Court Opinion

ID: 9420059
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:52:45.550586+00
Date Added: 2024-06-11T17:19:30.061234
License: Public Domain

Mr. Justice Burton,
dissenting.
The sums due to the Government are fixed obligations with fixed times of payment. They are debts incidental to the lawful conduct of business and not penalties imposed for violations of law. Accordingly, the debtor should pay and the Government should collect interest on them, as on other debts to the Government, to compensate for delays in their payment. The Agricultural Adjustment Act expressly fixed the amount and time for payment of the sums in question although it did not expressly mention the accrual or denial of interest on delayed payments. However, the federal rule is well-established that, without express statutory reference to the subject of interest, interest is due to the Government on unpaid statutory debts after they have become due in fixed amounts at fixed times, such as those for customs duties and taxes.
*377“Thus, as to the necessity for a statute it was long ago here decided in view of the true conception of interest, that a statute was not necessary to compel its payment where in accordance with the principles of equity and justice in the enforcement of an obligation, interest should be allowed.” Billings v. United States, 232 U. S. 261, 286.1
This statement was made by Chief Justice White, speaking for the Court, in a case upholding the collection of interest on a tax payable to the United States, under a statute that contained no reference to the accrual of interest.
The requirement that interest be paid to the Government upon the debts due to it under the Agricultural Adjustment Act not only is “in accordance with the principles of equity and justice” called for by the general rule just stated but the accrual of interest in favor of the Government under that Act also is thoroughly consistent with, and helpful to, the accomplishment of its purpose of price and crop control. The disallowance of such interest is equally inconsistent with, and a limitation upon, the accomplishment of that purpose.
*378The defaulted payments on which interest is claimed here became due because of the petitioner’s sales of cotton in excess of his statutory quota and such payments are referred to in the Act as “penalties.” However, the context shows that, instead of being criminal penalties imposed for violations of the law, they are “marketing penalties” consisting of governmental charges added to the presale expenses of the seller, especially to help keep prices and sales in line with the economic program of the Government. Satisfaction of these charges is made a condition of the seller’s legal right to sell his excess cotton at a particular time. They are the very opposite of penalties imposed for making illegal sales. They are lawful, “ordinary and necessary” business expenses incidental to his sales. They are deductible from his taxable income, whereas criminal penalties are not deductible from taxable income.2 These “marketing penalties” are also unlike *379criminal penalties in that they may be paid in advance, deposited in escrow or security given for their payment. When that is done, the seller may, in his usual manner, dispose of the excess-quota cotton to which the payments relate. Cotton marketing quota regulations, 1942-43, § 722.440 (c), 7 Fed. Reg. 4369; id. § 722.453, 7 Fed. Reg. 4374. These debts are more comparable to customs duties than to criminal penalties.3 Apparently these charges are collectible by the Government only by civil proceedings and liability for them need not be established beyond a reasonable doubt. Usher v. United States, 146 F. 2d 369, 371.
The payments are imposed in part for revenue purposes although especially as a means of inducing cotton owners to control their sales of cotton in interstate and foreign commerce in accordance with the economic policies of the Government. During its consideration of the Agricultural Adjustment Act, Congress declined to adopt a proposal to treat such sales as in violation of law4 and *380adopted instead the policy recognizing such sales as lawful sales conditioned upon payment to the Government of the charges here being considered. Financial burdens which may be postponed without the payment of interest are much less burdensome than those that are not postponable or that are subject to the accrual of interest during their postponement. The omission of the usual interest charge on postponed marketing penalties therefore decreases the force of the Act as a deterring factor and runs counter to the special purpose of the Act.
For these reasons, the judgment of the Circuit Court of Appeals, affirming that of the District Court allowing interest from the date of default, should have been affirmed.
Mr. Justice Rutledge joins in this dissent.

 “The conflict between the systems is pronounced and fundamental. In the one, the state rule, except as to contract, no interest without statute; in the United States rule, interest in all cases where equitably due unless forbidden by statute. In one no suit for taxes as a debt without express statutory authority, in the other the right to sue for taxes as for a debt in every ease where not prohibited by statute.
“From this review it results that the doctrine as to non-liability to pay interest for taxes which have become due which prevails in the state courts is absolutely in conflict with the doctrine applied to the same subject in this court and cannot now be made the rule without repudiating settled principles which have been here applied for many years in various aspects and without in effect disregarding the sanction either expressly or impliedly given by Congress to such rules. . . . Under this condition we can see no ground for departing from the rule which the cases enforced, Billings v. United States, supra, at pp. 287-288.

 “Although the amounts paid by the producer are designated as penalties in the statute and regulations referred to above, it appears that the purpose of the statute is to place a charge against the producer on the sale of the commodity which was produced in excess of the quota. The statute does not prohibit producers from producing the commodity, but merely places a charge on the excess of the quota produced and marketed. The so-called penalties are not paid for the violation of, or noncompliance with, a statute or regulation or for any illegal act, but are paid for the purpose of legalizing the marketing of the excess production, which with this condition the statute sanctions, and are, therefore, made in compliance with the statute. It is accordingly the view of this office that the so-called penalties are deductible from gross income under section 23 (a) of the Internal Revenue Code in computing net income as ordinary and necessary expenses incurred in carrying on a trade or business.” I. T. 3530, 1942-1 Cum. Bull, 43, 45-46.
Payments in the nature of penalties for the violation of federal or state statutes in the ordinary use of that term are not deductible. Commissioner v. Longhorn Portland Cement Co., 148 F. 2d 276; Burroughs Bldg. Material Co. v. Commissioner, 47 F. 2d 178; Great Northern R. Co. v. Commissioner, 40 F. 2d 372.

 Customs duties are personal debts to the United States. Meredith v. United States, 13 Pet. 486, 493. Interest is collectible on the debt to the Government arising out of the imposition of customs duties. United States v. Mexican International R. Co., 154 F. 519. It is common knowledge that, while some customs duties or tariffs may have been levied “for revenue only,” many have been enacted as “protective tariffs” in which a primary interest of the Government was, as under the Agricultural Adjustment Act, to restrict the flooding of the market with certain goods at a certain time. The collection of interest on delayed payments of customs duties would bear a similar relation of helpfulness to the Government’s economic and financial policies as would the collection of interest on defaulted market penalties. The Government, under the Agricultural Adjustment Act, not only seeks to restrict excess-quota sales, but it also seeks to add to its current cash resources from which it proposes to make the loans to cooperating producers which are authorized by the Act.

 § 33, H. R. 8505, 75th Cong., 2d Sess. (1937), as passed by the Senate but later rejected.