#### CHARLES M. COTTERMAN v. THE UNITED STATES1

[No. D-813.

Decided June 14, 1926]

*On the Proofs*

*Income tqx; American citizens residing in and deriving income from Philippine Islands.*— A citizen of the United States, domiciled in the Philippine Islands, is subject to be taxed by the United States on income "derived by him from sources in the Philippine Islands.

*The Reporter’s*statement of the case:

*Messrs. Walter E. Barton*and *James J. Lynch*for the plaintiff. *Messrs. William. F. Norman*and *Daniel R. Williams*were on the briefs.

*416
      *Mr. Cliarles T. Handler,*with whom was *Mr. Assistant Attorney General Herman J.*Galloway, for the defendant. *Mr. Fred K. Dyar*was on the brief.

The court made special findings of fact, as follows:

I. Plaintiff is now and always has been a citizen of the United States, and since November, 1900, he has been a resident of the Philippine Islands and domiciled therein.

II. Plaintiff did not make returns to the United States of his income for the calendar years 1918, 1919, and 1920 under the revenue act of 1918, and pay taxes claimed to be due thereon to the United States until he was compelled to do so by officials of the Treasury Department.

III. On or about August 14, 1928, plaintiff, who was then in Nebraska, was compelled by officers of the Bureau of Internal Revenue to make returns of his income for the calendar years 1918, 1919, and 1920, and to pay the taxes shown to be due thereon to the United States. Plaintiff made said returns and paid said taxes under protest.

IV. The returns which plaintiff made as aforesaid showed a net income of $43,300 and a normal tax and surtax of $8,766 for 1918; a net income of $55,500 and a normal tax and surtax of $11,000 for 1919; and a net income of $31,200 and a normal tax and surtax of $4,154 for 1920. Plaintiff deducted as a credit $4,000 representing income taxes paid by bim to the Philippine Islands during said years and paid the balance of $19,920 for which this suit is brought.

V. The income returned as aforesaid by the plaintiff, and on which the taxes sought to be recovered back in this proceeding were levied and collected was derived from sources within the Philippine Islands.

VI. In the returns made by plaintiff he stated that the income returned by him was derived from business, dividends, salaries, interest, etc.

VII. During said calendar years 1918, 1919, and 1920, and for several years prior thereto, citizens of the Philippine Islands and residents thereof who were citizens of England, France, China, Japan, and other foreign countries, owned stores and were engaged in the retail store business in the city of Manila and other parts of the Philippine Islands .and derived income from such businesses.

*417VIII. By an act approved March 7, 1919 (Act No. 2833, Public Laws of the Philippine Islands, vol. 14, p. 221), the Philippine Legislature established the income tax, which act contains the following provisions:

“ Sec. 1. (a) There shall be levied, assessed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources by every individual a citizen or resident of the Philippine Islands, a tax of two per centum upon such income; and a like tax shall be levied, assessed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources within the Philippine Islands by every individual a nonresident alien, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise.

“ (b) In addition to the income tax imposed by subdivision (a) of this section, herein referred to as the normal tax, there shall be levied, assessed, collected, and paid upon the total net income of every individual, or, in case of a nonresident alien, the total net income received from all sources within the Philippine Islands, an additional income tax, herein referred to as the additional tax of * * *.

“ (c) The foregoing normal and additional tax rates shall apply to the entire net income, except as hereinafter provided, received by every taxable person in the calendar year nineteen hundred nineteen and in each year thereafter. *****

“ Sec. 33. For the purposes of this law the terms £ alien ’ and 5 foreign government,’ shall be deemed to include the citizens and Government of the United States of America, including the political subdivisions thereof: Provided, *however,*That citizens of the United States residing in the Philippine Islands shall not be subject to taxation under this law as to their incomes derived from sources within the United States if it is shown that the tax thereon has been paid in accordance with the laws of that country.

“ Sec. 34. This act shall take effect on January 1,1920.”

IX. By an act approved March 26, 1920 (Act No. 2926, Public Laws of the Philippine Islands, vol. 15, p. 260), the Philippine Legislature amended certain sections of the act numbered 2833, increasing the normal and additional tax rates. Section 33 was not affected by the later amendatory act. This act was made to take effect January 1, 1921, except as to certain provisions.

*418X. On or about March 12, 1924, plaintiff duly filed a claim, for refund in the amount of $19,920, and on or about May 31, 1924, the Commissioner of Internal Bevenue rendered his decision thereon, in which he disallowed and rejected said claim.

The court decided that plaintiff was not entitled to recover.

Writ of certiorari denied.

Booth, Judge,

delivered the opinion of the court:

The facts in this case appear in the stipulated findings. It is not necessary to repeat them. The suit is to recover income taxes for the years 1918, 1919, and 1920. The taxes ■were paid under protest, a claim for refund was denied, and. jurisdiction is conceded. The plaintiff relies upon a single contention predicated upon a construction of the revenue laws under which the taxes were levied, assessed, and collected.

The revenue act of 1918, 40 Stat. 1051, provides in part by section 210 thereof as follows:

> “ That in lieu of the taxes imposed by subdivision (a) of section 1 of the revenue act of 1916, and by section 1 of the revenue act of 1911, there shall be levied, collected, and paid for each taxable year upon the net income of every individual a normal tax at the following rates. * * * ”

Plaintiff’s argument revolves exclusively around the words “ every individual,” and by a process of deduction, inference, and analysis, an insistence is put forward that the act was not intended to tax a citizen of the United States domiciled in the Philippine Islands and accumulating his income exclusively from property and investments located and made therein. We are unable to agree to this contention. Paragraph 2 of section 222 of the act seems to clearly refute the argument, and the other features of the case have been decided adversely to the contention in *Cook*v. *Tait,*265 U. S. 47.

The petition will be dismissed. It is so ordered.

Gkaham, *Judge;*Hat, *Judge;*and Campbell, *Chief Jus*tice. concur.