Legal Document

353 U.S. 180 77 Supreme Court Reporter 707 1 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 746 AUTOMOBILE CLUB OF MICHIGAN, Petitioner,v.COMMISSIONER INTERNAL REVENUE. Number 89. Argued March 6 and 7, 1957. Decided April 22, Rehearing Denied June 3, See 989, 1279. Messrs. Ellsworth C. Alvord, Washington, D.C., Raymond or Haw. Hawai‘i KFH45 A2 Berry, Detroit, Mich., for the petitioner. Mr. John N. Stull, respondent. Justice BRENNAN delivered opinion of Court. In 1945, Commissioner Internal Revenue revoked his 1934 1938 rulings exempting petitioner from federal income taxes, retroactively applied revocation to 1943 1944. The also determined that prepaid membership dues received by should be taken into in year received, rejecting petitioner's method reporting as only part was recorded on books earned tax year. Tax sustained Commissioner's determinations,1 Appeals Sixth Circuit affirmed.2 This granted certiorari.3 2 had a 'club' entitled exemption under provisions internal revenue laws corresponding § 101(9) Code 1939,4 notifying '* * future returns, section will not required so long there is no change your organization, purposes methods doing business.' 1938, confirmed this ruling letter stating: it appears has been form organization activities which would affect status previous Bureau holding you exempt filing returns affirmed *.' Accordingly did pay taxes 1933 1945. these however, directed file subsequent years.5 Pursuant direction, filed, protest, corporate excess profits 1943, 1944 3 earlier were grounded upon an erroneous interpretation term thus based mistake law. It conceded not, fact law, within meaning 101(9), subject taxation 1945 years.6 nevertheless contended power apply 1944, that, any event, assessment against barred statute limitations. 4 argues light rulings, equitably estopped applying retroactively. argument without merit. doctrine equitable estoppel bar correction law.7 decision Stockstrom versus Commissioner, 88 U.S.App.D.C. 286, 190 Federal Reporter, 2nd 283, 30 American Law Reports, 443, extent holds contrary, disapproved. 5 Petitioner's reliance H.S.D. company Kavanagh, Cir., 191 831, Woodworth Kales, 26 178, misplaced because those cases involve Reliance Lesavoy Foundation 238 589, court recognized correct but held circumstances case exceeded bounds discretion vested him 3791(b) 1939 Code.8 action may disturbed unless, case, abused Code. That provides: 7 'Retroactivity regulations rulings. 8 'The Secretary, with approval prescribe extent, if any, ruling, regulation, Treasury Decision, relating laws, shall retroactive effect.' 9 contends forbids taking action. On clear language its legislative history9 Congress thereby authority regulation retroactively, empowered him, discretion, limit application necessary avoid inequitable results. 10 petitioner, citing Helvering R. Judge Reynolds Tobacco Co., 306 110, 59 423, 83 L.Ed. 536, resort s precluded repeated re-enactments gave force law provision section. These provided when established right need thereafter make return further showing respect unless changed character operations purpose originally created.10 inapplicable case. As stated Court: involved (Helvering Co.) purported determine what constitute gain loss. here nowise whether exempt.'11 provide interpret merely specified information filed order might rule taxpayer exemption. administrative construction embodied regulation(s) *' which, re-enactment must have approved given law.' at pages 114, 115, page 425. 11 We must, then, abuse consequence reconsideration correctness prior automobile clubs, initiated General Counsel Memorandum interpreting such organizations.12 adopted Counsel's proceeded it, effective indiscriminately clubs.13 find basis disagreeing conclusion, reached both Appeals, having dealt same other discretion. Nor two-year delay proceeding circumstances, vitiate 12 contention limitations deficiencies Its years until October Within three years, August 25, 1948, signed consents extending period 30, 1949. later extended 20, 1950. Notice mailed February assessments therefore time §§ 275(a) 276(b)14 asserts, began run dates when, duty file, filing.15 omission 15, 1914, induced running But express condition prescribed date actual return, can modify conditions it. Lucas Pilliod Lumber 281 245, 249, 50 297, 299, 74 829, held: 13 'Under general limitation runs they assent prescribed. Here begin conditioned presentation duly sworn to. No officer substitute something else thing specified. *'16 14 argued Form 990 compliance 54(f) Code, amended,17 constituted 275(a). are furtherance congressional program secure useful determination legislation enacted certain tax-exempt corporations competing taxable corporations.18 Those lack data computation contemplation Cf. Lane-Wells 321 219, 64 511, 684. 15 final issue concerns treatment arises paid advance one collection deposited bank account segregated funds available used purposes. For bookkeeping purposes, receipt credited carried liability designated 'Unearned Membership Dues.' During first month each following eleven months one-twelfth amount 'Membership Income.' accounting followed 1934. reported through 1947 Income' account. claim right, restriction their disposition, entire income. relies North Oil Consolidated Burnet, 286 417, 424, 52 613, 615, 76 1197, where said: 'If receives earnings (it) 16 does deny unrestricted use receipt, accrual clearly reflects income, bound accept dues. do agree. Section 41 '(t)he net computed accordance regularly employed keeping reflect made *'19 pro rata allocation monthly amounts purely artificial bears relation services called render member.20 vests cannot say, here, discretionary permissible limits. Brown Helvering, 291 193, 204—205, 54 356, 361, 78 725. 17 Affirmed. 18 WHITTAKER took consideration 19 BURTON, whom CLARK joins, concurring dissenting part. 20 & N Dec. Immigration Nationality Decisions join Court's insofar (a) 1946, he (b) However, reasons HARLAN, dissent acted determined, 'claim right' doctrine, 21 dissenting. 22 think three-year limitations.1 hold taxpayer, relying returns2 see reason why we strain construe 'return' excluding time, especially procedures consequences resulted here. construed conjunction 276(a),3 provides regard 'the false fraudulent intent evade failure my judgment, who files rather than another directs charged 'failure' contemplated statute. 443; Balkan Nat. insurance 101 75. 684, cited Court, inapposite applicable statutes two one. Compare Germantown Trust 309 304, 60 566, 84 770. Under revoke 'abuse discretion.' subjected Congress. 23 disagree properly full seeks justify course announced 1197. seems me, comes play determining item influenced receive keep dispute; relate entirely different question items admittedly belong attributed principles accounting. 725, problems treated distinct. depend vicissitudes litigation third parties engaged. quite thing, taxpayers abandon reasonable accurate simply receipts received. 'in (taxpayer's) books,' reflect' taxpayer's 42,5 gross if, 'under permitted 41, accounted period.' And employed. Anderson, 269 422, 46 131, 70 347. own authorize deferral some instances.6 24 now by-passes argument, rests instead ground 'pro member,' say limits understand this, deny—as, indeed, could not—that considerably greater accuracy proposes. urge system defers manner Government unreasonably dependent continued solvency business. shown statutory exception. 25 grounds reverse judgment below. KF6280 U55 1033. 230 585. 352 817, 32, 44. follows: organizations chapter— sections identical Statutes-at-Large 480 (1938); 49 1673 (1936); 48 700 (1934); 47 193 (1932). qualify club composed fellowship among members plays material life then evidence submitted shows (petitioner's) principal activity rendering commercial (its) members.' Petitioner renders various members. Among emergency road service car disabled; furnishing maps, travel information; publishing magazine containing news pertaining automobiles. Keystone Auto. Club 181 402; Schafer 65 App.D.C. 292, 317, affirmed, 299 171, 57 148, 81 101; M. Parker 254; Southern Maryland Agricultural Fair Association 40 B.T.A. 549; Yokohama Ki-Ito Kwaisha, Ltd., 1248; also, Chattanooga (Warren Commissioner), 182 551 (by implication); Smyth California State Ass'n, 175 752 Automobile St. Paul 1152 implication). 53 467, KF62 3791(b), Annotated KF65 U5 3791(b). H.R.Rep. 704, 73d Cong., Sess. 38; S.Rep. 558, 48. Treas.Reg. 86, Article 101—1 94, 103, 19.101—1 (1939). 1041. G.C.M. 23688, Cum.Bull. 283. See, e.g., 551; 752; 1152. 'Except 276— '(a) rule. imposed chapter assessed after begun expiration 275(a), 276(b) '(b) Waiver. Where before 275 tax, consented writing agreed upon. agreements previously upon.' 87, 276(b), 276(b). due To 75, 28, amended, 58 36, 54(f), 54(f). 871, 7Th 1st 24—25; 627, 78th 21. 24, 41. Beacon Publishing 218 697, Schuessler 722, distinguishable facts. Beacon, performance subscription, most instances, was, part, necessarily deferred publication Schuessler, agreement furnish times substantially all performed member's demand related fixed decisions Schussler. 276(a), 276(a). 42, 42. Regulations 111, 29.22(a)—17(2)(a) (bond premiums), 29.42—4 (long-term contracts). I.T. 3369, 1940—1 (prepaid subscriptions periodicals); 2080, III—2 (1924) (advance sales tickets tourist cruises.

Classification Label: 11