Summary
In National Fire Insurance Co. v. United States, 52 F.2d 1011, 72 Ct.Cl. 663, this court held that section 284(e) requires a timely and sufficient claim, that is, one that gives notice of the items of overpayment actually found by the Board.
Summary of this case from Guantanamo Sugar Co. v. United StatesOpinion
No. L-49.
October 20, 1931.
Suit by the National Fire Insurance Company against the United States.
Petition dismissed.
See also 52 F.2d 1014.
This suit was brought to recover $33,349.76, overpayment of income and profits tax determined by the United States Board of Tax Appeals for 1919.
The question is whether the refund of the overpayment was barred by the statute of limitation at the date of the decision of the board.
1. Plaintiff, a stock fire and marine insurance company organized under the laws of the state of Connecticut, with principal office at Hartford, was during the taxable year, and for many years prior thereto, engaged in the business of making and selling fire and marine insurance within the United States. It filed a tentative consolidated income and profits tax return for 1919 on March 15, 1920, showing an estimated tax of $386,616.30 and on that date paid $100,000. Thereafter, on May 15, 1920, it filed a completed consolidated return for 1919 showing a tax of $371,656.64 which, together with the above-mentioned payment, was paid in three further installments of $85,828.32 on June 15, 1920, and $92,914.16 each on September 15 and December 15, 1920.
December 10, 1924, the Commissioner of Internal Revenue audited this return, determined a deficiency of $49,476.87, and notified the plaintiff thereof by letter giving it thirty days within which to file objections and protests. Thereafter, on January 31, 1925, plaintiff filed with the commissioner a protest against the deficiency asserted. In the objection to the deficiency certified by the commissioner the plaintiff protested against the inclusion in income of overdue and accrued interest on bonds in default at December 31, 1919, in the amount of $136,016.34. This protest is in evidence as Exhibit D and is made a part of this finding by reference.
2. Thereafter, on June 12, 1925, plaintiff and the commissioner consented in writing to an extension of the period of limitation for assessment of additional tax for 1919 to December 31, 1925. A second consent was entered into November 25, 1925, further extending the period to December 31, 1926, and on November 29, 1926, a third consent was entered into extending the period of limitation to December 31, 1927.
March 12, 1925, plaintiff filed a claim for refund of the total tax of $371,656.64 returned and paid for 1919 on the ground that it was entitled to a deduction from gross income of $323,143.83, the net addition to its loss claims reserve as required by the insurance laws of the state of Connecticut computed from figures taken from the corporation's annual report made to the superintendent of insurance for the state of New York. In this claim plaintiff also asked "for the refund of all taxes that may now, or hereafter, be properly refundable to it on account of having been illegally, erroneously, or in any manner wrongfully collected from it for the year 1919." This claim is in evidence as Exhibit E and is made a part of this finding by reference.
May 5, 1926, the commissioner made a further audit of the return for 1919 in connection with the claim for refund of March 12, 1925, and, as a result thereof, determined the correct tax liability for 1919 to be $316,910.13 and thereupon allowed a claim for refund for $54,746.51 and rejected it for $316,910.13. A certificate of overassessment was duly issued for $54,746.51 and the amount was, therefore, duly refunded to plaintiff.
Thereafter the commissioner made a further audit of the return for 1919 and on November 1, 1926, notified the plaintiff that he had determined a deficiency of $354,183.53, and by such notice gave plaintiff thirty days within which to file a protest against the deficiency. This deficiency resulted from an increase in the net income as disclosed by the certificate of overassessment aforementioned by inclusion therein of resisted losses in the amount of $136,307.34 on the ground that if the liability of an insurance company is in question, as in the case of resisted losses, such items are not deductible until such liability has been accurately determined, either by agreement or in the courts. The commissioner further decreased invested capital for 1919 as disclosed in the certificate of overassessment aforementioned in the amount of $11,105,817.78 by adding thereto inadmissibles in the amount of $1,688,903.17 and deducting therefrom unearned premium reserve of $12,794,720.95. Plaintiff duly filed a protest March 2, 1927, against these changes.
3. Pursuant to section 274(a) and section 283(a) of the Revenue Act of 1926, 26 USCA §§ 1048, 1064(a), the commissioner on April 6, 1927, mailed plaintiff a sixty-day notice in which he reduced the deficiency of $354,183.55 shown in the preliminary deficiency notice of April 6, 1927, to $283,248.90. This sixty-day deficiency notice is in evidence as Exhibit I and is made a part of this finding by reference.
4. On June 6, 1927, plaintiff instituted a proceeding before the United States Board of Tax Appeals for the redetermination of the deficiency determined by the commissioner by the filing of a petition therein which was given docket number 28967.
5. Subsequently, on December 23, 1927, plaintiff filed a claim for refund for 1919, which is in evidence as Exhibit L and is made a part of this finding by reference. This claim for refund was based upon items which were not mentioned in the first claim for refund of March 12, 1925, nor did the original refund claim specifically set out the items, the allowance of which later resulted in the overpayment of $33,349.76 determined by the United States Board of Tax Appeals for the recovery of which this suit was instituted.
6. February 20, 1928, the commissioner notified plaintiff by letter that his claim for refund of December 23, 1927, would be rejected because of the pendency of the case before the Board of Tax Appeals, and this claim was thereafter duly rejected on schedule No. 11623.
September 16, 1927, plaintiff requested the Commissioner of Internal Revenue to have its case pending before the Board of Tax Appeals for the years 1918 to 1922, inclusive, considered by the special advisory committee with the view of arriving at a settlement of the tax liability.
November 14, 1928, plaintiff filed a motion with the Board of Tax Appeals that it be permitted to amend its petition so as to include therein a claim for credit under section 238 of the Revenue Act of 1918 ( 40 Stat. 1080) for taxes paid to the Dominion of Canada. This motion to amend was allowed and the amended petition was filed November 17, 1928. January 15, 1929, the Commissioner of Internal Revenue filed an answer to the petition with the Board of Tax Appeals. January 21, 1929, plaintiff filed with the special advisory committee of the office of the Commissioner of Internal Revenue a claim asking that it be given credit on its 1919 tax of Canadian taxes paid in the amount of $92,223.67.
May 21, 1929, the commissioner advised plaintiff of the conclusion reached by the special advisory committee and inclosed with said letter the recommendations of said committee, and also inclosed a proposed stipulation for the adjustment of the case before the Board of Tax Appeals. The special advisory committee determined and recommended to the commissioner a total income and profits tax for 1919 of $375,784.04; that plaintiff be allowed a credit thereon of $92,223.67 for foreign income taxes paid, leaving a balance of $283,560.37 as the correct tax liability for 1919, which, less $316,910.13, left an overassessment of $33,349.76. The computation containing the recommendations of the special advisory committee, which were accepted and agreed to by the commissioner, is in evidence as Exhibit T and is made a part hereof by reference. Plaintiff accepted the recommendations of the special advisory committee, and on July 23, 1929, a stipulation of the tax liability was entered into between the plaintiff and the commissioner and filed with the United States Board of Tax Appeals as a basis for the entry by the board of its decision in the case. July 29, 1929, the United States Board of Tax Appeals entered its decision in the case in accordance with the stipulation, finding an overpayment of $33,349.76 for 1919. The stipulation filed with the board and the decision of the Board of Tax Appeals are in evidence as Exhibits U and V and are made a part hereof by reference. This suit was instituted February 20, 1930.
7. The Commissioner of Internal Revenue refused to refund any portion of the overpayment of $33,349.76 for 1919 determined by the Board of Tax Appeals on the ground that plaintiff had not filed a claim for refund therefor within the time required by section 284(g), Revenue Act of 1926 (26 USCA § 1065(g).
Guy Patten, of Washington, D.C. (A.R. Serven and John W. Smith, both of Washington, D.C., on the brief), for plaintiff.
Charles B. Rugg, Asst. Atty. Gen. (Lisle A. Smith and Edward H. Horton, both of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Plaintiff contends: First, that the jurisdiction of this court to entertain this action is not governed by the provisions of sections 3226 and 3228 of the Revised Statutes requiring a claim for refund to be filed and suit to be instituted within a certain time thereafter, but is governed by the general limitation provision of section 156 of the Judicial Code (28 USCA § 262), giving six years within which to sue upon claims against the United States; secondly, that the final decision of the United States Board of Tax Appeals entered July 29, 1929, finding an overpayment of $33,349.76, is res adjudicata and, as such, binding upon this court for the total amount sued for; thirdly, that plaintiff may also in this action recover interest upon the overpayment determined by the Board of Tax Appeals; and, fourthly, that, notwithstanding issues (1) and (2), its claim for refund of March 12, 1925, is sufficient in law to entitle it to maintain this suit and recover the overpayment in question.
On the other hand, the defendant insists that under the provisions of section 284 of the Revenue Act of 1926 and section 507 of the Revenue Act of 1928 (26 USCA § 1065) the latter act being in effect at the time of the entry of the decision by the Board of Tax Appeals, the plaintiff cannot recover the overpayment determined by the board for the reason that it failed to file a claim for refund therefor within the time allowed by subdivision (g) of section 284, supra.
We are of opinion: First, that under section 284 of the Revenue Act of 1926 plaintiff was required to file a proper claim for refund on or before April 1, 1927, which it did not do. Secondly, the United States Board of Tax Appeals has held that its jurisdiction extends only to the determination of the fact of overpayment and the amount thereof, Dickerman Englis, Inc., 5 B.T.A. 633, W.H. Hill Co., 23 B.T.A. 605, and we find no reason to question the correctness of these decisions. The decision of the Board of Tax Appeals is not therefore res adjudicata and binding on this court with respect to the question here involved. Thirdly, that the right to sue for the overpayment is given by section 284(e) of the act of 1926 (26 USCA § 1065 and note); that in the circumstances of this case the time within which this suit could be instituted is governed by the provisions of section 3226 of the Revised Statutes, as amended (26 USCA § 156), and not by the provision of section 156 of the Judicial Code (28 USCA § 262) as for suits upon claims against the United States, and that the right to recover is dependent upon whether a timely and sufficient claim for refund was filed.
In Ohio Steel Foundry Co. v. United States, 38 F.2d 144, 69 Ct. Cl. 158, and Arthur Curtiss James v. United States, 38 F.2d 140, 69 Ct. Cl. 215, this court pointed out that in cases where the Board of Tax Appeals determines an overpayment and no question of credits is involved, and the refund of the overpayment was not barred by the statute of limitation at the time of the decision by the board, suit might be brought within six years from the date the right to the overpayment accrued as for a claim against the United States in the event the commissioner refused to refund the overpayment determined by the board. See Bonwit Teller Co. v. United States, 283 U.S. 258, 51 S. Ct. 395, 75 L. Ed. 1018. But that rule does not apply here inasmuch as the refund was not allowed within the time during which the overpayment could be refunded without the filing of a claim therefor. Plaintiff did not comply with the statutory requirement that a claim for refund be filed on or before April 1, 1927, so as to authorize the refund of the overpayment or the institution of suit therefor at a later date. The decision of the Board of Tax Appeals finding the overpayment in question did not therefore give rise to an account stated upon which the plaintiff might bring suit within six years. Section 284(e) specifically prohibits the refund or credit of any overpayment determined by the board unless a timely and sufficient claim for refund is filed.
The claim for refund filed by plaintiff March 12, 1925, was allowed in part and rejected in part by the commissioner and no suit was brought thereon. None of the items giving rise to the overpayment finally determined by the board upon stipulation filed by the parties, and upon which this is based, was mentioned in this claim; nor did the overpayment in question directly relate to any of the grounds specified in the claim of March 12, 1925. The claim of December 23, 1927, was not an amendment of the first claim in that the grounds thereof did not relate to any of the matters specified in the earlier claim. It was filed more than eight months after the time allowed by section 284(g) of the Revenue Act of 1926 for filing of a claim for 1919. Plaintiff seems to place some reliance upon the provisions of section 284(d)(2) of the Revenue Act of 1926, 26 USCA § 1065(d)(2), but that subdivision has no bearing upon the question here involved. It authorizes the Commissioner of Internal Revenue to make a credit or refund, and authorizes the institution of suit to recover an amount which the commissioner may collect, after the decision of the board has become final, in excess of the tax computed in accordance with the final decision of the board.
The petition must be dismissed, and it is so ordered.