Case ID: us-ct-cl_33/html/0505-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Peceiiam", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THE COMMISSIONERS OF THE SINKING FUND OF LOGAN COUNTY AND THE COUNTY OF LOGAN, KY., v. THE UNITED STATES.
    [31 C. Cls. R., 23; 169 U. S. R., 255.]
    
      On the claimants'1 Appeal.
    
    A railroad company declares dividends and withholds the internal-revenue tax thereon from the stockholders as directed by the act 30th June, 1864. It also pays taxes on surplus profits not declared as dividends, but used to improve and augment the corporate property. Subsequently a stock dividend is declared on which no internal-revenue tax is paid. The claimants being exempt from taxation, under the decision of the Supreme Court, as “ a portion of the sovereign power of a State,” Congress pass an act authorizing the Commissioner of Internal Revenue to examine their claim for a refund of taxes illegally collected. The Commissioner, with the approval of the Secretary, allows a refund both for taxes paid on dividends declared and taxes paid on surplus profits not distributed as dividends, but used to increase and improve the property of the corporation. The Comptroller of the Treasury allows the former, hut refuses to allow the latter.
    The court below decides:
    1. The Commissioner of Internal Revenue is not authorized by law to refund a tax on the profits of a railroad corporation which were never distributed or paid over to the shareholders as dividends. (Acts 80th June, 1864 (13 Stats. L., p. 223, § 122); 85th February, 1893 (27 id., p. 477).
    2. The Act 1893 (supra) is simply remedial. It does not create a claim or declare a right, but merely relieves certain claims fioni the bar of a statu'e of limitations, leaving the rights of the parties to be determined by the internal-revenue-tax act 1864.
    3. The law of corporations knows no owner of corporate property save the company. To undistributed, unapportioned money which .has not become the shareholders by being declared a dividend, a shareholder can assert no right, constitutional, legal, or natural.
    4. The purpose of th6 Act 1864 (§§ 120, 122) was to impose a tax on all dividends derived from all corporate bodies, whether the stock was owned by citizens or aliens, by residents or nonresidents; and the policy of the act was to make the corporate bodies collect and pay over the tax. But profits not declared as dividends were not the property of any individual shareholder nor entitled to his personal immunity from taxation.
    5. There is no law which authorizes the Commissioner of Internal Revenue to refund to one person a tax imposed on the property of another, or which authorizes the refund of a tax which was legally imposed and collectable when it was paid.
    The decision of the court below is affirmed on the same grounds.
   Mr. Justice Peceiiam

delivered the opinion of the Supreme Court.