Source: https://supreme.justia.com/cases/federal/us/352/306/
Timestamp: 2019-04-21 08:12:06+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 352 › United States v. Allen-Bradley Co.
United States v. Allen-Bradley Co.
Under § 124(f) of the Internal Revenue Code of 1939, as amended, the War Production Board had authority to certify that only a part of the cost of essential wartime expansion of production facilities of a private manufacturer was "necessary in the interest of national defense," so as to be amortizable within five years or less under §§ 23(t) and 124 for income tax purposes. Pp. 352 U. S. 306-311.
the task. However, business exhibited a reluctance to build new war plants because of widespread fears that such facilities would become wholly useless when the emergency had passed. In response to these fears, Congress acted to lessen the financial risks involved in the private construction of emergency facilities. Among other things it amended the 1939 Internal Revenue Code by adding §§ 23(t) and 124, [Footnote 1] which allowed business to write off the cost of new facilities as a deduction against taxable income within a period of five years or less, regardless of the actual economic life of the facilities, provided they had been certified by the proper executive agency as "necessary in the interest of national defense." This accelerated amortization privilege generally enabled those businesses receiving it to reduce their federal income taxes, with the net result that a large part of the construction costs was at least temporarily, borne by the Federal Government through a reduction in its tax receipts.
covered by it were necessary in the interest of national defense, but only up to a specified percentage of their total cost. This "partial certification" was made pursuant to a policy adopted by the Board in 1943 that it would certify essential facilities, which could reasonably be expected to have peacetime utility, only to the extent that their costs were attributable to the wartime increase in prices. Respondent accepted these partial certifications, proceeded with the expansion, and, in its tax returns for 1944 and 1945, deducted an amount based on the accelerated amortization of that part of the total cost which had been certified by the Board.
In 1953, respondent first raised the claim which is the basis of this suit -- that the Board had no authority to certify only part of the cost of a necessary emergency facility. Respondent concedes that the Board had discretion to refuse to issue any certificate at all, but contends that, once it decided that a facility was necessary to the national defense, its function was at an end, and that any attempt by it to limit the certification to a part of the cost of such facility was a nullity. Therefore, respondent contends, it was entitled to accelerate the amortization of the full cost of those facilities covered by the three partial certificates, and not just that part of the full cost which had been certified by the Board. On the basis of these contentions, respondent filed the present action in the Court of Claims to recover an alleged overpayment of its 1944 and 1945 income taxes. The Court of Claims accepted respondent's arguments and rendered judgment for it. 134 Ct.Cl. 800. We granted certiorari, 351 U.S. 981, because of the conflict between this decision and that of the Court of Appeals for the Second Circuit in Commissioner v. National Lead Co., 230 F.2d 161.
"(1) There shall be included only so much of the amount . . . as is properly attributable to such construction . . . after December 31, 1939, as [the War Production Board] has certified as necessary in the interest of national defense during the emergency period. . . ."
revenue to the Government caused by accelerated amortization before issuing a certificate. The power to certify only a portion of the cost gave them a more flexible instrument to balance these conflicting objectives.
work in practice. They could not foresee the many problems that would arise in the administration of this sweeping power which could be used to encourage expansion of any industry producing materials useful in the all-out war effort. Therefore, it is not strange that the provision was loosely drawn and, in some respects, imprecise. However, it would have been strange in these circumstances if Congress had embarked on this new course without leaving wide discretion for flexible administration in the light of the day-to-day grind of experience. The language of § 124(f) lends itself to such flexibility.
We hold that the Board had authority under § 124(f) to issue certificates, as in this case, certifying that only a part of the cost of essential wartime improvements was necessary to the national defense. Therefore, the judgment of the Court of Claims must be reversed.
54 Stat. 998-1003, as amended, 26 U.S.C. §§ 23(t), 124.
See War Department Regulations, Issuance of Necessity Certificates, 7 Fed.Reg. 4233 (1942); War Production Board Regulations, Issuance of Necessity Certificates, 8 Fed.Reg. 16964 (1943). And compare Treas.Reg. 111, § 29.124-6.
55 Stat. 4, 55 Stat. 757, 56 Stat. 50, 56 Stat. 850 and 59 Stat. 525.
S.Res. 71, 77th Cong., 1st Sess. (87 Cong.Rec. 1615), and S.Res. 6, 78th Cong., 1st Sess. (89 Cong.Rec. 331).
that Congress did not interfere with the authority claimed by the Board.
However, in my view, the scope of the Board's powers need not be reached in this case, because, for the reasons given by Judge Lumbard in his opinion for the unanimous Court of Appeals in Commissioner v. National Lead Co., 230 F.2d 161, I think it clear that respondent cannot maintain the present action. On that basis, I join in the Court's decision.
National Lead Co. v. Commissioner, 23 T.C. 988; Allen-Bradley Co. v. United States, 134 Ct.Cl. 800.
"§ 124(e)(1). As used in this section, the term 'emergency facility' means any facility, land, building, machinery, or equipment, or part thereof, the construction, reconstruction, erection, installation, or acquisition of which was completed after December 31, 1939, and with respect to which a certificate under subsection (f) has been made. . . ."
"§ 124(f). In determining, for the purposes of subsection (a) . . . the adjusted basis of an emergency facility --"
"(1) There shall be included only so much of the amount otherwise constituting such adjusted basis as is properly attributable to such construction, reconstruction, erection, installation, or acquisition after December 31, 1939, as either the Secretary of War or the Secretary of the Navy has certified as necessary in the interest of national defense during the emergency period, which certification shall be under such regulations as may be prescribed from time to time by the Secretary of War and the Secretary of the Navy, with the approval of the President."
"§ 124(f)(3). . . . In no event and notwithstanding any of the other provisions of this section, no amortization deduction shall be allowed in respect of any emergency facility for any taxable year --"
"(C) unless a certificate in respect thereof under paragraph (1) shall have been made (i) prior to the filing of the taxpayer's return for such taxable year, or prior to the making of an election . . . to take the amortization deduction, or (ii) before December 1, 1941, whichever is later. . . ."
On December 17, 1943, the powers under these sections were transferred by the President to the War Production Board.

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