Source: http://openjurist.org/357/us/63
Timestamp: 2015-09-02 10:41:40
Document Index: 528539540

Matched Legal Cases: ['§ 1346', '§ 1346', '§ 1346', '§ 1346', '§ 1346', '§ 1346', '§ 3226', '§ 7422', '§ 7422', '§ 7422', '§ 7422', '§ 1346', '§ 1346', '§ 3226', '§ 7422', '§ 7422']

357 US 63 Flora v. United States | OpenJurist
357 U.S. 63 - Flora v. United States Home
357 US 63 Flora v. United States 357 U.S. 63
78 S.Ct. 1079
2 L.Ed.2d 1165
The issue in this case is whether a taxpayer must pay the full amount of an income tax deficiency before he may challenge its correntness by a suit for refund under 28 U.S.C. § 1346(a)(1), 28 U.S.C.A. § 1346(a)(1).
During 1950 petitioner suffered losses on the sale of certain commodities and futures. He reported them as ordinary losses, but the Commissioner of Internal Revenue characterized them as capital losses. A deficiency assessment was levied in the amount of $28,908.60, including interest. Petitioner made two payments that totaled $5,058.54, and then submitted a claim for refund of that amount. The claim was disallowed. On Aug. 3, 1956, petitioner brought this action under 28 U.S.C. § 1346(a)(1), 28 U.S.C.A. § 1346(a)(1), for refund. The United States moved to dismiss for want of jurisdiction and for failure to state a claim upon which relief could be granted. The district judge held that because petitioner had not paid the full amount of the deficiency he 'should not maintain' the action. Because the question had not been resolved by the Court of Appeals, however, he deemed it advisable to pass upon the merits, and upon doing so entered judgment for defendant United States. 142 F.Supp. 602, 604. The Court of Appeals for the Tenth Circuit vacated the judgment and remanded with instructions to dismiss, holding that the complaint 'failed to state a claim' because petitioner had not paid the entire assessment for the period in question. 246 F.2d 929, 931.1 We granted certiorari, 355 U.S. 881, 78 S.Ct. 150, 2 L.Ed.2d 112, to resolve the conflict between that decision and Bushmiaer v. United States, 8 Cir., 230 F.2d 146.2
The pertinent jurisdictional statute, 28 U.S.C. § 1346(a)(1), 28 U.S.C.A. § 1346(a)(1), reads as follows:
Section 1346 was originally enacted as Section 1310(c) of the Revenue Act of 1921.3 Its essential language seems to have been copied from R.S. § 3226, the predecessor of the present claim-for-refund statute, 26 U.S.C. (Supp. V) § 7422(a), 26 U.S.C.A. § 7422(a). Those statutes use language identical to that appearing above to provide that no suit for the refund of a 'tax,' 'penalty,' or 'sum' shall be maintained until similar relief has been sought from the Secretary or his delegate.4 The meaning that has been ascribed to this language in the claim-for-refund statute provides the key to what Congress intended when it used that language in the jurisdictional provision.
The original claim-for-refund statute, Section 19 of the Revenue Act of July 13, 1866, provided that no suit should be maintained in any court for the recovery of 'any tax alleged to have been erroneously or illegally assessed or collected, until appeal shall have been duly made to the commissioner of internal revenue * * *.'5 On this 'appeal' the Commissioner was empowered to 'remit, refund, and pay back' all taxes or penalties improperly assessed or collected.6 When the appeal requirement was restated in Section 3226 of the Revised Statutes,7 Congress added the 'penalty' and 'sum' clauses, bringing together for the first time the three-way division that survives in 26 U.S.C. (Supp. V) § 7422(a), 26 U.S.C.A. § 7422(a), and 28 U.S.C. § 1346(a)(1), 28 U.S.C.A. § 1346(a)(1). The revisers left no indication of what significance, if any, was to be attached to this addition.
During the period of this formative legislation refund suits could not be brought against the United States because of its sovereign immunity. Tax litigation took the form of an action of assumpsit against the collector. See City of Philadelphia v. Diehl, 5 Wall. 720, 18 L.Ed. 614.8 Such suits were of course subject to the provision in Section 19 of the 1866 Act that they must be preceded by 'appeal' to the Commissioner. The meaning of that command, which later became R.S. § 3226 and eventually, as amended, 26 U.S.C. (Supp. V) § 7422(a), 26 U.S.C.A. § 7422(a), was considered in Cheatham v. United States, 92 U.S. 85, 23 L.Ed. 561. There, in response to an appeal, the Commissioner of Internal Revenue had set aside the first assessment of taxpayer's 1864 income taxes and directed the local assessor to make a second one. The taxpayer paid the second assessment and sued the collector for refund. The Court held that by failing to appeal from the second assessment the taxpayer failed to comply with Section 19 and hence had no right of action. In the course of its opinion the Court made this careful statement of the remedies then available to taxpayers who sought to contest the correctness of their tax:
'* * * While a free course of remonstrance and appeal is allowed within the departments before the money is finally exacted, the general government has wisely made the payment of the tax claimed, whether of customs or of internal revenue, a condition precedent to a resort to the courts by the party against whom the tax is assessed. * * * If the compliance with this condition (that suit must be brought w