and that in fact and in law the petitioner was never an exempt corporation. The petitioner seeks to defend itself against the assessment and collection of the deficiencies and penalties on the grounds, first, that the statutes of limitation bar assessment and collection, and, second, that the Commissioner had no authority to change the ruling of his predecessor and hold in 1937*839 that the petitioner was not an exempt corporation.
The petitioner concedes in its brief that the period of limitation had not run as to 1934 and 1935 when the Commissioner made his determinations in the notice of deficiency. The returns for 1921 and 1922 were due before the Commissioner made his ruling of January 18, 1924, and the petitioner has failed to show any reason whatsoever for its failure to file timely returns for those years. It has not filed returns for any of the years and, therefore, the penalties must stand, if any of the deficiencies may be properly assessed. See section 3176 of the Revised Statutes, as amended by section 1103 of the Revenue Act of 1926; section 291 of the Revenue Acts of 1928, 1932, and 1934; ; affd., ; ; affd., ; certiorari denied, ; *840 ; . Although the petitioner probably could have avoided the penalties by filing returns after the ruling of March 6, 1937, , it chose not to do so, thinking, perhaps, that the filing of returns might give the Commissioner additional time to assess and collect the taxes imposed upon it by the various revenue acts.
The Revenue Act of 1921 and subsequent acts have required "every corporation subject to taxation under this title" to file a return within a prescribed time. See section 239 of the Revenue Act of 1921. Although a corporation exempt from taxation under the statute is not required to file any return, the petitioner was not exempt and, therefore, was required by the statute to file a return. Section 250(d) of the Revenue Act of 1921 provided that "taxes due under any return made under this Act for the taxable year 1921 or succeeding taxable years shall be determined and assessed by the Commissioner *552 within four years after the return was filed" and provided further that there should be no time limit in the case "of a*841 failure to file a required return." The provisions of later acts are, for present purposes, substantially similar. The statutory period of limitations upon determination, assessment, and collection of a deficiency is initiated under these provisions by the filing of a return. . The only exception, where the shareholders report the net income of the corporation, is not urged by the petitioner and the record contains no evidence to support that exception. The petitioner concedes that it is not within the letter of the statutes, since it filed no returns. The point which it attempts to make is that it was excused from filing returns by the ruling of the Commissioner that it was exempt and the statutes should be read as if they provided a period of limitation beginning when the return for the particular year was "filed or excused." It cites no case in point.
The petitioner relies upon the regulations of the Commissioner as authority for adding the words "or excused" to the statute. The regulations have provided, at all times material hereto, that a corporation claiming exemption shall first make certain proof*842 to the Commissioner "to establish its exemption, and thus be relieved of the duty of filing returns of income and paying the tax" and "when an organization has established its right to exemption, it need not thereafter make a return of income or any further showing" so long as it does not change its character. See, for example, article 511, Regulations 45 and 62, and article 521, Regulations 74. The Commissioner issued some kind of a ruling on January 18, 1924, holding that the petitioner was exempt from tax, apparently as an agricultural organization. The argument of the petitioner is that it had "established its right to exemption" on January 18, 1924, and "it need not thereafter make a return of income," since it never changed its character thereafter.
This brings up the question of whether the regulations were ever meant to add the words "or excused" or whether they could add anything to the words of the statute. The Commissioner by his regulations can not change the law. ; *843 ; ; ; certiorari denied, ; ; ; ; . Cf. ; . Corporations actually exempt under the revenue acts were not required to file any returns and were not *553 affected by any period of limitation or penalty for failure to file returns, since, in no event, would they owe any tax or penalty. The Commissioner could not change their status by regulations and no words need be read into the limitation provisions for their benefit. The Commissioner could, of course, make reasonable regulations to assist him in administering the act and deciding whether a particular corporation was*844 or was not exempt by the statute. That is what he has done. Articles 511 and 521 just mentioned were intended to be and were administrative, not legislative. The inference should not be drawn from those provisions that he intended to write into the limitation provisions of the acts the words "or excused" for the benefit of those corporations which he might erroneously conclude were exempt. He could not thus change the law if he so desired. He can decide what documents he will accept as returns but, in the absence of returns, he has no authority to permit the statute of limitations to start running against him by some means not provided by statute. The petitioner was not exempt under the statute or the regulations and was required to file returns and pay taxes. The Commissioner made an erroneous ruling that it was exempt and for a number of years did not demand returns or tax. The record does not show how the error was made or who was at fault. However, the erroneous ruling did not relieve the petitioner from filing the returns and paying the taxes as the statute provided, and it did not start the running of any statutory period of limitation. The Supreme Court said in *845 , affirming :
* * * Under the established general rule a statute of limitations runs against the United States only when they assent and upon the conditions prescribed. Here assent that the statute might begin to run was conditioned upon the presentation of a return duly sworn to. * * * The necessity for meticulous compliance by the taxpayer with all named conditions in order to secure the benefits of the limitation was distinctly pointed out in Florsheim Bros. etc v.United States.
Here, likewise, the condition prescribed by Congress to secure the benefits of the limitation was the filing of a return 2 and, since the taxpayer filed none, it receives no benefits under this particular statutory provision.
Although this petitioner was encouraged by the action of the Commissioner to believe that it would not have to file returns for 1923 and subsequent years, nevertheless, it was never prevented*846 from filing returns. It could have filed returns and might thereby have started the period of limitations, though still claiming exemption. Some taxpayers take such precautionary steps. There is no inequity in *554 requiring this petitioner to pay the taxes actually imposed upon it by the revenue acts. It could have avoided the inequity of the penalties by filing returns promptly after it learned of the correctness of the ruling in 1937, but it chose not to file any returns for the years here involved, apparently hoping thereby to avoid both tax and penalty. Having made the choice, it must abide by it and take the consequences.
The conclusion here reached that the statute never started to run is consistent with prior decisions that a return is required to start the period of limitations. ; ; ; ; ; *847 ; The Circuit Court of Appeals for the Second Circuit recently reversed a decision of the Board on this subject. See , reversing . The facts there were that the Alien Property Custodian had seized all of the records of a foreign corporation prior to the time the return for 1918 was due. The corporation filed no return. The court held that the statute had run in 1934 against assessment of a deficiency for 1918, since the Government had made it impossible for the taxpayer to file any return for 1918. The present petitioner might well have cited that case and quoted language used in the opinion. However, the present case is not like that case, but is less strong factually for the taxpayer. The Board is not disposed voluntarily to reverse further the consistent position which it has taken upon this subject.
When the Commissioner determined in 1937 that the petitioner was not exempt and never had been, it was his duty to determine, assess and collect the tax due*848 for all years not barred by the statutes of limitation. The conclusion reached and announced by his predecessor in 1924 was not binding upon him. It did not exempt the petitioner from tax. This same point was decided in this way in ; affd., . See also ; affd., ; ; affd., ; ; affd., ; ; ; ; . The ruling of the Interstate Commerce Commission on the reasonableness of a rate thereafter used by shippers and carriers was quite a different thing and the decision in ,*849 holding that a later change in ruling could not be retroactively applied, is not in point.
Decision will be entered for the respondent.