Court Opinion

ID: 9446342
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:52:38.30888+00
Date Added: 2024-06-11T17:30:37.409980
License: Public Domain

On Petition for Rehearing
PER CURIAM.
Each party has petitioned for a rehearing. Petitioner but restates a portion of his earlier argument.
Respondent, however, now advances the contention that “the Treasury Regulation in question could hardly be inconsistent with the statute * * * because the language of the Treasury Regulation is almost identical to the language used by Congress in the Committee Reports dealing with the statute.” [Compare Treasury Regulation 111 § 29,294-1 (b) (3) (i), 26 C.F.R. (1949) with S.Rep. No. 221, 78th Cong., 1st Sess. 42 (1943 Cum.Bull, 1314, 1345), and H.R.Rep. No. 510, 78th Cong., 1st Sess. 56 (1943 Cum. Bull. 1351, 1372).]
Respondent also calls to our attention the recent decisions of Patchen v. Commissioner, 5 Cir., 1958, 258 F.2d 544, Abbott v. Commissioner, 3 Cir., 1958, 258 F.2d 537, and Hansen v. Commissioner, 9 Cir., 1958, 258 F.2d 585. These decisions, rendered subsequent to the publication of our opinion in this case, express disagreement with our holding that the penalty for failure to file a declaration of estimated tax [Int.Rev. Code of 1939 § 294(d) (1) (A), 26 U.S.C.A. § 294(d) (1) (A)] and the penalty for substantial underestimation of estimated tax [id. § 294(d) (2)] cannot be imposed concurrently so as to work the exaction of a double penalty.
In the Patchen case the learned Court of Appeals for the Fifth Circuit appears to credit as authority decisions of this Court in which the problem was never raised. [See footnote 15 citing Fogel v. Commissioner, 6 Cir., 1956, 237 F.2d *576918 and Clayton v. Commissioner, 6 Cir., 1957, 245 F.2d 238. See also 3 Roehner, Federal Taxation Par. 153 at page 191 (Aug. 8, 1958).]
In the Abbott case the learned Court ■of Appeals for the Third Circuit recognizes that: “An examination of the underestimation provisions of Section 294 (d) (2), taken alone, leaves unanswered the question of whether the penalty provided should be imposed where no declaration of estimated tax is filed.” [Abbott v. Commissioner, supra, 258 F. '2d at page 543.] The Court then observed that “[t]he statute being ambiguous, resort to legislative history is proper in an endeavor to ascertain Congressional intent” [ibid.] ; and concluded from the legislative history that the •Congress intended the double penalty since “the regulation is precisely in accord with the Congressional intent expressed in the conference report.” [Ibid.]
In the Hansen ease the learned Court •of Appeals for the Ninth Circuit likewise concluded from the legislative history That “[n]o other conclusion is possible ’but that Congress intended” to provide in the Act for the double penalty. [Hansen v. Commissioner, supra, 258 F.2d at page 591.]
However, it has long been our view that “[such an] intention of the Congress must be gathered from the language of the Act * * [United States v. Stroop, 6 Cir., 1940, 109 F.2d 891, 893; see also Hopkins v. Commissioner, 6 Cir., 1944, 144 F.2d 683, 692, 158 A.L.R. 1301.]
“Further”, as the Court of Appeals for the Third Circuit has pointed out on another occasion, “it is well-settled that in the application of penalties ‘all questions in doubt must be resolved in favor of those from whom the penalty is sought.’ ” [Hatfried, Inc., v. Commissioner, 3 Cir., 1947, 162 F.2d 628, 633.]
While our great respect for the learning and acumen of the Courts of Appeals for the Third, Fifth, and Ninth Circuits naturally gives us pause, we are nonetheless of opinion that the challenged regulation authorizing imposition of double penalties cannot be validated by the fact that it is substantially a quotation from the Congressional committee reports.
It seems to us a policy of first order that taxpayers under this “government of laws and not of men” be entitled to expect that whenever the Congress intends to exact a penalty for a particular omission, this will be done by unequivocal language embodied in a statute regularly enacted conformably to the Constitution, and not by a committee report that is neither voted on by the members of both Houses nor submitted to the President for his approval. [U.S.Const. Art. I, §§ 7, 8, clause 1; Amend. XVI; see: Langstaff v. Lucas, D.C.W.D.Ky.1925, 9 F.2d 691, 692-693, affirmed upon the opinion of the District Court, 6 Cir., 13 F.2d 1022, certiorari denied, 1926, 273 U.S. 721, 47 S.Ct. 111, 71 L.Ed. 858; Masonite Corp. v. Fly, 5 Cir., 1952, 194 F.2d 257, 260; Helvering v. Rebsamen Motors, Inc., 8 Cir., 1942, 128 F.2d 584, 587-588.]
Especially is this so where, as in the case at bar, the penalty sought to be imposed by administrative regulation is cumulative with and in addition to another penalty clearly and expressly imposed by the statute for the identical omission. Such a regulation is an attempted expansion and extension of the statute tantamount to an amendment thereof, and neither “presumptions of validity” nor “reenactment doctrines” can serve to validate it. [United States v. Calamaro, 1957, 354 U.S. 351, 358-359, 77 S.Ct. 1138, 1 L.Ed.2d 1394; Koshland v. Helvering, 1936, 298 U.S. 441, 446-447, 56 S.Ct. 767, 80 L.Ed. 1268; Manhattan General Equipment Co. v. Commissioner, 1936, 297 U.S. 129, 134-135, 56 S.Ct. 397, 80 L.Ed. 528; Lincoln Elec. Co. Employees’ Profit-Sharing Trust v. Commissioner, 6 Cir., 1951, 190 F.2d 326, 330; Langstaff v. Lucas, supra, 9 F.2d at pages 692-693; see United States v. Abrams, 6 Cir., 197 *577F.2d 805, certiorari denied, 1952, 344 U.S. 855, 73 S.Ct. 93, 97 L.Ed. 664.]
“The secretary of the treasury cannot by his regulations alter or amend a revenue law.” [Morrill v. Jones, 1882, 106 U.S. 466, 467, 1 S.Ct. 423, 424, 27 L.Ed. 267.]
Each of the petitions for rehearing is denied.