Court Opinion

ID: 9449723
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:20:47.767919+00
Date Added: 2024-06-11T17:31:57.567396
License: Public Domain

DAVIS, Judge
(dissenting).
Though for me the result is not plain either way, I conclude that we should take Congress at its word when it provided without qualification, in Section 1601(d) of the 1939 Code,1 that “[n]o interest shall be allowed or paid on the amount of any such credit or refund.” 58 Stat. 78. The two sentences of this subsection form a specific provision dealing, I think, with all situations like that before us— any refund of federal tax directly connected with and attributable to a credit for the amounts paid (or creditable) to the states. This provision does not make any express distinction between a refund payable because of events occurring after the taxpayer filed its return and a refund owing because the Internal Revenue Service incorrectly applied the Code to the facts existing when the return was made. On its face the language is general and all-inclusive. Nor can I find such a distinction implied in the direction that refund is to be made “in accordance with” the Code provisions “applicable in the case of erroneous or illegal collection of the tax (including statutes of limitations)” ; this seems no more than a customary shorthand reference to the normal body of adjective law used in processing all refund claims. Other implications from slight variations in phraseology also seem to be insignificant and denied by the language of the 1954 Code.2 The precise words of this tax statute, in sum, cover plaintiff’s case. I find it hard to restrict their reach without some compelling reason.
Unlike the court, I interpret the legislative history as tending to confirm what the unqualified words of Section 1601 (d) appear to say. The precursor of the subsection was adopted in 1938, it is true, in connection with the initial allowance of post-return payments of contributions to state funds. Plaintiff says that is the *977only set of circumstances to which the provision still applies. But in 1939, when Congress amended and rearranged this portion of the social security tax legislation, it appeared to attach this same provision to all refunds based on the credit for state contributions; and in the Revenue Act of 1943, if one looks to its language and arrangement, the statute again seems to take the same position. The Committee Reports for the latter Act refer to Section 1601(d) as applying to “all claims for refund or credit of the Federal tax, based on any credit allowable under section 1601 [for contributions to state funds].” H. R. Rep. No. 871, 78th Cong., 1st Sess., p. 73 (1944 Cum.Bull. 901, 955); S. Rep. No. 627, 78th Cong., 1st Sess., p. 96 (1944 Cum. Bull. 973, 1043) (emphasis added). I see nothing in the history that persuades me that, despite Congress’ apparent extension of the prohibition on interest to all refunds based on the credit for state payments, it still desired to confine that prohibition to refunds based on post-return contributions.3
What impels me to find the reality of Congress’ intention in the appearance of its prose is the special nature of the tax credit for contribution to state funds. This credit has a social and governmental, not a revenue, purpose; it was designed to foster the establishment and utilization of state unemployment compensation programs by drastically reducing the federal unemployment tax if the employer participates in a state system. Congress could very well choose to treat such a special adjustment — given as a matter of legislative discretion for non-fiscal ends — differently from the ordinary revenue-producing tax. Especially since the whole federal unemployment tax system is geared to protect the less affluent members of our society, Congress could decide that the burden of administrative errors in the calculation of the credit (generally the major factor in the ultimate federal tax) should be borne by the employer rather than by the beneficiaries of the unemployment compensation program. The majority of the court fears that this would permit the Commissioner to embark on a project of arbitrarily disallowing proper claims for credit. Congress could well think, however, that this possibility was too remote to outweigh the need to cut down on the administrative expenses ultimately to be borne by the employee-participants.4

. Since I agree •with the court that for the present problem the relevant provisions of the 1939 and 1954 Codes have the same meaning, I follow the court’s lead and treat with the 1939 provisions.

. The comparable provisions of the 1954 Code (which all agree has the same meaning) uses neither the words “based on” the credit for state contributions, nor “credit allowable,” nor “in accordance with” the provisions of law for recovery of erroneous or illegal tax collections. It is incorrect, therefore, to draw refined inferences from the use in the 1939 Code of this particular phraseology. The 1954 Code says that “any credit allowable under section 3302 [providing for the credit for state contributions], to the extent not previously allowed, shall be considered an overpayment, but no interest shall be allowed or paid with respect to such overpayment.” The court believes that “to the extent not previously allowed” means “allowed by law,” but I doubt that this is the import of the phrase since tax legislation generally uses “allowable” when it means “allowed by law.”

. The Committees did refer, specifically, to the situation where an allowable credit had not been taken by the taxpayer. But this illustration is used in the same reports which also refer to “aE” claims for refund and contain statements which must have been meant to apply to aE refund claims based on the credit under Section 1601, not merely those instances in which an allowable credit had not been taken. See also footnote 2, supra.

. In other contexts Congress has occasionaEy forbidden the payment of interest on refunds resulting from readjustments (even where the refund did not flow from retroactive legislation). See, e. g., American Radiator & Standard Sanitary Corp. v. United States, Ct.Cl., 1963, 318 F.2d 915 (cf. 56 Stat. 815); Albert & J. M. Anderson Mfg. Co. v. United States, 145 F.Supp. 195, 136 Ct.Cl. 553 (1956); Skinner v. United States, 8 F.Supp. 999 (S.D.Ohio, 1934).