Court Opinion

ID: 9466557
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:19:35.95502+00
Date Added: 2024-06-11T17:39:48.271611
License: Public Domain

BARRETT, Circuit Judge,
dissenting:
The majority opinion, in essence, holds that the Internal Revenue Service may retain gift taxes unlawfully imposed and erroneously collected by means of involuntary levies against the taxpayer’s property, predicated on the bar of the two-year statute of limitations.
The power of the Congress to lay and collect taxes “not only includes prescribing the basic rates of taxation, the time and manner in which taxes are to be paid; but also includes the means and methods for making refunds — with or without interest, which must be viewed realistically as no more than one function of the overall rate of such exaction.” Jacobs v. Gromatsky, 494 F.2d 513 (5th Cir. 1974) (per curiam), cert. denied, 419 U.S. 868, 95 S.Ct. 126, 42 L.Ed.2d 107 (1974). There are, however, limitations to the exercise of this power.
Indeed, one might fairly say of the Bill of Rights in general, and the Due Process Clause in particular, that they were designed to protect the fragile values of a vulnerable citizenry from the overbearing concern for efficiency and efficacy that may characterize praiseworthy government officials no less, and perhaps more, than mediocre ones. Stanley v. Illinois, 405 U.S. 645, 656, 92 S.Ct. 1208, 1215, 31 L.Ed.2d 551 (1972).
An effective levy by the Internal Revenue Service pursuant to statutory authority is “ ‘an absolute appropriation in law,’ and a seizure of the property levied upon, tantamount to a transfer of ownership.” United States v. Pittman, 449 F.2d 623 (7th Cir. 1971). In the case at bar, the Internal Revenue Service collected allegedly delinquent taxes, additional penalties and interest in the amount of $55,823.67 through its statutory authority to levy on a taxpayer’s property. As pointed out by the majority, the Commissioner now “concedes the merits of the taxpayer’s refund claim in this case.” Ante at p. 1187. See also: Brief for the United States at p. 4. The Commissioner has thus conceded that the collection of the taxes in this case was not lawfully justified under the provisions of the Internal Revenue Code. Despite this concession, however, the Commissioner contends that the validity of the refund claim on its merits is not at issue inasmuch as no gift tax return was ever filed and because the two-year period of limitations prescribed in 26 U.S.C. § 6511 limits the refund to that portion of the tax paid within two years of the claim for refund. As a result, the Commissioner has refused to return approximately $14,-500.00 which the IRS now concedes it was not entitled to collect in the first place.
In Magnano Co. v. Hamilton, 292 U.S. 40, 54 S.Ct. 599, 78 L.Ed. 1109 (1934), the Supreme Court observed:
Except in rare and special instances,* the due process of law clause contained in the Fifth Amendment is not a limitation upon the taxing power conferred upon Congress by the Constitution, [citation] . That clause is applicable to a taxing statute such as the one here assailed only if the act be so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the direct exertion of a different and forbidden power, as, for example, the confiscation of property, [citations]. 292 U.S. at p. 44, 54 S.Ct. at p. 601. [Footnote omitted]. Compare: Pittsburg v. Alco Parking Corp., 417 U.S. 369, 94 S.Ct. 2291, 41 L.Ed.2d 132 (1974).
*1190While cases involving this exception to the general rule focus upon the validity, of the statute, I believe that the exception must logically apply with like force and effect to the validity of conduct involved in administering the taxing statutes. In my view, the conduct of IRS in retaining the tax improperly collected and assessed here is “so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes, in substance and effect, the direct exertion of a different and forbidden power, as, for example, the confiscation of property.” Magnano Co. v. Hamilton, supra, 292 U.S. at 44, 54 S.Ct. at 601.
The Supreme Court has held that “a denial by a state court of a recovery, of taxes exacted in violation of the laws or Constitution of the United States by compulsion is itself in contravention of the Fourteenth Amendment.” Carpenter v. Shaw, 280 U.S. 363, 369, 50 S.Ct. 121, 123, 74 L.Ed. 478 (1930).
Further, the Supreme Court has observed:
As the payment [of taxes] was not voluntary, but made under compulsion, no statutory authority was essential to enable or require the county to refund the money. It is a well settled rule that “money got through imposition” may be recovered back; and, as this court has said on several occasions, “the obligation to do justice rests upon all persons, natural and artificial, and if a county obtains the money or property of others without authority, the law, independent of any statute, will compel restitution or compensation.” [citations] To say that the county could collect these unlawful taxes by coercive means and not incur any obligation to pay them back is nothing short of saying that it could take or appropriate the property of these [individuals] arbitrarily and without due process of law. .
Ward v. Love County, 253 U.S. 17, 24, 40 S.Ct. 419, 422, 64 L.Ed. 751 (1920).
Although, Carpenter, supra, and Ward, supra, involved county and state taxation of Indian allotees, I view that rationale as applicable in this case.1 These concepts have been recognized elsewhere. For example, in Enochs v. Williams Packing and Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), the Supreme Court held that an injunction may be obtained against the collection of taxes “if it is clear that under no circumstances could the Government ultimately prevail, . . . and, . equity jurisdiction otherwise exists. In such a situation the exaction is merely in ‘the guise of a tax’.” Enochs v. Williams Packing and Navigation Co., supra, at p. 7, 82 S.Ct. at p. 1129, quoting Miller v. Standard Nut Margarine Co., 284 U.S. 498, 509, 52 S.Ct. 260, 263, 76 L.Ed. 517 (1932). See: Commissioner v. Shapiro, 424 U.S. 614, 96 S.Ct. 1062, 47 L.Ed.2d 278 (1976).
In my view, this case presents “special and extraordinary facts and circumstances” which require the United States to disgorge the money it is attempting to retain in the face of its concession of unlawful collection. “While here the money was taken through mistake without any element of fraud, the unjust retention is immoral and amounts in law to a fraud on the taxpayer’s rights.” Bull v. United States, 295 U.S. 247, 261, 55 S.Ct. 695, 700, 79 L.Ed. 1421 (1935).
I agree with the majority’s opinion that a strict and literal construction of the statutes leads to the result it has reached, but I must dissent from its conclusion that the . taxpayer’s “refund is limited to [the] amounts paid on or after July 6, 1974.” Ante at p. 1189.

. For claims found in a similar context see: Gallagher v. Evans, 536 F.2d 899 (10th Cir. 1976).