Source: https://www.legalcrystal.com/case/82508/dollar-savings-bank-vs-united-states
Timestamp: 2019-04-18 18:51:47+00:00

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The ninth section of the Internal Revenue Act of 1866 subjects to the tax of five percent laid on the undistributed sum or sums made and added during the year to their surplus or contingent funds by banks and savings institutions generally, such sum or sums, when made and added to such funds even by savings banks without stockholders or capital stock, and which do the business of receiving deposits to be lent or invested for the sole benefit of their depositors.
2. A construction of a proviso to an act which makes the proviso plainly repugnant to the body of the act is inadmissible.
3. The construction given to the Internal Revenue Act by Commissioners of Internal Revenue, even though published in an Internal Revenue Record, is not a construction of so much dignity that a reenactment of the statute subsequent to the construction's having been made and published is to be regarded as a legislative adoption of that construction, especially not when the construction made a proviso to an act repugnant to the body of the act.
4. By the Internal Revenue law, the United States are not prohibited from adopting the action of debt or any other common law remedy for collecting what is due to them. This is true on general principles.
5. Under the Internal Revenue Act of July 13, 1866, "taxes may be sued for and recovered in the name of the United States in any proper form of action."
6. The requirement by statute on all banks to pay a tax of a certain sum, percent, on all undistributed earnings made or added during the year to their contingent funds is a charge of a certain sum upon the banks, and without assessment makes the banks a debtor for the sum prescribed.
institutions, and insurance companies shall pay the said tax, and are hereby authorized to deduct and withhold from all payments made on account of any dividends or sums of money that may be due and payable as aforesaid, the said tax of five percentum. And a list or return shall be made and rendered to the assessor, . . . on or before the tenth day of month following that in which any dividends or sums of money become due or payable as aforesaid, and said list or return shall contain a true and faithful account of the amount of taxes as aforesaid, and there shall be annexed thereto a declaration of the president, cashier, or treasurer of the bank, trust company, savings institution, or insurance company, under oath or affirmation, in form and manner as may be prescribed by the Commissioner of Internal Revenue, that the same contains a true and faithful account of the taxes as aforesaid. And for any default in the making or rendering of such list or return, with such declaration annexed, the bank, trust company, savings institution, or insurance company making such default shall forfeit as a penalty the sum of $1,000, and in case of any default in making or rendering said list or return, or of any default in the payment of the tax as required, or any part thereof, the assessment and collection of the tax and penalty shall be in accordance with the general provisions of law in other cases of neglect and refusal. "
" Provided that the tax upon the dividends of life insurance companies shall not be deemed due until such dividends are payable; nor shall the portion of premiums returned by mutual life insurance companies to their policyholders, nor the annual or semiannual interest allowed or paid to the depositors in savings banks or savings institutions, be considered as dividends."
The view of the government was that this act required a tax of five percent to be levied and collected, amongst other things, on sums added during the year by the Dollar Savings Bank, the defendant in the case, to its surplus or contingent fund, without regard to the character of the bank, or the nature and purpose of that fund.
true and faithful account of the taxes aforesaid."
The Dollar Savings Bank, it seemed, had accordingly made no return during either of the years mentioned in the declaration, not being required to do so by the Commissioner of Internal Revenue.
on the first days of July and January in each year. And we find, if the court should be of opinion, on this state of facts, that the plaintiff is entitled to recover, a verdict for the United States for the sum of $5,356, to which is to be added, if the court should be of opinion that plaintiff is entitled to interest on the semiannual taxes from the time they were due and payable, the further sum of $1,100; but if the court should be of opinion on the said facts so found that the plaintiff is not entitled to recover under the law, then we find for the defendant."
1st. Holding that the Act of Congress authorized the levy and collection of the tax.
2d. Holding that an action of debt was maintainable for the recovery of the tax.
No question was made in the court below as to whether debt was the proper form of action, nor any question except as to the liability of the savings bank to pay the tax.
The facts found by the special verdict are that the plaintiff in error is a banking institution created by the laws of the State of Pennsylvania, without stockholders or capital stock, and doing the business of receiving deposits to be loaned or invested for the sole benefit of its depositors; that the charter authorizes the retention of a contingent fund accumulated from the earnings to the extent of ten percentum of its deposits for the security of its depositors; that the bank has earned and added to the said contingent fund, or undistributed sum, from July 13, 1866, to December 31, 1870, one hundred and seven thousand dollars, and that such earnings were carried to and added to said contingent or undistributed fund semiannually, on the first days of January and July in each year.
"There shall be levied and collected a tax of five percentum on all dividends in scrip or money thereafter declared due, whenever and wherever the same shall be payable to stockholders, policyholders, or depositors, or parties whatsoever, including nonresidents, whether citizens or aliens, as part of the earnings, income, or gains of any bank, trust company, savings institution, and of any fire, marine, life, inland insurance company, either stock or mutual, under whatever name or style known or called in the United States or territories, whether specially incorporated or existing under general laws, and on all undistributed sum or sums made and added during the year to their surplus or contingent funds. "
This tax the banks, trust companies, savings institutions, and insurance companies are required to pay, and they are authorized to deduct it from all payments made on account of any dividends or sums of money that may be due and payable as aforesaid. It is, however, only so much of the tax as is levied upon dividends or sums of money due and payable to stockholders, policyholders, or depositors &c.;, which they are authorized to deduct. Thus it appears the tax is laid upon two subjects -- the one dividends or sums due and payable, and the other the undistributed surplus of gains or earnings carried to a surplus or contingent fund. These subjects, though together making up the entire net earnings, are distinct from each other, and they are thus treated throughout the section as well as throughout other sections of the act. If the portion of the act which we have quoted were all, it would not admit of a doubt that both these subjects -- the dividends, or annual or semiannual payments, and the sums added to the contingent fund -- are made taxable.
" Provided that the tax upon dividends of life insurance companies shall not be deemed due until such dividends are payable; nor shall the portion of premiums returned by mutual life insurance companies, nor the annual or semiannual interest allowed or paid to the depositors in savings banks or savings institutions be considered as dividends."
But so far as it relates to savings banks, the only subject of the proviso is the annual or semiannual interest allowed or paid to the depositors. It makes no reference to the undistributed surplus which may be carried to a surplus fund. That it leaves as it was in the body of the section, subject to the tax therein imposed. And to us it appears quite plain that such was the intention of Congress. Had it been the purpose to exempt savings banks from liability to pay the tax on both the interest paid to its depositors and on all undistributed sums carried to the surplus fund, the plain mode of expressing such a purpose was to say in the proviso that such banks should be excepted from the operation of the section. If such was the purpose, why except them expressly from the operation of a part of the section only? Why take out one subject of taxation specifically and leave the other unmentioned? And still more. If, as the plaintiff in error contends, it was intended that savings banks should pay no tax on either of the two subjects mentioned in the body of the section, why were such banks mentioned in the section at all? The broad construction of the proviso contended for makes it plainly repugnant to the body of the act, and it is therefore inadmissible.
reduced internal taxation, employed substantially the same language respecting savings banks as that contained in the act of 1866. In view of this, the plaintiffs in error argue that Congress required the Commissioner to prescribe what returns savings banks should make; that this made it his duty to put a construction on the law; that he did so, and held that such institutions were not required to return undistributed earnings carried to a surplus fund, and that after this practical construction had been made and acted upon more than three years, Congress reenacted the tax, reduced in amount, in the same words. Hence, it is inferred, the construction given by the Commissioner was adopted. It is doubtless a rule that when a judicial construction has been given to a statute, the reenactment of the statute is generally held to be in effect a legislative adoption of that construction. This, however, can only be when the statute is capable of the construction given to it and when that construction has become a settled rule of conduct. The rule, we think, is inapplicable to this case. In the first place, the decisions of the Internal Revenue Commissioner can hardly be denominated judicial constructions. That officer was not required by the law to prescribe what returns savings banks were required to make. That was prescribed by the act of Congress itself, and he had no power to dispense with the requisition. There is therefore no presumption that his decisions were brought to the knowledge of Congress when the Act of 1870 was passed. And again, the construction he gave is an impossible one, for, as we have seen, it makes the proviso plainly repugnant to the body of the section.
We are constrained, then, to hold that the act of Congress does impose upon the plaintiffs in error the tax to recover which the present suit was brought.
The second error assigned is that the circuit court erred in holding that an action of debt is maintainable in that court for the recovery of the taxes.
and it is not clear that it may first be raised here. But if it may, the answer must be that the taxes may be recovered in an action of debt brought in the circuit court.
The argument in support of the assignment of error is that the United States has no common law; that the thirty-fourth section of the Judiciary Act enacts that the laws of the several states shall be the rules of decision in the trial of actions at common law, of which debt is one; that the act of Congress which imposes the tax on savings banks provides a special remedy for its assessment and collection, and that it is a principle of the common law of Pennsylvania that when a statute creates a right and provides a particular remedy by which that right may be enforced, no other remedy than that afforded by the statute can be used.
"In case of any default in making or rendering said list or return or any default in the payment of the tax as required or any part thereof, the assessment and collection of the tax and penalty shall be in accordance with the general provisions of law in other cases of neglect and refusal."
What those general provisions are may be seen in other sections of the act which prescribe assessments, delivery thereof to the collectors, and distraint if necessary.
It must also be conceded to be a rule of the common law in England, as it is in Pennsylvania and many of the other states, that where a statute creates a right and provides a particular remedy for its enforcement, the remedy is generally exclusive of all common law remedies.
"And taxes may be sued for and recovered in the name of the United States in any proper form of action before any circuit or district court of the United States for the district in which the liability for such tax may have been or may be incurred or where the party from whom such tax is due may reside at the time of the commencement of said action."
contingent funds. There was no occasion or room for any other assessment. This was a charge of a certain sum upon the bank, [ Footnote 15 ] and without more it made the bank a debtor.
We think, therefore, the second assignment of error cannot by sustained.
14 Stat. at Large 138.
5 Internal Revenue Record 60.
The court gave no interest, because it was admitted that the savings bank was not reprehensibly in default, and that its refusal to pay the tax was induced by the inconsistent action and the conflicting opinions of the Internal Revenue Department.
Act of 1866, § 120.
Magdalen College Case, 11 Reports, 74; King v. Allen 15 East 333.
7 Reports 32; Potter's Dwarris on Statutes 151, 152.
Commonwealth v. Baldwin, 1 Watts 54; People v. Rossiter, 4 Cowen 143; United States v. Davis, 3 McLean 483; Same v. Williams, 5 id. 133; Commonwealth v. Johnson, 6 Pa.St. 136; United States v. Greene, 4 Mason 427; Same v. Hoar, 2 id. 311; Same v. Hewes, Crabbe 307.
See pp. 155, 299, 300, 339; see also Comyn's Digest, title "Debt," A. 9; 1 Rolle 383.
38 U. S. 13 Pet. 486.
14 Stat. at Large 111.
Attorney General v. _____, 2 Anstruther 558.
I dissent from the judgment of the Court on the ground that an action will not lie for a tax of the kind in question in this case unless it be first entered on the assessment roll. The assessment roll should be regarded as conclusive as to the persons or things liable to taxation. If it is not, if the matter is left open so that any person or corporation may be prosecuted for taxes at any time, it leaves the citizen exposed to many hazards and to the mercy of prying informers when the evidence by which he could have shown his immunity or exemption has perished. If an action of debt without an assessment can be brought, what is the limit of time within which it must be brought? To what statute of limitations is the government subject? It seems to me that the decision introduces a new principle in the system of taxation dangerous to the rights of the citizen and the peace and security of society.

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