Source: https://www.legalcrystal.com/case/99928/flora-vs-united-states
Timestamp: 2017-12-14 06:22:03
Document Index: 692954113

Matched Legal Cases: ['§ 1346', '§1346', '§ 1346', '§1346', '§ 1346', '§ 1346', '§ 1346', '§ 405', '§ 7422', '§ 1346', '§ 1346', '§ 1346', '§ 1310', '§ 1346', '§ 3226', '§ 3226', '§ 1346', '§ 1346', '§ 1346', '§ 7422', '§ 405', '§ 7422', '§ 1346', '§ 1346', '§ 275', '§ 250', '§ 21', '§ 119', '§ 1346', '§ 601', '§ 1346', '§ 1346', '§ 2', '§ 2', '§ 1346', '§ 1310', '§ 1346', '§ 1310', '§ 3226', '§ 1346', '§ 1346', '§ 1346', '§ 1346', '§ 1346', '§ 1346']

Flora Vs United States - Citation 99928 - Court Judgment | LegalCrystal
Flora Vs. United States - Court Judgment
LegalCrystal Citation legalcrystal.com/99928
Case Number 362 U.S. 145
Appellant Flora
flora v. united states - 362 u.s. 145 (1960) u.s. supreme court flora v. united states, 362 u.s. 145 (1960) flora v. united states no. 492, october term, 1957 argued may 20, 1958 decided .june 16, 1958 rehearing granted june 22, 1959 reargued november 12, 1959 decided march 21, 1960 362 u.s. 145 on rehearing syllabus under 28 u.s.c. § 1346(a)(1), a federal district court does not have jurisdiction of an action by a taxpayer for refund of a part payment made by him on an assessment for an alleged deficiency in his income tax. the taxpayer must pay the full amount of the assessment before he may challenge its validity in an action under §1346(a)(1). flora v. united states, 357 u. s. 63 ,.....
Flora v. United States - 362 U.S. 145 (1960)
U.S. Supreme Court Flora v. United States, 362 U.S. 145 (1960)
Under 28 U.S.C. § 1346(a)(1), a Federal District Court does not have jurisdiction of an action by a taxpayer for refund of a part payment made by him on an assessment for an alleged deficiency in his income tax. The taxpayer must pay the full amount of the assessment before he may challenge its validity in an action under §1346(a)(1). Flora v. United States, 357 U. S. 63 , reaffirmed. Pp. 362 U. S. 146 -177.
(a) The language of § 1346(a)(1) can more readily be construed to require payment of the full tax before suit than to permit suit for recovery of a part payment. Pp. 362 U. S. 148 -151.
(b) The legislative history of § 1346(a)(1) is barren of any clue to the congressional intent on this issue; but that section is a jurisdictional provision which is a keystone in a carefully articulated and quite complicated structure of tax laws; since enactment of its precursor in 1921, Congress has several times acted upon the assumption that § 1346(a)(1) requires full payment before suit; and any evidence of a contrary intent is too weak and insubstantial to justify destroying the existing harmony of the tax statutes. Pp. 362 U. S. 151 -158.
(c) In establishing the Board of Tax Appeals (now the Tax Court), Congress acted upon the assumption that full payment of the tax assessed was a condition precedent for bringing suit for refund in a District Court, and it chose to establish the Board as a different forum where the validity of an assessment could be litigated without prior payment in full. Pp. 362 U. S. 158 -163.
(d) To permit such a suit in a District Court would be inconsistent with the purpose of § 405 of the Revenue Act of 1935, which amended the Declaratory Judgment Act so as to except disputes "with respect to Federal taxes." Pp. 362 U. S. 164 -165.
(e) To permit such a suit in a District Court would generate the very problems which Congress believed it had solved by § 7422(e) of the Internal Revenue Code of 1954. Pp. 362 U. S. 165 -167.
(f) A different conclusion is not required by the administrative practice prior to 1940, nor by a few inconsequential exceptions to
the otherwise uniform belief prior to 1940 that full payment had to precede suit in a District Court for refund. Pp. 362 U. S. 167 -175.
(g) Requiring taxpayers to pay assessments in full before suing in a District Court will not necessarily subject them to undue hardships, since they may appeal to the Tax Court without first paying anything. Pp. 362 U. S. 175 -177.
Under such circumstances, normally a brief epilogue to the prior opinion would be sufficient to account for our decision. However, because petitioner, in reargument, has placed somewhat greater emphasis upon certain contentions than he had previously, and because our dissenting colleagues have elaborated upon the reasons for their
Page 362 U. S. 147
The relevant facts are undisputed and uncomplicated. This litigation had its source in a dispute between petitioner and the Commissioner of Internal Revenue concerning the proper characterization of certain losses which petitioner suffered during 1950. Petitioner reported them as ordinary losses, but the Commissioner treated them as capital losses and levied a deficiency assessment in the amount of $28,908.60, including interest. Petitioner paid $5,058.54 and then filed with the Commissioner a claim for refund of that amount. After the claim was disallowed, petitioner sued for refund in a District Court. The Government moved to dismiss, and the judge decided that the petitioner "should not maintain" the action, because he had not paid the full amount of the assessment. But since there was a conflict among the Courts of Appeals on this jurisdictional question, and since the Tenth Circuit had not yet passed upon it, the judge believed it desirable to determine the merits of the claim. He thereupon concluded that the losses were capital in nature, and entered judgment in favor of the Government. 142 F.Supp. 602. The Court of Appeals for the Tenth Circuit agreed with the district judge upon the jurisdictional issue, and consequently remanded with directions to vacate the judgment and dismiss the complaint. 246 F.2d 929. We granted certiorari because the Courts of Appeals were in conflict with respect to a question which is of considerable importance in the administration of the tax laws. [ Footnote 1 ]
Page 362 U. S. 148
The question raised in this case has not only raised a conflict in the federal decisions, but has also in recent years provoked controversy among legal commentators. [ Footnote 2 ] In view of this divergence of expert opinion, it would be surprising if the words of the statute inexorably dictated but a single reasonable conclusion. Nevertheless, one of the arguments which has been most strenuously urged is that the plain language of the statute precludes, or at the very least strongly militates against, a decision that full payment of the income tax assessment is a jurisdictional condition precedent to maintenance of a refund suit in a District Court. If this were true, presumably we could but recite the statute and enter judgment for petitioner -- though we might be pardoned some perplexity as to how such a simple matter could have caused so much confusion. Regrettably, this facile an approach will not serve.
"(1) Any civil action against the United States for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected
Page 362 U. S. 149
without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws. . . ."
It is clear enough that the phrase "any internal revenue tax" can readily be construed to refer to payment of the entire amount of an assessment. Such an interpretation is suggested by the nature of the income tax, which is "[ a ] tax . . . imposed for each taxable year," with the "amount of the tax" determined in accordance with prescribed schedules. [ Footnote 3 ] (Emphasis added.) But it is argued that this reading of the statute is foreclosed by the presence in § 1346(a)(1) of the phrase "any sum." This contention appears to be based upon the notion that "any sum" is a catchall which confers jurisdiction to adjudicate suits for refund of part of a tax. A catchall the phrase surely is, but to say this is not to define what it catches. The sweeping role which petitioner assigns these words is based upon a conjunctive reading of "any internal revenue tax," "any penalty," and "any sum." But we believe that the statute more readily lends itself to the disjunctive reading which is suggested by the connective "or." That is, "any sum," instead of being related to "any internal revenue tax" and "any penalty," may refer to amounts which are neither taxes nor penalties. Under this interpretation, the function of the phrase is to permit suit for recovery of items which might not be designated as either "taxes" or "penalties" by Congress or the courts. One obvious example of such a "sum" is interest. And it is significant that many old tax statutes described the amount which was to be assessed under certain circumstances as a "sum" to be added to the tax, simply as a
Page 362 U. S. 150
"sum," as a "percentum," or as "costs." [ Footnote 4 ] Such a rendition of the statute, which is supported by precedent, [ Footnote 5 ] frees the phrase "any internal revenue tax" from the qualifications imposed upon it by petitioner and permits it to be given what we regard as its more natural reading -- the full tax. Moreover, this construction, under which each phrase is assigned a distinct meaning, imputes to Congress a surer grammatical touch than does the alternative interpretation, under which the "any sum" phrase completely assimilates the other two. Surely a much clearer statute could have been written to authorize suits for refund of any part of a tax merely by use of the phrase "a tax or any portion thereof," or simply "any sum paid under the internal revenue laws." This Court naturally does not review congressional enactments as a panel of grammarians; but neither do we regard ordinary principles of English prose as irrelevant to a construction of those enactments. Cf. Commissioner v. Acker, 361 U. S. 87 .
We conclude that the language of § 1346(a)(1) can be more readily construed to require payment of the full tax before suit than to permit suit for recovery of a part
Page 362 U. S. 151
payment. But, as we recognized in the prior opinion, the statutory language is not absolutely controlling, and consequently resort must be had to whatever other materials might be relevant. [ Footnote 6 ]
The precursor of § 1346(a)(1) was § 1310(c) of the Revenue Act of 1921, [ Footnote 7 ] in which the language with which we are here concerned appeared for the first time in a jurisdictional statute. Section 1310(c) had an overt purpose unrelated to the question whether full payment of an assessed tax was a jurisdictional prerequisite to a suit for refund. Prior to 1921, tax refund suits against the United States could be maintained in the District Courts under the authority of the Tucker Act, which had been passed in 1887. [ Footnote 8 ] Where the claim exceeded $10,000, however, such a suit could not be brought, and in such a situation, the taxpayer's remedy in District Court was against the Collector.
Page 362 U. S. 152
But, because the Collector had to be sued personally, no District Court action was available if he was deceased. [ Footnote 9 ] The 1921 provision, which was an amendment to the Tucker Act, was explicitly designed to permit taxpayers to sue the United States in the District Courts for sums exceeding $10,000 where the Collector had died. [ Footnote 10 ]
The ancestry of the language of § 1346(a)(1) is no more enlightening than is the legislative history of the 1921 provision. This language, which, as we have stated, appeared in substantially its present form in the 1921 amendment, was apparently taken from R.S. § 3226 (1878). But § 3226 was not a jurisdictional statute at all; it simply specified that suits for recovery of taxes, penalties, or sums could not be maintained until after a claim for refund had been submitted to the Commissioner. [ Footnote 11 ]
It is argued, however, that the puzzle may be solved through consideration of the historical basis of a suit to recover a tax illegally assessed. The argument proceeds as follows: a suit to recover taxes could, before the Tucker
Page 362 U. S. 153
Act, be brought only against the Collector. Such a suit was based upon the common law count of assumpsit for money had and received, and the nature of that count requires the inference that a suit for recovery of part payment of a tax could have been maintained. Neither the Tucker Act nor the 1921 amendment indicates an intent to change the nature of the refund action in any pertinent respect. Consequently, there is no warrant for importing into § 1346(a)(1) a full payment requirement.
For reasons which will appear later, we believe that the conclusion would not follow even if the premises were clearly sound. But, in addition, we have substantial doubt about the validity of the premises. As we have already indicated, the language of the 1921 amendment does, in fact, tend to indicate a congressional purpose to require full payment as a jurisdictional prerequisite to suit for refund. Moreover, we are not satisfied that the suit against the collector was identical to the common law action of assumpsit for money had and received. One difficulty is that, because of the Act of February 26, 1845, c. 22, 5 Stat. 727, which restored the right of action against the Collector after this Court had held that it had been implicitly eliminated by other legislation, [ Footnote 12 ] the Court no longer regarded the suit as a common law action, but rather as a statutory remedy which, "in its nature, [was] a remedy against the Government." Curtis' Administratrix v. Fiedler, 2 Black 461, 67 U. S. 479 . On the other hand, it is true that none of the statutes relating to this type of suit clearly indicate a congressional intention to require full payment of the assessed tax before suit. [ Footnote 13 ] Nevertheless, the opinion of this Court in Cheatham v. United States, 92 U. S. 85 , prevents us from accepting the
Page 362 U. S. 154
analogy between the statutory action against the Collector and the common law count. In this 1875 opinion, the Court described the remedies available to taxpayers as follows:
". . . 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 appeal must be made to the Commissioner and suit brought within six months of his decision] requires the party aggrieved to pay the money, he must do it. He cannot, after the decision is rendered against him, protract the time within which he can contest that decision in the courts by his own delay in paying the money. It is essential to the honor and orderly conduct of the Government that its taxes should be promptly paid and drawbacks speedily adjusted, and the rule prescribed in this class of cases is neither arbitrary nor unreasonable. . . ."
"The objecting party can take his appeal. He can, if the decision is delayed beyond twelve months,
Page 362 U. S. 155
rest his case on that decision; or he can pay the amount claimed, and commence his suit at any time within that period. So, after the decision, he can pay at once, and commence suit within the six months. . . ."
92 U.S. at 92 U. S. 88 -89. (Emphasis added.)
Reargument has not changed our view that this language reflects an understanding that full payment of the tax was a prerequisite to suit. Of course, as stated in our prior opinion, the Cheatham statement is dictum; but we reiterate that it appears to us to be "carefully considered dictum." 357 U.S. at 357 U. S. 68 . Equally important is the fact that the Court was construing the "claim for refund" statute from which, as amended, the language of § 1346(a)(1) was presumably taken. [ Footnote 14 ] Thus, it seems that, in Cheatham, the Supreme Court interpreted this language not only to specify which claims for refund must first be presented for administrative reconsideration, but also to constitute an additional qualification upon the statutory right to sue the Collector. It is true that the version of the provision involved in Cheatham contained only the phrase "any tax." But the phrase "any penalty" and "any sum" were added well before the decision in Cheatham; [ Footnote 15 ] the history of these amendments makes it quite clear that they were not designed to effect any change relevant to the Cheatham rule; [ Footnote 16 ] language in
Page 362 U. S. 156
opinions of this Court after Cheatham is consistent with the Cheatham statement; [ Footnote 17 ] and, in any event, as we have indicated, we can see nothing in these additional words which would negate the full payment requirement.
Page 362 U. S. 157
We are not here concerned with a single sentence in an isolated statute, but rather with a jurisdictional provision which is a keystone in a carefully articulated and quite complicated structure of tax laws. From these related statutes, all of which were passed after 1921, it is apparent that Congress has several times acted upon the assumption that § 1346(a)(1) requires full payment before suit. Of course, if the clear purpose of Congress at any time had been to permit suit to recover a part payment, this subsequent legislation would have to be disregarded. But, as we have stated, the evidence pertaining to this intent
Page 362 U. S. 158
is extremely weak, and we are convinced that it is entirely too insubstantial to justify destroying the existing harmony of the tax statutes. The laws which we consider especially pertinent are the statute establishing the Board of Tax Appeals (now the Tax Court), the Declaratory Judgment Act and § 7422(e) of the Internal Revenue Code of 1954.
The Board of Tax Appeals was established by Congress in 1924 to permit taxpayers to secure a determination of tax liability before payment of the deficiency. [ Footnote 18 ] The Government argues that the Congress which passed this 1924 legislation thought full payment of the tax assessed was a condition for bringing suit in a District Court; that Congress believed this sometimes caused hardship; and that Congress set up the Board to alleviate that hardship. Petitioner denies this, and contends that Congress' sole purpose was to enable taxpayers to prevent the Government from collecting taxes by exercise of its power of distraint. [ Footnote 19 ]
"The committee recommends the establishment of a Board of Tax Appeals to which a taxpayer may appeal prior to the payment of an additional assessment of income, excess profits, war profits, or estate taxes. Although a taxpayer may, after payment of
Page 362 U. S. 159
his tax, bring suit for the recovery thereof, and thus secure a judicial determination on the questions involved, he cannot, in view of section 3224 of the Revised Statutes, which prohibits suits to enjoin the collection of taxes, secure such a determination prior to the payment of the tax. The right of appeal after payment of the tax is an incomplete remedy, and does little to remove the hardship occasioned by an incorrect assessment. The payment of a large additional tax on income received several years previous and which may have, since its receipt, been either wiped out by subsequent losses, invested in nonliquid assets, or spent, sometimes forces taxpayers into bankruptcy, and often causes great financial hardship and sacrifice. These results are not remedied by permitting the taxpayer to sue for the recovery of the tax after this payment. He is entitled to an appeal and to a determination of his liability for the tax prior to its payment. [ Footnote 20 ]"
Moreover, throughout the congressional debates are to be found frequent expressions of the principle that payment of the full tax was a precondition to suit: "pay his tax . . . , then . . . file a claim for refund"; "pay the tax, and then sue"; "a review in the courts after payment of the tax"; "he may still seek court review, but he must first pay the tax assessed"; "in order to go to court, he must pay his assessment"; "he must pay it [his assessment]
Page 362 U. S. 160
before he can have a trial in court"; "pay the taxes adjudicated against him, and then commence a suit in a court"; "pay the tax . . . , [t]hen . . . sue to get it back"; "paying his tax and bringing his suit"; "first pay his tax, and then sue to get it back"; "take his case to the district court -- conditioned, of course, upon his paying the assessment." [ Footnote 21 ]
Petitioner's argument falls under the weight of this evidence. It is true, of course, that the Board of Tax Appeals procedure has the effect of staying collection, [ Footnote 22 ] and it may well be that Congress so provided in order to alleviate hardships caused by the longstanding bar against suits to enjoin the collection of taxes. But it is a considerable leap to the further conclusion that amelioration of the hardship of pre-litigation payment as a jurisdictional requirement was not another important
Page 362 U. S. 161
motivation for Congress' action. [ Footnote 23 ] To reconcile the legislative history with this conclusion seems to require the presumption that all the Congressmen who spoke of payment of the assessment before suit as a hardship understood -- without saying -- that suit could be brought for whatever part of the assessment had been paid, but believed that, as a practical matter, hardship would nonetheless arise because the Government would require payment of the balance of the tax by exercising its power of distraint. But if this was, in fact, the view of these legislators, it is indeed extraordinary that they did not say so. [ Footnote 24 ]
Page 362 U. S. 162
Moreover, if Congress' only concern was to prevent distraint, it is somewhat difficult to understand why Congress did not simply authorize injunction suits. It is interesting to note in this connection that bills to permit the same type of prepayment litigation in the District Courts as is
Page 362 U. S. 163
possible in the Tax Court have been introduced several times, but none has ever been adopted. [ Footnote 25 ]
Page 362 U. S. 164
The Federal Declaratory Judgment Act of 1934 [ Footnote 26 ] was amended by § 405 of the Revenue Act of 1935 expressly to except disputes "with respect to Federal taxes." [ Footnote 27 ] The Senate Report explained the purpose of the amendment as follows:
"Your committee has added an amendment making it clear that the Federal Declaratory Judgments Act of June 14, 1934, has no application to Federal taxes. The application of the Declaratory Judgments Act to taxes would constitute a radical departure from the long continued policy of Congress (as expressed in Rev.Stat. 3224 and other provisions) with respect to the determination, assessment, and collection of Federal taxes. Your committee believes that the orderly and prompt determination and collection of Federal taxes should not be interfered with by a procedure designed to facilitate the settlement of private controversies, and that existing procedure both in the Board of Tax Appeals and the courts affords ample remedies for the correction of tax errors. [ Footnote 28 ]"
It is clear enough that one "radical departure" which was averted by the amendment was the potential circumvention of the "pay first and litigate later" rule by way of suits for declaratory judgments in tax cases. [ Footnote 29 ] Petitioner
Page 362 U. S. 165
would have us give this Court's imprimatur to precisely the same type of "radical departure," since a suit for recovery of but a part of an assessment would determine the legality of the balance by operation of the principle of collateral estoppel. With respect to this unpaid portion, the taxpayer would be securing what is in effect -- even though not technically -- a declaratory judgment. The frustration of congressional intent which petitioner asks us to endorse could hardly be more glaring, for he has conceded that his argument leads logically to the conclusion that payment of even $1 on a large assessment entitles the taxpayer to sue -- a concession amply warranted by the obvious impracticality of any judicially created jurisdictional standard midway between full payment and any payment.
One distinct possibility which would emerge from a decision in favor of petitioner would be that a taxpayer might be able to split his cause of action, bringing suit for refund of part of the tax in a Federal District Court and litigating in the Tax Court with respect to the remainder. In such a situation, the first decision would, of course, control. Thus, if, for any reason, a litigant would prefer a District Court adjudication, [ Footnote 30 ] he might sue for a small portion of the tax in that tribunal while at the same time protecting the balance from distraint by invoking the protection of the Tax Court procedure. On the other hand, different questions would arise if this device were not employed. For example, would the Government be required to file a compulsory counterclaim for the unpaid
Page 362 U. S. 166
balance in District Court under Rule 13 of the Federal Rules of Civil Procedure? If so, which party would have the burden of proof? [ Footnote 31 ]
Section 7422(e) of the 1954 Internal Revenue Code makes it apparent that Congress has assumed these problems are nonexistent except in the rare case where the taxpayer brings suit in a District Court and the Commissioner then notifies him of an additional deficiency. Under § 7422(e), such a claimant is given the option of pursuing his suit in the District Court or in the Tax Court, but he cannot litigate in both. Moreover, if he decides to remain in the District Court, the Government may -- but seemingly is not required to -- bring a counterclaim, and if it does, the taxpayer has the burden of proof. [ Footnote 32 ] If we
Page 362 U. S. 167
were to overturn the assumption upon which Congress has acted, we would generate upon a broad scale the very problems Congress believed it had solved. [ Footnote 33 ]
357 U.S. at 357 U. S. 69 -- we feel obliged to comment upon the material introduced upon reargument. The
Page 362 U. S. 168
So far as appears, Suhr v. United States, 18 F.2d 81, decided by the Third Circuit in 1927, is the earliest case in which a taxpayer in a refund action sought to contest an assessment without having paid the full amount then due. [ Footnote 34 ] In holding that the District Court had no jurisdiction of the action, the Court of Appeals said:
Page 362 U. S. 169
Although the statement by the court might have been dictum, [ Footnote 35 ] it was in accord with substantially contemporaneous statements by Secretary of the Treasury A. W. Mellon, by Under Secretary of the Treasury Garrard B. Winston, by the first Chairman of the Board of Tax Appeals, Charles D. Hamel, and by legal commentators. [ Footnote 36 ]
Page 362 U. S. 170
There is strong circumstantial evidence that this view of the jurisdiction of the courts was shared by the bar at least until 1940, when the Second Circuit Court of Appeals rejected the Government's position in Coates v. United States, 111 F.2d 609. Out of the many thousands of refund cases litigated in the pre-1940 period -- the Government
Page 362 U. S. 171
reports that there have been approximately 40,000 such suits in the past 40 years -- exhaustive research has uncovered only nine suits in which the issue was present, in six of which the Government contested jurisdiction on part payment grounds. [ Footnote 37 ] The Government's failure to
Page 362 U. S. 175
raise the issue in the other three is obviously entirely without significance. Considerations of litigation strategy may have been thought to militate against resting upon such a defense in those cases. Moreover, where only nine lawsuits involving a particular issue arise over a period of many decades, the policy of the Executive Department on that issue can hardly be expected to become familiar to every government attorney. But, most important, the number of cases before 1940 in which the issue was present is simply so inconsequential that it reinforces the conclusion of the prior opinion with respect to the uniformity of the pre-1940 belief that full payment had to precede suit.
A word should also be said about the argument that requiring taxpayers to pay the full assessments before bringing suits will subject some of them to great hardship. This contention seems to ignore entirely the right of the taxpayer to appeal the deficiency to the Tax Court without paying a cent. [ Footnote 38 ] If he permits his time for filing such an appeal to expire, he can hardly complain that he has been unjustly treated, for he is in precisely the same position as any other person who is barred by a statute of limitations. On the other hand, the Government has a substantial interest in protecting the public purse, an interest which would be substantially impaired if a taxpayer could sue in a District Court without paying his tax in full. It is instructive to note that, as of June 30, 1959, tax cases pending in the Tax Court involved $920,046,748, and refund suits in other courts involved $446,673,640. [ Footnote 39 ]
Page 362 U. S. 176
It is quite true that the filing of an appeal to the Tax Court normally precludes the Government from requiring payment of the tax, [ Footnote 40 ] but a decision in petitioner's favor could be expected to throw a great portion of the Tax Court litigation into the District Courts. [ Footnote 41 ] Of course, the Government can collect the tax from a District Court suitor by exercising its power of distraint -- if he does not split his cause of action -- but we cannot believe that compelling resort to this extraordinary procedure is either wise or in accord with congressional intent. Our system of taxation is based upon voluntary assessment and payment, not upon distraint. [ Footnote 42 ] A full payment requirement will promote the smooth functioning of this system; a part payment rule would work at cross-purposes with it. [ Footnote 43 ]
In sum, if we were to accept petitioner's argument, we would sacrifice the harmony of our carefully structured twentieth century system of tax litigation, and all that
Page 362 U. S. 177
would be achieved would be a supposed harmony of § 1346(a)(1) with what might have been the nineteenth century law had the issue ever been raised. Reargument has but fortified our view that § 1346(a)(1), correctly construed, requires full payment of the assessment before an income tax refund suit can be maintained in a Federal District Court.
Revenue Act of 1924, c. 234, § 275(a), 43 Stat. 298; Revenue Act of 1918, c. 18, § 250(e), 40 Stat. 1084; Act of June 6, 1872, c. 315, § 21, 17 Stat. 246; Act of June 30, 1864, c. 173, § 119, 13 Stat. 283. See also Helvering v. Mitchell, 303 U. S. 391 , 303 U. S. 405 .
Lower courts have given this construction to the same three phrases in certain "claim for refund" and limitations provisions in prior tax statutes. United States v. Magoon, 77 F.2d 804; Union Trust Co. v. United States, 5 F.Supp. 259, 261 ("The natural definition of "tax" comprehends one "assessment" or one tax in the entire amount of liability"), affirmed, 70 F.2d 629, 630 ("We agree with the District Court that "tax," "penalty," and "sum" refer to distinct categories of illegal collections and "tax" includes the entire tax liability as assessed by the Commissioner"); United States v. Clarke, 69 F.2d 748; Hills v. United States, 50 F.2d 302, 73 Ct.Cl. 128; 55 F.2d 1001, 73 Ct.Cl. 128; cf. Blair v. Birkenstock, 271 U. S. 348 .
In the prior opinion, we stated that, were it not for certain countervailing considerations, the statutory language "might . . . be termed a clear authorization" to sue for the refund of part payment of an assessment. 357 U.S. at 357 U. S. 65 . It is quite obvious that we did not regard the language as clear enough to preclude deciding the case on other grounds. Moreover, it could at that time be assumed that the terms of the statute favored the taxpayer, because eight members of the Court considered the extrinsic evidence alone sufficient to decide the case against him. Although we are still of that opinion, we now state our views with regard to the bare words of the statute because the argument that these words are decisively against the Government has been urged so strenuously.
24 Stat. 505, as amended, 28 U.S.C. §§ 1346, 1491. See United States v. Emery, Bird, Thayer Realty Co., 237 U. S. 28 .
Smietanka v. Indiana Steel Co., 257 U. S. 1 .
Kings County Savings Institution v. Blair, 116 U. S. 200 , 116 U. S. 205 (1886) ("No claim for the refunding of taxes can be made according to law and the regulations until after the taxes have been paid. . . . [N]o suit can be maintained for taxes illegally collected, unless a claim therefor has been made within the time prescribed by the law"); Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 , 157 U. S. 609 (1895) (dissenting opinion) ("The same authorities [including the Cheatham case] have established the rule that the proper course, in a case of illegal taxation, is to pay the tax under protest or with notice of suit, and then bring an action against the officer who collected it"); Bailey v. George, 259 U. S. 16 , 259 U. S. 20 (1922) ("They might have paid the amount assessed under protest and then brought suit against the collector. . . ."). This view of Cheatham also corresponds to that of the Court of Appeals in this case. 246 F.2d at 930. See also Bushmiaer v. United States, 230 F.2d 146, 152-155 (dissenting opinion).
"Mr. FLETCHER. . . . I think the most important right that is preserved here . . . is the right to go into the district court by the taxpayer upon the payment of the tax. I do not think that we ought to allow him to do that unless he does pay the tax; but when he pays the tax, his right to go into the district court is preserved. "
In Old Colony Trust Co. v. Commissioner, 279 U. S. 716 , 279 U. S. 721 , this Court expressed the view that the Board
"The practice, as I understand it, has been to require the taxpayer to pay in the amount of the increased assessment, and then to allow him to get it back, if he can. In addition to this, distraints frequently have been issued seizing the property of the citizen. . . ."
"Mr. SWANSON. What are the processes by which a citizen who has overpaid can get back his money under the existing law?"
"Mr. SWANSON. Does the Senator mean that, if there is a dispute, the tax is not assessed permanently against him until the board reaches its final decision?"
"Mr. WALSH of Montana. Mr. President, the hardships . . . in connection with the collection of these taxes is a very real one. . . . At least two or three instances have come under my notice, and my assistance has been asked in cases where the assessing officers have . . . assessed against the [taxpayer] delinquent taxes of such an amount that he found it impossible to pay in advance and secure redress through the ordinary proceeding in a court of law, simply because it would bankrupt him to endeavor to raise the money. He was therefore obliged to suffer a distraint. . . ."
". . . After the board of review determines the matter, it seems to me, that is as far as the Government ought to be interrupted in the matter of the collection of its revenues. Then the taxpayer would be obliged to pay the tax and take his ordinary action at law to recover whatever he claims was exacted of him illegally."
"In my own personal experience, I have had two clients who were absolutely ruined by assessments that were unjust and that could not have stood up in a court of justice. . . . [A]nd it was no protection to them to say, 'Pay your taxes and then go into court,' because they did not have the money to pay the taxes, and could not raise the money to pay the taxes and be out of the money two or three years."
". . . I think the bill needs just one more amendment in this particular, and that is a provision that any citizen can go into court without paying any tax and resist the payment. In the meantime, I agree that the Government, for its own protection, ought to be allowed, perhaps, in such a case as that, to issue a distraint. But the idea that a man must first pay his money and then sue to get it back is anomaly in the law."
"(e) STAY OF PROCEEDINGS. -- If the Secretary or his delegate prior to the hearing of a suit brought by a taxpayer in a district court or the Court of Claims for the recovery of any income tax, estate tax, or gift tax (or any penalty relating to such taxes) mails to the taxpayer a notice that a deficiency has been determined in respect of the tax which is the subject matter of taxpayer's suit, the proceedings in taxpayer's suit shall be stayed during the period of time in which the taxpayer may file a petition with the Tax Court for a redetermination of the asserted deficiency, and for 60 days thereafter. If the taxpayer files a petition with the Tax Court, the district court or the Court of Claims, as the case may be, shall lose jurisdiction of taxpayer's suit to whatever extent jurisdiction is acquired by the Tax Court of the subject matter of taxpayer's suit for refund. If the taxpayer does not file a petition with the Tax Court for a redetermination of the asserted deficiency, the United States may counterclaim in the taxpayer's suit, or intervene in the event of a suit as described in subsection (c) (relating to suits against officers or employees of the United States), within the period of the stay of proceedings notwithstanding that the time for such pleading may have otherwise expired. The taxpayer shall have the burden of proof with respect to the issues raised by such counterclaim or intervention of the United States except as to the issue of whether the taxpayer has been guilty of fraud with intent to evade tax. This subsection shall not apply to a suit by a taxpayer which, prior to the date of enactment of this title, is commenced, instituted, or pending in a district court or the Court of Claims for the recovery of any income tax, estate tax, or gift tax (or any penalty relating to such taxes)."
"The first requirement is obvious. We have, in the preceding portions of this volume, found that a proceeding commenced in the Board of Tax Appeals is the only exception to the rule that no review by the courts is permissible at common law or under the statutes, until the tax has been paid and the Government assured of its revenue."
(e) In some of the cases, the Government was not legally entitled to collect the unpaid tax at the time of suit, either because the tax system at the time permitted installment payment ( see note 34 supra ), because the unpaid portion had not yet been assessed, or for some other reason. Although the statute may not support any distinction based on facts of this nature, it is quite understandable that a taxpayer might have predicated a suit upon the theory that the distinction was meaningful, and that the Government might not have contested it, whether because it agreed or for tactical reasons.
In the light of these considerations, we regard the following pre-1941 cases as immaterial: Baldwin v. Higgins, 100 F.2d 405 (C.A. 2d Cir. 1938) (petitioner concedes); Sampson v. Welch, 23 F.Supp. 271 ( D.C.S.D.Cal.1938) (same); Charleston Lumber Co. v. United States, 20 F.Supp. 83 (D.C.S.D.W.Va.1937) (same); Sterling v. Ham, 3 F.Supp. 386 (D.C.Me.1933) (same); Farmers' Loan & Trust Co. v. Bowers, 15 F.2d 706 (D.C.S.D.N.Y.1926), modified, 22 F.2d 464 (1927), reversed, 29 F.2d 14 (C.A. 2d Cir. 1928) (same); Heinemann Chemical Co. v. Heiner, 36-4 CCH Fed.Tax Serv. Ś 9302 (D.C.W.D.Pa.1936), reversed, 92 F.2d 344 (C.A. 3d Cir. 1937) (only interest unpaid); Welch v. Hassett, 15 F.Supp. 692 (D.C.Mass.1936), reversed, 90 F.2d 833 (C.A. 1st Cir. 1937), aff'd, 303 U. S. 303 (1938) (full assessment paid); Leavitt v. Hendricksen, 37-4 CCH Fed.Tax Serv. Ś 9312 (D.C.W.D.Wash.1937) (no unpaid assessment); Bowers v. Kerbaugh-Empire Co., 271 U. S. 170 (1926) (all due installments paid); Cook v. Tait, 265 U. S. 47 (1924) (same).
To these cases should be added Riverside Hospital v. Larson, 38-4 CCH Fed.Tax Serv. Ś 9542 (D.C.S.D.Fla.1938), where the Government raised the full payment question and won, and Suhr v. United States, 14 F.2d 227 (D.C.W.D.Pa.1926), aff'd, 18 F.2d 81 (C.A. 3d Cir. 1927), another concurrent jurisdiction case where the Government raised the issue and won, although the grounds for the decision are not entirely clear.
It would be bootless to consider each of the post-1940 cases cited by petitioner or to list the multitude of cases cited by the Government in which the jurisdictional issue has been raised. As we have stated, we believe these cases have no significance whatsoever. However, perhaps it is worth noting that all but a handful of the cases which petitioner, in the petition for rehearing, asserted to be ones in which the Government failed to raise the jurisdictional issue would be immaterial even if they were pre- Coates. Thus, for example, petitioner has conceded error with respect to three cases. Dickstein v. McDonald, 149 F.Supp. 580 (D.C.M.D.Pa.1957), aff'd, 255 F.2d 640 (C.A. 3d Cir. 1958); O'Connor v. United States, 76 F.Supp. 962 (D.C.S.D.N.Y.1948); Terrell v. United States, 64 F.Supp. 418 (D.C.E.D.La.1946). A number of the cases involved excise taxes. E.g., Griffiths Dairy v. Squire, 138 F.2d 758 (C.A. 9th Cir. 1943); Auricchio v. United States, 49 F.Supp. 184 (D.C.E.D.N.Y.1943). In some of the cases, only interest remained unpaid. Raymond v. United States, 58-1 U.S.T.C. Ś 9397 (D.C.E.D.Mich.1958); Hogg v. Allen, 105 F.Supp. 12 (D.C.M.D.Ga.1952). And some of the cases arose in the Third Circuit after a decision adverse to the Government in Sirian Lamp Co. v. Manning, 123 F.2d 776 (C.A. 3d Cir. 1941). Gallagher v. Smith, 223 F.2d 218 (C.A. 3d Cir. 1955); Peters v. Smith, 123 F.Supp. 711 (D.C.E.D.Pa.1954), rev'd, 221 F.2d 721 (C.A. 3d Cir. 1955). It might be noted also that Jones v. Fox, 162 F.Supp. 449 (D.C.Md.1957), cited as a case in which the Government argued the jurisdictional question and lost, was an excise tax case in which the court distinguished our prior decision in Flora because of the divisibility of the excise tax. Another such decision during the pre-1941 period was Friebele v. United States, 20 F.Supp. 492 (D.C.N.J.1937).
See Helvering v. Mitchell, 303 U. S. 391 , 303 U. S. 399 ; Treas.Regs. on Procedural Rules (1954 Code) § 601.103(a).
While Dobson v. Commissioner, 320 U. S. 489 , is no longer law, the opinion of the much lamented Mr. Justice Jackson, based as it was on his great experience in tax litigation, has not lost its force insofar as it laid bare the complexities and perplexities for judicial construction of tax legislation. For one not a specialist in this field to examine every tax question that comes before the Court independently would involve in most cases an inquiry into the course of tax legislation and litigation far beyond the facts of the immediate case. Such an inquiry entails weeks of study and reflection. Therefore, in construing a tax law, it has been my rule to follow almost blindly accepted understanding of the meaning of tax legislation, when that is manifested by long continued, uniform
Page 362 U. S. 178
(357 U.S. 63 at 357 U. S. 69 ), I deemed such a long continued, unbroken practical construction of the statute controlling as to the meaning of the Revenue Act of 1921, now 28 U.S.C. § 1346(a)(1). Once the basis which for me governed the disposition of the case was no longer available, I was thrown back to an independent inquiry of the course of tax legislation and litigation for more than a hundred years, for all of that was relevant to a true understanding of the problem presented by this case. This involved many weeks of study during what is called the summer vacation. Such a study led to the conclusion set forth in detail in the opinion of my Brother WHITTAKER.
In his income tax return for the year 1950, petitioner deducted in full, as ordinary in character, the losses he had suffered in commodity transactions in that year, but the Commissioner viewed those losses as capital in
Page 362 U. S. 179
character, and proposed, by his 90-day letter, the assessment of a deficiency in the amount of $27,251.13, plus interest. Petitioner did not petition the Tax Court for a redetermination of the proposed deficiency, and the Commissioner assessed it on March 27, 1953. In April and June, 1953, petitioner paid to the Commissioner a total of $5,058.54 upon the assessment, and timely thereafter filed a claim for refund of that sum. The claim was rejected on July 13, 1955, and, on August 3, 1956, petitioner brought this action against the United States in the District Court for Wyoming to recover the amount paid, alleging, inter alia, that said sum "has been illegally and unlawfully collected" from him, and he prayed judgment therefor with interest from the date of payment.
The answer to that question depends upon whether the United States has waived its sovereign immunity to, and
Page 362 U. S. 180
has consented to, such a suit in a District Court. The applicable jurisdictional statute is 28 U.S.C. § 1346(a). It provides:
"(1) Any civil action against the United States for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws. "
In its former opinion, the Court recognized that the words of the statute might "be termed a clear authorization to sue for the refund of any sum,'" 357 U.S. at 357 U. S. 65 , but it concluded that Congress had left room in the statute for an implication that the waiver of immunity and grant of jurisdiction applied only to refund suits in which the entire amounts of assessments had been paid. Advocating the existence of that implication, the Government contended and urged that, from the time of the decision in Cheatham v. United States, 92 U. S. 85 , in 1875 until the decision in Coates v. United States, 111 F.2d 609 (C.A. 2d Cir.), in 1940, there was an unquestioned understanding and uniform practice that full payment of an assessment was a condition upon the right to sue for refund, and, finding what it then accepted as adequate support for that contention, the Court was persuaded that, since no subsequent statute had purported to change it, such unquestioned understanding so long and uniformly applied was still effective.
Support for that asserted unquestioned understanding and uniform practice was principally derived from two sources. First, statements in Cheatham v. United States, supra, were thought to have enunciated a full payment
Page 362 U. S. 181
doctrine [ Footnote 2/1 ] which seemed never to have been directly questioned. Second, the contention was accepted that
357 U.S. at 357 U. S. 69 .
The Government now concedes that the second contention was erroneous. There were, for example, two cases in this Court ( Cook v. Tait, 265 U. S. 47 (1924); Bowers v. Kerbaugh-Empire Co., 271 U. S. 170 (1926)), in which taxpayers had sued for refunds after having paid only
Page 362 U. S. 182
portions (in one case $298.34 of an assessment of $1,193.38, in the other $5,198.77 of an assessment of $10,320.14) of the amounts assessed against them. It was not contended by the Government in either of those cases that there was any want of jurisdiction, and this Court considered and decided both upon the merits. [ Footnote 2/2 ] Petitioner has now cited many other tax refund cases, decided in the lower courts prior to 1940, in which taxpayers had paid, and sued to recover, less than the whole of assessments alleged to have been illegal, and in which cases the Government did not question jurisdiction. [ Footnote 2/3 ] The Government concedes that, in
Page 362 U. S. 183
at least two of these ( Thomas v. United States, 85 Ct.Cl. 313, 18 F.Supp. 942 (1937); Tsivoglou v. United States, 31 F.2d 706 (C.A. 1st 1929), aff'g 27 F.2d 564 (D.C.Mass.1928)) taxpayers had paid, and sued to
Page 362 U. S. 184
recover, less than the whole of deficiency assessments, and that the Government did not question jurisdiction in either of them. Prior to the decision in the present case, there were two decisions in the Courts of Appeals that fully treated with the precise question here presented. Both held that District Courts have jurisdiction over actions to recover partial payments upon assessments alleged to have been illegal. Coates v. United States, 111 F.2d 609 (C.A. 2d Cir. 1940); Bushmiaer v. United States, 230 F.2d 146 (C.A. 8th Cir. 1956). [ Footnote 2/4 ] Certainly, the cited cases and the Government's concession preclude
Page 362 U. S. 185
Judicial proceedings for refund of United States taxes in federal courts originated, without express statutory authority, by suits against Collectors (now District Directors), before the United States had made itself amenable to suit. Elliott v. Swartwout, 10 Pet. 137 (1836), recognized the existence of a right of action against a Collector of Customs for refund of duties
Page 362 U. S. 186
illegally assessed and paid under protest. [ Footnote 2/5 ] The doctrine of the action, based upon the common law count of assumpsit for money had and received, was thus formulated:
10 Pet. at 35 U. S. 158 . As a result of that case, Collectors of Customs who collected monies, paid under protest, resorted to the practice of withholding such amounts from the Government as indemnity against loss should a refund suit against them be successful. See Plumb, Tax Refund Suits Against Collectors of Internal Revenue, 60 Harv.L.Rev. 685, 688-689. That practice led to abuses, and facilitated peculation under the guise of self-protection. Because of the wholesale frauds of Swartwout, the New York Collector ( see Swartwout, 18 Dictionary of American Biography (1936), 238-239), Congress, in 1839, expressly prohibited such withholdings by Customs Collectors pending the possibility, or the result, of litigation against them. Act of March 3, 1839, c. 82, § 2, 5 Stat. 348. Six years later, in 1845, this Court held that this Act, by reducing the Collector to "the mere bearer of those sums [duties] to the Treasury," terminated the right of action against the Collector for refund, for, being deprived of the right to withhold payment to his principal, he was no longer under an implied promise to refund illegally collected duties to the taxpayer. Cary v. Curtis, 3 How. 236, 44 U. S. 241 (1845).
This created the intolerable condition of denying to taxpayers any remedy whatever in the District Courts to recover amounts illegally assessed and collected, and -- doubtless also influenced by the vigorous dissents of Mr.
Page 362 U. S. 187
Justice Story and Mr. Justice McLean in that case -- induced Congress to pass the Act of Feb. 26, 1845, c. 22, 5 Stat. 727, [ Footnote 2/6 ] which was the first statute expressly giving taxpayers the right to sue for refund of taxes illegally collected. That Act, in substance, provided that nothing contained in the Act of March 3, 1839 (c. 82, § 2, 5 Stat. 348), should be construed to take away or impair the right of any person who had paid duties under protest to any Collector of Customs, which were not lawfully "payable in part or in whole," to maintain an action at law against the Collector to recover such amounts. It is evident that Congress, by that statute, was merely concerned to reverse the consequences of Cary v. Curtis, supra, and to restore the right of action against Collectors which had originally been sustained in Elliott v. Swartwout, supra. Neither the terms of that statute nor such knowledge as is available of its history [ Footnote 2/7 ] reveals any limiting purpose except that
Page 362 U. S. 188
While that statute, the Act of Feb. 26, 1845, referred only to refunds of customs duties, this Court held in City of Philadelphia v. The Collector, 5 Wall. 720, 72 U. S. 730 -733 (1866), that taxpayers had the same right of action against Collectors to recover illegally collected internal revenue taxes. [ Footnote 2/8 ]
This jurisdictional grant
Page 362 U. S. 189
was held, in United States v. Emery, Bird, Thayer Realty Co., 237 U. S. 28 (1915), to have included jurisdiction over suits for tax refunds, as claims "founded upon" the internal revenue laws. The general language of that Act, the Tucker Act, was most evidently not intended to, and did not, impose any new conditions upon the preexisting right to sue (the Collector) for the refund of taxes illegally collected, save for a monetary limit of $1,000, which was increased to $10,000 in 1911. [ Footnote 2/9 ]
The gist of § 1346(a), [ Footnote 2/10 ] with which we are now concerned, first appeared in the jurisdictional statute in 1921, as part of the Revenue Act of 1921, c. 136, § 1310(c), 42 Stat. 311. The reason for its appearance is entirely unrelated to the question whether full payment of an assessment is a condition precedent to a suit for refund. Under the Tucker Act, as it stood in 1921, the United States could not be sued in a District Court for a tax refund of more than $10,000. Taxpayers with larger claims could pursue either their old remedy -- which continued to be available and is today -- against the Collector in the District Courts or their remedy against the United States in the Court of Claims. But the right of suit against the Collector was impaired in 1921 by the decision in Smietanka v. Indiana Steel Co., 257 U. S. 1 (1921). It held that such actions against the Collector were personal in character, and not maintainable against his successor in office. Hence, if the Collector had died or ceased to be
Page 362 U. S. 190
in office, a taxpayer with a refund claim of more than $10,000 had no remedy in a District Court. The portion of the Revenue Act of 1921 that is now embodied in § 1346(a) was an amendment of the Tucker Act and was designed to preserve to taxpayers with claims of more than $10,000 a District Court remedy, even where the Collector had died or was out of office, by suit against the United States. The legislative history makes this purpose plain. [ Footnote 2/11 ]
The relevant portion of the 1921 Amendment to the Tucker Act -- part of the Revenue Act of 1921 (c. 136, § 1310(c), 42 Stat. 311) [ Footnote 2/12 ] -- was apparently taken from a provision in Revised Statutes § 3226 (1875) that
"No suit shall be maintained in any court for the recovery of any internal tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until appeal shall have been duly made to the Commissioner of [the] Internal Revenue. [ Footnote 2/13 ]"
In that context, it is clear that the language "any tax," "any penalty" or "any sum" had no reference to what payments were required to precede a suit for refund. Quite evidently, its function was only to describe, in broadest terms,
Page 362 U. S. 191
The Government heavily relies on statements made in Congress pertaining to the establishment in 1924 of the Board of Tax Appeals (since 1942, designated the Tax Court) and its reorganization in 1926. It asserts that these statements demonstrate a congressional understanding that the broad language in § 1346(a) excludes jurisdiction of District Courts to entertain suits to recover only partial payments of assessments alleged to be illegal. It is true that those statements, some of which are reproduced in the margin, [ Footnote 2/14 ] are consistent with the Government's
Page 362 U. S. 192
interpretation of that section. But, as with the statements in Cheatham v. United States, supra, they are not directed to the question we have here, and are too imprecise for the drawing of such a far-reaching inference, involving, as it does, the interpolation of a drastic qualification
Page 362 U. S. 193
The Tax Court was created to alleviate hardships occasioned by the fact that the collection of assessments, however illegal, could not be enjoined. And the Government argues that the hardships which motivated Congress to establish the Tax Court would not have existed if a taxpayer could, as the petitioner did here, pay only part of a deficiency assessment and then, by way of a suit for refund, litigate the legality of the assessment in a District Court. But that procedure would not then, nor today, afford any sure relief to taxpayers from the hardships which troubled Congress in 1924, for it is undisputed that the institution of a suit for refund of a partial payment of an assessment does not stay the Commissioner's power of collection [ Footnote 2/15 ] by distraint or otherwise, and a taxpayer with the property or means to pay the balance of the assessment cannot avoid its payment, except through the Commissioner's acquiescence and failure to exercise his power of distraint. [ Footnote 2/16 ]
The Government argues, with some force, that our tax legislation as a whole contemplates the Tax Court as the forum for adjudication of deficiencies, and the District Courts and Court of Claims as the forums for adjudication of refund suits. This, in general, is true, and it is also true that to hold that full payment of assessments
Page 362 U. S. 194
is not a condition upon the jurisdiction of District Courts to entertain suits for refund is to sanction what may be called a "hybrid" remedy in the District Courts, for the suit of the taxpayer who has paid only part of an assessment and has sued for refund will, under application of the principles of collateral estoppel, determine the legality of the remainder of the deficiency as well as his right to refund of the amount paid. But such dual determinations are possible under the present law, [ Footnote 2/17 ] and it is difficult to conceive how they may create sufficient disharmony to justify such a strained interpretation of the plain words of § 1346(a) as the Government's contention would require. [ Footnote 2/18 ]
Nor is the argument sound that to hold that full payment of an illegal assessment is not a condition upon the jurisdiction of District Courts to entertain suits for refund would unduly hamper the collection of taxes, by encouraging taxpayers to withhold payment of large portions of assessments while prosecuting litigation for the refund of the part already paid. Not only is it true that the institution of a suit for refund does not stay collection, [ Footnote 2/19 ] but, since the creation of the Tax Court, any taxpayer has a method of withholding payment, immune
Page 362 U. S. 195
from distraint, [ Footnote 2/20 ] until the legality of the assessment is finally determined. Any delay in collection which might be caused by holding that full payment of an assessment is not a condition upon the jurisdiction of a District Court to entertain a suit for refund would be of the same order as the delay incident to adjudication by the Tax Court, and would not create so incongruous a result as to justify giving an otherwise clear and unlimited statute a strained and unnatural meaning.
Petitioner, on the other hand, suggests that, if it be held that full payment of illegal assessments is a condition upon the jurisdiction of District Courts in refund suits, not only will the words of § 1346(a) be disregarded, but great hardships upon taxpayers will result, and that such an intention should not lightly be implied. Where a taxpayer has paid, upon a normal or a "jeopardy" assessment, either voluntarily or under compulsion of distraint, a part only of an illegal assessment, and is unable to pay the balance within the two-year period of limitations, [ Footnote 2/21 ] he would be deprived of any means of establishing the invalidity of the assessment and of recovering the amount illegally collected from him, unless it be held, as it seems to me Congress plainly provided in § 1346(a), that full payment is not a condition upon the jurisdiction of District Courts to entertain suits for refund. [ Footnote 2/22 ] Likewise, taxpayers
Page 362 U. S. 196
No one has suggested that Congress could not constitutionally confer jurisdiction upon District Courts to entertain suits against the United States to recover sums
Page 362 U. S. 197
wrongfully collected under, but which did not discharge the whole of, illegal assessments. Nor can it be denied that Congress has provided in § 1346(a) that:
"The district courts shall have original jurisdiction . . . of . . . [a]ny civil action against the United States for the recovery of . . . any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws. "
By § 1346(a), Congress expressed its purpose to waive sovereign immunity to suits, and to grant jurisdiction to District Courts over suits, to recover "any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws." Surely these words do not limit the waiver of immunity or the grant of jurisdiction to actions in which the entire amounts of illegal assessments have been paid. Even if the words "any internal revenue tax" or "any penalty," when read in isolation and most restrictively, could be thought to contemplate only the entire amount of an illegal assessment,
Page 362 U. S. 198
the concluding phrase -- "or any sum alleged to have been excessive or in any manner wrongfully collected" -- leaves no room or basis for any such construction of the statute as a whole. Judged by its text and its history in relation to other provisions of the tax laws, as must be done, I cannot doubt that Congress plainly expressed its intention to waive sovereign immunity to suits, and to grant jurisdiction to District Courts over suits, against the United States to recover "any sum" alleged to have been wrongfully collected. Petitioner's complaint here alleged that the $5,058.54 which he had paid to the Commissioner upon the questioned assessment "has been illegally and unlawfully collected" from him. The complaint, therefore, stated a cause of action within the jurisdiction of the District Court.
". . . 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 within six months of the Commissioner's decision] requires the party aggrieved to pay the money, he must do it. He cannot, after the decision is rendered against him, protract the time within which he can contest that decision in the courts by his own delay in paying the money. It is essential to the honor and orderly conduct of the Government that its taxes should be promptly paid and drawbacks speedily adjusted, and the rule prescribed in this class of cases is neither arbitrary nor unreasonable. . . ."
92 U.S. at 92 U. S. 88 -89.
The lower court' decisions cited by petitioner, that were rendered prior to 1940, in which taxpayers had paid, and sued to recover, less than the whole of assessments alleged to have been illegal, and in which the Government did not question jurisdiction, are: Tsivoglou v. United States, 31 F.2d 706 (C.A. 1st Cir. 1929); Heinemann Chemical Co. v. Heiner, 92 F.2d 344 (C.A. 3d 1937); Thomas v. United States, 85 Ct.Cl. 313, 18 F.Supp. 942 (1937); Peerless Paper Box Mfg. Co. v. Routzahn, 22 F.2d 459 (D.C.N.D.Ohio 1927); Welch v. Hassett, 15 F.Supp. 692 (D.C.Mass.1936); McFadden v. United States, 20 F.Supp. 625 (D.C.E.D.Pa.1937); Leavitt v. Hendricksen, 37-2 U.S.T.C. Ś 9312 (D.C.W.D.Wash.1937).
Petitioner has also cited 22 similar cases, decided by the lower courts since 1940. In 17 of them ( Kavanagh v. First National Bank, 139 F.2d 309 (C.A. 6th Cir. 1943); Griffiths Dairy, Inc., v. Squire, 138 F.2d 758 (C.A. 9th Cir. 1943); United States v. Pfister, 205 F.2d 5389 (C.A. 8th Cir. 1953); Gallagher v. Smith, 223 F.2d 218 (C.A. 3d Cir. 1955); Perry v. Allen, 239 F.2d 107 (C.A. 5th Cir. 1956); Auricchio v. United States, 49 F.Supp. 184 (D.C.E.D.N.Y.1973); Professional Golf Co. v. Nashville Trust Co., 60 F.Supp. 398 (D.C.M.D.Tenn.1945); Jack Little Foundation v. Jones, 102 F.Supp. 326 (D.C.W.D.Okl. 1951); Hogg v. Allen, 105 F.Supp. 12 (D.C.M.D.Ga.1952); Snyder v. Westover, 107 F.Supp. 363 (D.C.S.D.Cal.1952); Wheeler v. Holland, 120 F.Supp. 383 (D.C.N.D.Ga.1954); Peters v. Smith, 123 F.Supp. 711 (D.C.E.D.Pa.1954); Zukin v. Riddell, 55-2 U.S.T.C. Ś 9688 (D.C.S.D.Cal.1955); Lewis v. Scofield, 57-1 U.S.T.C. Ś 9251 (D.C.W.D.Tex.1956); McFarland v. United States, 57-2 U.S.T.C. Ś 9733 (D.C.M.D.Tenn.1957); Raymond v. United States, 58-1 U.S.T.C. Ś 9397 (D.C.E.D.Mich.1958); Freeman v. United States, 58-1 U.S.T.C. Ś 9309 (D.C.S.D.Cal.1958)), the Government did not question the jurisdiction of the courts, and in the other five cases ( Bushmiaer v. United States, 230 F.2d 146 (C.A. 8th Cir. 1956); Sirian Lamp Co. v. Manning, 3 Cir., 1941, 123 F.2d 776 (C.A. 3d Cir. 1941); Jones v. Fox, 57-2 U.S.T.C. Ś 9876 (D.C.Md.1957); Hanchett v. Shaughnessy, 126 F.Supp. 769 (D.C.N.D.N.Y.1954); Rogers v. United States, 155 F.Supp. 409 (D.C.E.D.N.Y.1957)), the Government did challenge the jurisdiction of the courts, but prevailed upon the point only in the last-mentioned case.
City of Philadelphia v. The Collector, 5 Wall. at 72 U. S. 733 .
" The district courts shall have original jurisdiction . . . of . . . [a]ny civil action against the United States for the recovery of . . . any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws? "