Therrell v. Commissioner of Internal Revenue

HUTCHESON, Circuit Judge

(dissenting).

The view of the majority, that to tax petitioner in respect of the compensation he receives from the banks he liquidates is to invade and impair the sovereignty of Florida, seems to me illogical and unreal. Illogical and unreal because by law his compensation is to be, it is in fact, paid not by the state from its own funds, but by each bank he liquidates and from the funds of that bank. I recognize the existence and binding force of the holding that to tax officers and employees of a state actually employed in conducting, or in connection with the conduct of, its governmental functions in respect of their compensation as salaries or wages paid them by the state from its own funds is to burden the state. I realize that it would be vain now to protest that ruling. Texas Co. v. Carmichael (D.C.) 13 F.Supp. 242, 247. I think it plain, however, that the decisions which so hold have pressed the doctrine of governmental immunity to its very verge. To extend the protection of that doctrine as here proposed to one who is neither an officer of the state nor its employee but a mere agent at the will of or contractee with the Comptroller is, I think, not only without the support of a single authority but contrary to the very reason of the doctrine invoked. That reason, that the state must be free from interference in the exercise of its sov*873ereign powers and that if its officers and agents are subject to be taxed in respect of the compensation it pays them, the state is no longer sovereign but subj ect, may support the exemption from federal taxation where the salaries are charged upon and are paid from state funds. It certainly, I think, does not support the exemption of the compensation paid by banks to their liquidators out of their own funds, any more than it exempts the salaries and wages, paid to the officers, agents, and employees of the bank who are employed or retained in its service by and under the liquidator.

I do not believe my associates would extend the exemption this far. I have difficulty in making flesh of one and fowl of the other when ail are engaged to the same end, in liquidating the bank, all are under the satne general supervision and control of the state Comptroller, and all are paid from the same source. It will avail nothing to point out that the supervision and liquidation of banks is a governmental function .and the Comptroller an officer of the state, discharging that function. The liquidator is not an officer of, he draws no salary from, the state. He merely undertakes for and under the appointment of a Comptroller, as a court receiver does for and under the appointment of a court, to handle specific matters of conservation and liquidation when appointed to do so. It will serve no purpose to cite or discuss the great number of authorities according or denying exemption on varying states of facts. It is sufficient to say they all agree upon the principle that where the effect of the tax upon the state is regarded as immediate and direct there is immunity; where it is regarded as remote and indirect there is none. Illustrative cases discussing the principle and assembling the authorities are: Helvering v. Powers, 293 U.S. 214, 55 S.Ct. 171, 79 L.Ed. 291; Burnet v. A. T. Jergins Trust, 288 U.S. 508, 53 S.Ct. 439, 77 L.Ed. 925; Metcalf & Eddy v. Mitchell, Administratrix, 269 U.S. 514, 46 S.Ct. 172, 70 L.Ed. 384; Register v. Commissioner (C.C.A.) 69 F.(2d) 607, 93 A.L.R. 186; Fox Film Corporation v. Doyal, 286 U.S. 123, 52 S.Ct. 546, 76 L.Ed. 1010; Liggett & Meyers Tobacco Co. v. United States, 57 S.Ct. 239, 81 L.Ed. -, decided January 4, 1937.

I think the Board rightly denied the exemption. Its decision and order should stand. I dissent from the reversal.