Opinion
Plaintiff brought this suit to recover $4,800 collected for the first capital stock tax year ending June 30, 19833, under section 215 of the National Industrial Recovery Act, 48 Stat. 207, approved June 16, 1933.
Special Findings of Fact.
1. Plaintiff is a Delaware corporation doing business in the United States, with its principal office in Washington, D.C. It was organized July 18, 1923.
2. Under the provisions of section 215 of the National Industrial Recovery Act of June 16, 1933, 48 Stat. 207, plaintiff was required to file a capital stock tax return for the year ending June 30, 1933. Except for extensions subsequently granted, that return was due July 31, 1933. However, the Commissioner of Internal Revenue granted an extension of time for the filing of the return to August 30, 1933.
3. Prior to the expiration date as extended, plaintiff on August 22, 1933, mailed to the collector of internal revenue at Baltimore, Maryland, a capital stock tax return (Form 707) for the year ending June 30, 1933. That return showed a declared value of plaintiff's entire capital stock of $6,800,000 as of December 31, 1932, and a tax due of $6,800. Plaintiff paid that tax September 1, 1933, and no part thereof has been credited or refunded to plaintiff.
4. August 24, 1933, the Commissioner granted a further extension of time until September 29, 1933, for filing all Federal capital stock tax returns for the year ending June 30, 1933.
5. September 28, 1933, plaintiff executed and mailed to the collector of internal revenue at Baltimore, Maryland, another capital stock tax return for the year ending June 30, 1933, which it denominated "First Return." That return was received by the collector September 29, 1933, and showed a declared value for plaintiff's entire capital stock of $2,000,000 as of December 31, 1932, and a tax due of $2,000.
6. At all times during the calendar year 1933 plaintiff was a subsidiary corporation of the Great Northern Railroad Company, its entire capital stock being owned by that company. The railroad company and its subsidiaries, including plaintiff, were authorized to file, and did file, consolidated Federal income and excess profits tax returns for the calendar year 1933 in accordance with the provisions of section 141 of the Revenue Act of 1932, 26 U.S.C.A. § 141.
7. The consolidated group, consisting of the Great Northern Railroad Company and its subsidiaries, including plaintiff, sustained a net loss for Federal income and excess profits tax purposes for the calendar year 1933 and filed a consolidated return reflecting that net loss. The net income of plaintiff for Federal income and excess profits tax purposes for the calendar year 1933, without reference to the consolidated returns provisions, was $650,172.78.
8. September 29, 1933, plaintiff filed a claim for the refund of $4,800 of the capital stock tax of $6,800 which had been paid by it September 1, 1933, on the ground that the return as filed by it on September 29, 1933, which was within the period for filing capital stock tax returns as extended, should be accepted as its first return in lieu of the return filed August 22, 1933. February 23, 1934, the Commissioner rejected that claim on the ground that the documents filed August 22, 1933, should be considered plaintiff's first return and therefore, under the statute, could not be amended to permit a different declared value for its capital stock.
9. August 17, 1937, plaintiff filed a further claim for refund of the entire capital stock tax of $6,800 paid by it on September 1, 1933, for the year ending June 30, 1933, on the ground that section 215 of the National Industrial Recovery Act was unconstitutional. October 18, 1937, the Commissioner notified the plaintiff by registered mail of his rejection of that claim.
10. The capital stock tax return of plaintiff as filed on August 22, 1933 (referred to in finding 3), was prepared by plaintiff's secretary, the officer charged with the duty of preparing that return. In its preparation that officer collaborated with plaintiff's comptroller in order to arrive at a fair estimate of plaintiff's net income for the calendar year 1933, and also consulted various attorneys as to the general practice in the preparation of a return of that character. On the basis of information that the general practice was to multiply the estimated income by eight in order to arrive at a declared value of capital stock which would result in no excess profits tax, plaintiff's secretary multiplied the estimated income of $850,000 by eight and thereby determined a declared value for plaintiff's capital stock of $6,800,000.
11. At the time the capital stock tax return was filed on August 22, 1933, plaintiff's secretary was unaware, nor did he take into consideration, that consolidated returns for Federal excess profits tax purposes would be permitted for 1933 under the National Industrial Recovery Act for the consolidated group of which plaintiff was a member. On or about September 16, 1933, through the issuance by the Treasury Department of T.D. 4390, plaintiff's secretary became aware that consolidated returns would be permitted for excess profits tax purposes under the National Industrial Recovery Act. When plaintiff's secretary became aware of that fact and since he was aware that a net loss was being shown for the group, which fact was likewise known to him on August 22, 1933, he proceeded to prepare the capital stock tax return referred to in finding 5, in which the declared value of plaintiff's entire capital stock was $2,000,000 instead of $6,800,000 as shown in the return filed August 22, 1933. While it was not necessary to show any declared value in order to obviate the necessity for the payment of any excess profits tax for 1933, plaintiff's secretary used the declared value of $2,000,000 because of a provision in the statute which required the same value to be used for subsequent years and, since the same value was to be used in subsequent years, plaintiff's secretary considered that such amount might be beneficial to plaintiff in such years in the event sufficient profit was shown for the group to produce an excess profits tax liability. Neither the declared value of $2,000,000 nor the declared value of $6,800,000 was arrived at on the basis of any necessary relationship to the actual value of plaintiff's capital stock, both amounts being arbitrary in character and being set out in the returns because of the reasons heretofore stated. [Copyrighted Material Omitted] Thomas M. Wilkins, of Washington, D.C., for plaintiff.
George H. Foster, of Washington, D.C., and James W. Morris, Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, Sp. Assts. to Atty. Gen., on the brief), for defendant.
Before WHALEY, Chief Justice, and GREEN, LITTLETON, WILLIAMS and WHITAKER, Judges.
PER CURIAM.
On August 22, 1933, plaintiff filed a capital stock tax return for the first capital stock year ending June 30, 1933, and in this document a value of $6,800,000 for its capital stock at December 31, 1932, was shown. Thereafter, on September 28, 1933, plaintiff prepared, executed, and filed another return for the first capital stock tax year ending June 30, 1933, which it denominated its "First Return", in which it declared the value of its entire capital stock at $2,000,000 as at December 31, 1932. The time as extended for filing the capital stock tax return for the first year ending June 30, 1933, and for declaring a value for the capital stock, for the purpose of the capital stock and the excess profits tax, did not expire until September 29, 1933. Both documents above mentioned were filed within the time allowed by statute as extended by the Commissioner of Internal Revenue pursuant to authority conferred by statute.
A capital stock tax of $6,800 was collected on the basis of the value of $6,800,000 stated by plaintiff in the first document filed. The capital stock tax due based on the value declared in the second return, denominated by plaintiff as its "First Return" for the first capital stock tax year, was $2,000. Plaintiff duly filed a claim for refund for the difference of $4,800 which the Commissioner rejected on the ground that plaintiff was bound on the value of $6,800,000 declared in the return filed August 22, 1933. Thereafter this suit was timely instituted.
Plaintiff was entitled under the statute to amend the declaration of value as made in the return filed August 22, 1933, within the time allowed for filing its capital stock tax return for the "First Year" ending June 30, 1933. In Haggar Company v. Helvering, 60 S.Ct. 337, 340, 84 L.Ed. 340, decided January 2, 1940, the court said: " 'First return' thus means a return for the first year in which the taxpayer exercises the privilege of fixing its capital stock value for tax purposes, and includes a timely amended return for that year. A timely amended return is as much a 'first return' for the purpose of fixing the capital stock value in contradistinction to returns for subsequent years, as is a single return filed by the taxpayer for the first tax year."
Plaintiff is entitled to recover and judgment will be entered in its favor for $4,800 with interest as provided by law. It is so ordered.