Crown Zellerbach Corp. v. United States

Fahy, Circuit Judge,

sitting by designation, delivered the opinion of the court:

Plaintiff filed its income and excess profits tax returns for the taxable year 1951 on July 16, 1951, in accordance with section 53 (a) of the Internal Eevenue Code of 19391 then in effect. Under the provisions of sections 56 (b) (2) (A) and 56 (b) (3) (A) plaintiff elected to pay the tax liability disclosed on its returns in four installments and made pay*339ment of 30 percent on July 16, 1951, and 30 percent on October 15, 1951. Each, of these payments amounted to $5,995,655.'ll. On October 20, 1951, the Revenue Act of 1951, 65 Stat. 452, which had been pending in Congress during the above periods, became effective. It provided in section 124 that corporate taxpayers whose taxable years ended after March 31,1951, and before October 1, 1951 — which included plaintiff, whose fiscal year ended on April 30, 1951— should file returns after October 20, 1951, and on or before January 15, 1952, as to the tax imposed by chapter 1 of the Internal Revenue Code, and that no return for such taxable year filed on or before October 20,1951, was to be considered as a return for any purpose of the Code.

Plaintiff contends that by reason of these statutory provisions effective October 20, 1951, the payments it had previously made on July 16 and on October 15, 1951, were not applicable to any of its 1951 tax liability, and that accordingly the payments constituted overpayments and continued in that category until January 15,1952, the due date of plaintiff’s 1951 return pursuant to the 1951 act. Plaintiff’s claim in this court is for interest at six percent on the amount of the two payments. It relies upon section 3771 (a) of the Internal Revenue Code, which provides:

Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the rate of 6 per centum per annum.

As alternatives to its claim of interest plaintiff contends (a) there arose an obligation on the part of the United States to compensate plaintiff for the reasonable value of the use and enjoyment of the funds, or (b) failure of the United States to refund or to credit said amounts to plaintiff against any income tax, or installment thereof, then due by plaintiff, deprived it of the use of its funds without due process of law, entitling plaintiff to the reasonable value of the use and enjoyment of the funds. We cannot agree that plaintiff is entitled either to interest or to other compensation.

In addition to the provisions relied upon by the plaintiff, namely, that no return filed on or before the date of its enactment should be considered as a return for 1951, and *340specifying later dates for making returns, section 124 of the 1951 act also provides:

All payments with respect to any tax for such taxable year imposed by chapter 1 of such code under the law in effect prior to the enactment of this Act, to the extent that such payments have not been credited or refunded, shall be deemed payments made at the time of the filing of the return required by this section * * *.

On March 14, 1952, to which date the Commissioner had extended the time for filing returns, plaintiff filed its new returns. The payments made July 16, 1951, and October 15,1951, under the law then in effect, were credited upon the 1951 tax liability of plaintiff, which exceeded those payments.

Clearly, the above factual and legislative situation gives no indication of any intention on the part of Congress to convert such payments as were here made into overpayments carrying interest charges against the United States. There is a “traditional immunity of the Government from the burden of interest unless it is specifically agreed upon by contract or imposed by legislation.” United States v. Goltra, 312 U. S. 203, 207, and cases there cited. We cannot impute to Congress an unwitting departure from this tradition. In providing in substance that the relevant returns, if previously made, were to be held for naught as it were, and were to be remade between the effective date of the new act October 20, 1951, and January 15, 1952, except as the time might be extended, there was no extinguishment of tax liability. On the contrary, the act of 1951 simultaneously provided that previous payments should be deemed payments on that liability at the time new returns were filed. The pertinent provisions of the act of 1951 are interdependent. They should not be read in isolation one from the other. The benefit plaintiff seeks from the provisions regarding returns is countermanded by the provision which applies the earlier payments to a tax liability which, we think, continued to exist although new returns were to be filed. Unless in excess of that liability, which is not the case, the payments were not overpayments.

Had plaintiff made no payments until it filed new returns under the 1951 act, no doubt it would have retained the use *341of the funds involved; but it does not follow that an obligation arose on the part of the United States to compensate plaintiff for its use of the funds. They came into the hands of the United States for what they purported to be, payments on a tax liability. Even if statutory changes caused them to become prepayments, no interest was due thereon, for no statute provides for interest on prepayments. And we know of no support, resting in the constitution or elsewhere, for requiring the United States to pay compensation for the use of funds received by it on the amount of an existing tax liability, when the funds are less than the amount of the liability. There was in fact no hiatus during which the payments could be considered as not made in a regular manner, within the power of Congress to require. The payments were due when made, under the statute then in effect. When that statute was superseded October 20, 1951, by the act of 1951, relied upon as suspending the time of payment, they were held for credit on such liability as might appear in a definite amount from the new returns. Had that amount turned out to be less than the payments, a different case would have been presented. But since this did not eventuate, the funds were at all times available for uncompensated use by the United States. This much latitude allowed to the Government in the intricate problems of meshing together operations under a new tax statute with the statute it supersedes seems reasonable enough to escape any serious challenge to its validity on any score. There is no obligation to compensate for the use of amounts paid which are the subject matter of transition from one statutory plan to a succeeding one, when the amounts are less than the amount of liability for the tax.

Plaintiff’s petition will be dismissed.

It is so ordered.

Madden, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.

FINDINGS OF FACT

The court makes findings of fact, based upon the stipulation of the parties, and the briefs and argument of counsel, as follows:

*3421. Crown Zellerbach Corporation, sometimes hereinafter referred to as “Crown,” is a Nevada corporation with principal offices located at San Francisco, California. At all times here material Crown kept its books npon the accrual basis of accounting and filed its Federal income and excess profits tax returns on the accrual basis for the fiscal year ended April 30th.

2. On July 16, 1951, Crown duly filed its Federal income and excess profits tax returns for the taxable year ended April 30,1951, with the Collector of Internal Eevenue, San Francisco, California (subsequently designated as District Director of Internal Eevenue, San Francisco, California, and sometimes hereinafter referred to as “the Collector” or “the District Director”). Plaintiff’s income and excess profits tax returns for the taxable year ended April 30, 1951, disclosed net taxable income in the amount of $41,960,501.62.

3. On its income and excess profits tax returns for the taxable year ended April 30, 1951, plaintiff duly reported its Federal income and excess profits tax liabilities in the following amounts:

Kind of Tax Amount
Income tax_$16,424, 373.48
Excess profits tax_ 3,661,145. 76
Total_$19,985,519.24

4.In accordance with the provisions of section 56 (b) (2) (A) and section 56 (b) (3) (A) of the Internal Eevenue Code of 1939, then in effect in such circumstances, plaintiff duly elected to pay its above-mentioned Federal income and excess profits tax liabilities for the taxable year ended April 30, 1951, in four installments. Plaintiff duly paid to the Collector, on the dates indicated, the following amounts on account of its Federal income and excess profits tax liability for the taxable year here involved:

Date Amount
July 16,1951_ $5,995,655.77
October 15,1951_ 5,995, 655.77
Total_$11,991,311.54

*343The above-mentioned installments were paid by plaintiff in accordance with the applicable provisions of the Internal Eevenne Code of 1939 in effect on the dates of payment.

The tax liability shown due on the returns as set forth in finding 3 above was duly assessed on the Collector’s August 1951 list. Against this assessment the payments made on July 16,1951, and October 15,1951, were duly credited.

5. Public Law 183, chapter 521 (65 Stat. 452), known as the Eevenue Act of 1951, became effective on October 20, 1951. Under the provisions of section 124 of the Eevenue Act of 1951, the payments made by plaintiff on July 16,1951, and October 15,1951, to the Collector on account of its Federal income and excess profits tax liability for the taxable year ended April 30,1951, under the applicable provisions of the Internal Eevenue Code of 1939, as hereinabove set forth in effect prior to the enactment of the Eevenue Act of 1951, in the sum of $11,991,311.54 constituted payments by plaintiff on account of its income and excess profits tax liability for the taxable year 1951 which were credited by defendant to plaintiff’s account on March 14, 1952, in the manner herein set forth. Under the provisions of section 124 of the Eevenue Act of 1951 the Federal income and excess profits tax returns filed by plaintiff prior to the effective date of section 124 of the Eevenue Act of 1951 did not constitute returns for the purpose of the tax imposed by chapter 1 of the Internal Eevenue Code of 1939 as amended.

6. Pursuant to the applicable provisions of the Eevenue Act of 1951, and an extension of time for filing its returns thereunder having been granted by the Commissioner, plaintiff prepared and filed with the Collector on March 14,1952, its income and excess profits tax returns for the taxable year ended April 30,1951. The payments made by the plaintiff to the Collector on July 16,1951, and October 15,1951, were credited by defendant against plaintiff’s income and excess profits tax liability for the taxable year ended April 30,1951, in the manner set forth in finding 9 herein.

7. The returns filed March 14, 1952, disclosed net taxable income in the amount of $41,882,557.81 and disclosed plaintiff’s Federal income and excess profits tax liability as follows:

*344 Kind of Tam Amount
Income tax_ $16,513, 616.12
Excess profits tax_ 3,423,372.50
Total_$19,936,988.62

8. In accordance with the provisions of section 56 (b) (2) (A) and section 56 (b) (3) (A) of the Internal Revenue Code of 1939, then in effect in such circumstances, plaintiff duly elected to pay its Federal income and excess profits tax liability per finding 7 above, for the taxable year ended April 30,1951, in four installments.

9. After the filing of plaintiff’s income and excess profits tax returns on March 14,1952, as set forth in finding 6 above, a tax abatement voucher was prepared in the full amount of the previous assessment of $19,985,519.24. A new assessment was made on the Collector’s April 1952 list in the amount of the new declaration of tax liability, i. e., $19,936,988.61, as set forth in finding 7 above. The payments made against the original assessment in the total amount of $11,991,311.54, as set forth in finding 4 above, were credited against the new assessment. Except for the aforementioned credit, defendant has not paid back, refunded or credited to plaintiff all or any part of the amount of $11,991,311.54 set forth in finding 4 above.

10. On July 11, 1952, plaintiff filed its amended Federal income and excess profits tax return for the taxable year ended April 30,1951, with the Collector, disclosing corrected net taxable income in the amount of $42,164,249.20, as computed in accordance with the provisions of the Revenue Act of 1951. Plaintiff computed its revised Federal income and excess profits tax liability as follows:

Kind of Tam Amount
Income tax_$16,469,827.17
Excess profits tax_ 3,267,222. 54
Total_$19, 737,049.71

11.In accordance with the provisions of section 56 (b) (2) (A) and section 56 (b) (3) (A) of the Internal Revenue Code of 1939, then in effect in such circumstances, plaintiff duly elected to pay its Federal income and excess profits tax *345liability as disclosed per finding 10 above for the taxable year ended April 30,1951, in fonr installments.

Plaintiff’s revised income and excess profits tax liability for tbe taxable year ended April 30, 1951, as disclosed by its amended returns filed, as set forth in finding 10 hereof, was satisfied and paid as follows:

Revised income and excess profits tax liability:
Income-$16,469,827.17
Excess profits_ 3,267,222.54
Total-$19,737,049.71
Payments:
Credit, March 14,1952_$11,991,311.54
Paid — July 14, 1952_ 3,798,328.07
Paid — October 15, 1952_ 3,947,410.10 $19,737,049.71
Balance None

12. On or about March 11, 1952, plaintiff duly filed with the Collector a verified claim for refund of income and excess profits tax.

13. On or about January 14,1953, plaintiff duly filed with the District Director a verified claim for refund of income and excess profits taxes for the taxable year ended April 30, 1951, in the amount of $135,000, plus interest thereon in respect of adjustments to plaintiff’s net income for said taxable year which are not in controversy herein.

14. On or about April 27, 1953, plaintiff duly filed with the District Director a verified claim for refund of interest in the amount of $359,800 on amounts paid by plaintiff to defendant on account of its income and excess profits tax liability for the taxable year ended April 30, 1951, amending its claim for refund filed on March 11,1952.

15. On or about July 6,1954, plaintiff duly filed with the District Director a verified claim for refund of income and excess profits taxes for the taxable year ended April 30, 1951.- Said claim amended plaintiff’s claim for refund filed on March 11, 1952, and April 27, 1953. Defendant has not issued a statutory notice of disallowance of said claim to plaintiff and has not granted, in whole or in part, plaintiff’s claim for refund.

*34616. No action is now pending or has ever been undertaken on plaintiff’s claims by Congress, or by any department of defendant or in any judicial proceedings other than the proceedings in this court.

CONCLUSION 0E LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is not entitled to recover, and the petition is therefore dismissed.

All statutory references are to sections of the Internal Revenue Code of 1939 unless otherwise specifically designated.