#### THE WASHINGTON WATER POWER COMPANY v. THE UNITED STATES.

[No. 34092.

Decided February 14, 1921.]

*On the Proofs.*

*Excise taxes; collections in advance.*— Special excise taxes imposed by the act of September 8, 1916, 30 Stat., 756, on corporations for carrying on a doing business and collected in advance under regulations promulgated by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury, in pursuance of the act of October 1, 1890, 26 Stat., 624, providing for the payment of all special excise taxes in advance, can not be recovered. - «

*Same; suit after taxes become due.*— Where taxes have been erroneously collected in advance, but suit has not been brought for their recovery until after they become due, there can be no recovery.

*The Reporter's*statement of the case:

*Mr. Barry Mohvm,*for the plaintiff.

*Mr. Charles H.*Bradley, with whom was *Mr. Assistant Attorney General Frank*Davis, *jr.,*for the defendant.

The following are the facts of the case as found by the court:

I. The plaintiff, The Washington Water Power Co., is and was during the period hereinafter stated a corporation organized for profit and engaged in business in the State of Washington.

II. On or about January 31, 1917, the plaintiff duly filed a return on form 707, prescribed by the Treasury Department for the return of the tax on corporations under section 407, Title IV, act of September 8, 1916 (30 Stat., 756). In this return plaintiff stated the value and amount of its capital stock, surplus; and undivided profits for the year ending June 30, 1916, and computed the amount of tax due thereon for the six months ending June 30, 1917, at the rate of 25 cents for each $1,000 of such value to be the sum of $2,977.75. . This return was accompanied by the following written statement:

*77“ The Washington Water Power Co. hereby formally protests against the filing of this return, and only does so under compulsion exerted by the collector of internal revenue. In support of its protest the company states that no return is due from it to the United States at this time under the act commonly known as the capital-stock tax law, being embraced in Title IV of the act approved September 8, 1916, and that the demand of the collector of internal revenue for the filing of such return is illegal and unauthorized.”

III. On or about March 9, 1917, the plaintiff paid to the United States collector of internal revenue for the District of Washington in said State the sum of $2,977.75, as a tax under said statute for the six months’ period ending June 80, 1917. This tax was paid voluntarily and without protest.

IV. On or about July 25, 1917, plaintiff filed another return similar in form to that described in Finding II, computing thereon the amount of tax due for the year ending June 30, 1918, to be the sum of $5,458.50. This return was also accompanied by a written statement identical with that set forth in Finding II.

V. On or about September 24, 1917, the plaintiff paid the United States collector for said district in the sum of $5,458.50 as a tax under said statute for the year ending June 30, 1918, which was computed at the rate of 50 cents for each $1,000 of plaintiff’s capital stock, surplus, and undivided profits less authorized deduction.

The payment of this tax was accompanied by the following written protest:

“The Washington Water Power Company hereby protests against the payment of taxes in the amount of $5,458.50, or any other amount, which are alleged to be due by the Collector of Internal Revenue under the-terms of tbie act commonly known as the capital stock tax law, being embraced in Title IV of the act of Congress approved September 8, 1916. That this payment is made by this company involuntarily, under duress and compulsion, and in order to avoid penalties and the institution of distraint proceedings, which it is advised by the Collector of Internal Revenue will be exacted and instituted unless payment is now made. Further, in support of its protest the Washington Water Power Company states that no tax is now lawfully due by said company to the United States under the'terms of the capital *78stock tax law, as aforesaid. Said company hereby notifies the Collector of Internal Revenue of its intention to recover said taxes illegally collected by appropriate proceedings in the courts.”

YI. On or about October 31, 1917, the plaintiff filed in the Treasury Department an application demanding a refund to it of the sum of $2,977.75, and also the sum of $5,458.50, being the amount of the taxes which it had paid as set forth in Findings III and Y. The said claim for refund was rejected by the Commissioner of Internal Revenue on or about June 14, 1918.

VII. The petition to recover in this case was filed on February 26, 19Í9.

Graham, Judge,

delivered the opinion of the court:

In this suit the plaintiff seeks to have refunded taxes collected from it under section 407, Title IV, act of September 8,1916, 39 Stat., 789, which provides as follows:

> “ Every corporation * * * shall pay annually a special excise tax with respect to carrying on or doing business by such corporation * *

The act, by its terms, provides for “ a special excise tax ” on corporations which had been doing business during the previous year of $0.50 per $1,000 of the value of the capital stock, this value to include surplus and undivided profits, the tax to be computed on the basis of the fair average value of the capital stock for the preceding year.

It is further provided in the said act as follows:

> “ Sec. 409. That all administrative or special provisions of law, including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this title, and every person, firm, company, corporation, or association liable to any tax imposed by this title shall keep such records and render, under oath, such statements and returns as shall comply with such regulations as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may from time to time prescribe.

> “The amount of such annual tax shall in all cases be computed on the basis of the fair average value of the capital stock for the preceding year: * * * and, *Provided further,*That this tax shall not be imposed upon any corpora*79tion * * * not engaged in business during the preceding taxable year.

> “Any person who carries on any business or occupation for which special taxes are imposed by this title, without having paid the special tax thereon provided, shall, besides being liable to the payment of such special tax, be deemed guilty of a misdemeanor * * * ” and goes on to provide a penalty.

Thus it appears that all administrative or special provisions, including the law relating to the assessment of taxes, are made applicable to its enforcement. The act of October 1, 1890, 26 Stat. 624, which deals with the collection of special taxes, provides for the payment of these taxes in advance.

On October 19, 1916, the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, as authorized by law, promulgated regulations which adopted, as a basis of payment, the provisions of the said act of October 1, 1890, requiring payment in advance. These regulations contained the following:

> “ 1. *Time of filing returns.*— The capital stock tax, which becomes effective January 1, 1917, will be payable in January, 1917, on returns to be made during that month for the six months ending June 30, 1917. In July, 1917, and annually thereafter, returns must again be made and the tax paid for the ensuing fiscal year.”

On January 30, 1917, the plaintiff made a return for the six months ending June 30, 1917, showing that it was liable for the payment of $2,977.76, and attached thereto a written protest against making the return. The plaintiff paid the sum above shown by its return to the Collector of Internal Revenue, the tax being upon the basis of this return, without protest. On the 26th of July, 1917, the plaintiff , made another return in the sum of $5,458.50, to which was attached a protest, and on the 13th day of September, 1917, paid this sum to the Collector of Internal Revenue, attaching a protest against payment.

On October 28, 1917, the plaintiff filed with the Treasury Department an application for the refund of the aforesaid sums of money, which application was, on June 14, 1918, rejected and denied by the collector of internal revenue. *80The moneys have never been refunded. This suit was filed February 26, 1919, for the recovery of these two sums so paid.

From the above quotations from the act it will be seen that the tax is spoken of in the act as “ a special excise tax with respect to carrying on or doing business,” so that there can be no question that Congress intended it to be what it called it, namely, “ a special excise tax.” The capital stock of the plaintiff corporation was a proper subject for taxation by the Government, and within its constitutional powers of taxation, and the tax was due after the passage of the act and the promulgation of the said regulations by the Treasury Department. The presumption will be in favor of the legality of the act and that Congress performed its duties, with the burden upon the plaintiff to show that the taxes it seeks to recover were not due; *(Arthur*v. Unkart, 96 U. S., 118; *Union Trust Co.*v. *United*States, 55 C. Cls. 424) and this the petitioner has failed to do.

The contention is that the tax was illegal because it was assessed and collected in advance under the regulations of the Treasury Department. The matter might be disposed of without further comment on the familiar principle that a suit can not be maintained to recover taxes once paid, and which were, in fact, due, because the manner of collecting the tax was not authorized. *Schafer*v. *Craft,*144 Fed. 907; *Anderson*v. Farmers’ *Loan & Trust Co.,*241 Fed. 322-829.

However, without regard to the question of advance payment, if these taxes were due, when collected, and had not been paid in advance, they would have been due and payable, the first installment on July 1, 1917, and the last installment on July 1, 1918; so that, at the time this suit was brought on February 26, 1919, these taxes would have been due and payable over 7 months, and consequently the money for their payment was properly in the hands of the Treasury Department. If these taxes being due had not been paid, they would still be due and payable. Thus, thi« seems to be an effort to compel the Treasury to take the money out of one hand and pass it into the other, without any benefit accruing to the petitioner.

*81It may be well to point out that, as appears from the foregoing quotations from it, the act itself contemplated the payment of this tax as a tax upon the right to the “carrying on or doing business,” computed on the basis of the “ fair average value of the capital stock for the preceding year ” — that is, a corporation must pay a tax on its capital stock for the preceding year in order to do business for the coming year.

In the light of the foregoing, it is clear that the interpretation of the act by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, providing for payments in advance, was right. If another interpretation might have been put upon the act, it would have to be shown that the interpretation was clearly erroneous. *Moore's*case, 95 U. S. 760. This does not appear.

The petition is dismissed, and it is so ordered.

Hat, *Judge;*Downey, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.