United States v. Price (361 U.S. 304)/Opinion of the Court

The United States brought this action against the respondent taxpayer for the collection of a deficiency in taxes for the year 1946, and statutory interest thereon. The respondent defended on the ground that the action could not be maintained because the Commissioner of Internal Revenue had never issued to the taxpayer a notice of deficiency (commonly known as a '90-day letter') for the amount in question. This defense was based on § 272(a)(1) of the Internal Revenue Code of 1939, 53 Stat. 82, as amended, 26 U.S.C.A. § 272(a)(1), providing in pertinent part as follows:

'If in the case of any taxpayer, the Commissioner determines     that there is a deficiency in respect of the tax imposed by      this chapter, the Commissioner is authorized to send notice      of such deficiency to the taxpayer by registered mail. Within     ninety days after such notice is mailed *  *  * the taxpayer      may file a petition with The Tax Court of the United States      for a redetermination of the deficiency. No assessment of a     deficiency in respect of the tax imposed by this chapter and      no distraint or proceeding in court for its collection shall      be made, begun, or prosecuted until such notice has been      mailed to the taxpayer, nor until the expiration of such      ninety-day period, nor, if a petition has been filed with the      Tax Court, until the decision of the Tax Court has become      final. * *  * '

The Government relied on the admitted fact that respondent had executed a Treasury Department form waiving the restrictions on assessment and collection of the deficiency sued for, and on § 272(d) of the 1939 Code, 53 Stat. 83, said to authorize such a waiver, which provides:

'The taxpayer shall at any time have the right, by a signed     notice in writing filed with the Commissioner, to waive the restrictions provided in subsection (a)      of this section on the assessment and collection of the whole      or any part of the deficiency.'

The District Court held that the waiver was not effective because a 90-day letter had not been issued, and that § 272(a) therefore barred the action. The Court of Appeals affirmed, 263 F.2d 382, and in view of contrary decisions in the First and Sixth Circuits, we granted certiorari. 359 U.S. 988, 79 S.Ct. 1120, 3 L.Ed.2d 977. For reasons hereafter stated we think the court below was in error.

We start with the language of § 272(d). By its terms, the right of waiver is to be available 'at any time,' and is applicable to 'the restrictions' contained in § 272(a). Those restrictions include the prohibitions on assessment and collection of a deficiency prior to the mailing of a 90-day letter, no less than the same prohibitions relating to the period following the issuance of such a letter during which a petition for a redetermination of a deficiency may be filed or is awaiting decision of the Tax Court.

Respondent seeks to support the view that these provisions should be read as applying only to the period following the issuance of the 90-day letter by noting that § 272(d) is limited to waivers of restrictions on the assessment and collection of 'the deficiency,' and asserting that 'the deficiency' does not come into existence, as it were, until a 90-day letter has been mailed. This reading of the statute is said to follow from the first sentence of § 272(a)(1):

'If in the case of any taxpayer, the Commissioner determines     that there is a deficiency in respect of the tax imposed by this chapter, the Commissioner is authorized      to send notice of such deficiency to the taxpayer by      registered mail.'

A deficiency, it is argued, is not 'determined' until the statutory notice has been issued. We cannot accept any such fine-spun refinements. The plain sense of this provision contemplates, first, a determination, and then the sending of a notice. No persuasive reason appears for artificially engrafting upon the statutory terms excessively formal conditions. Nor do we find any force in the argument that because a determination and assessment of additional deficiencies may follow upon one already made, 'the deficiency' referred to in § 272(d) must be taken as limited to one previously determined.

Section 272(d) does not on its face therefore support the view that a waiver of the restrictions on assessment and collection of a tax is effective only if filed after the issuance of a 90-day letter. We think a similar conclusion follows from an examination of the legislative history of the relevant statutory enactments.

In creating the Tax Court (originally known as the Board of Tax Appeals), Congress provided a forum in which taxpayers could obtain an 'independent review of the Commissioner of Internal Revenue's determination of additional income * *  * taxes by the Board in advance of their paying the tax found by the Commissioner to be due.' Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 721, 49 S.Ct. 499, 501, 73 L.Ed. 918. Section 274(a) of the Revenue Act of 1924, 43 Stat. 297, and the Revenue Act of 1926, § 274(a), 44 Stat. 55 (the predecessors of § 272(a) of the 1939 Code), disabled the Commissioner from assessing or collecting any deficiency until a notice of such deficiency had been issued, and for 60 (later amended to 90) days thereafter, or, in the event that a taxpayer took an appeal to the Board of tax Appeals within such period, until that body had rendered a final decision. However, even though a taxpayer did not wish to contest the Commissioner's determination of a deficiency before the Board, interest on such deficiency continued to accrue from the original due date of the tax until the time for seeking Board review had run, such interest being thereafter collectible upon assessment of the tax. Revenue Act of 1924, § 274(f), 43 Stat. 297.

To meet this situation, the 1926 Revenue Act added, in § 274(d), 44 Stat. 56, the waiver provisions re-enacted as § 272(d) of the 1939 Code. At the same time, Congress provided, in § 274(j) (the predecessor of § 292 of the 1939 Code, 26 U.S.C.A. § 292), that the filing of a waiver as provided for by subsection (d) should stop the running of interest on the deficiency upon the expiration of 30 days from such filing or upon the assessment of such deficiency, whichever is the earlier. The relation between the two sections of the 1926 Act, and between the comparable sections of the 1939 Code as well, is clear: (1) a waiver is provided for in § 274(d) (1939 Code, § 272(d)) '(i)n order to permit the taxpayer to pay the tax and stop the running of interest,' S.Rep.No. 52, 69th Cong., 1st Sess., p. 27; (2) the Commissioner is thereupon permitted to assess and collect the tax free of the restrictions contained in § 274(a) (1939 Code, § 272(a)); and (3) the taxpayer is protected against the continued running of interest, due to delay in assessment, by the 30-day cutoff provided for by § 274(j) (1939 Code, § 292).

We can find in this history and the purpose it discloses no warrant for inferring that it was intended that a taxpayer should be without power to stop the running of interest against him until a formal notice of deficiency has been issued. Yet, as will appear, such is the necessary effect of respondent's position. Major reliance is placed on a passage in the Senate Committee Report on the 1926 Act:

'In order to permit the taxpayer to pay the tax and stop the     running of interest, the committee recommends in section      274(d) of the bill that the taxpayer at any time be permitted      to waive in writing the restrictions on the commissioner      against assessing and collecting the tax, but without taking      away the right of the taxpayer to take the case to the      board.' S.Rep.No. 52, 69th Cong., 1st Sess., p. 27.

Respondent claims that the last clause of this passage should be taken as indicating that § 274(d), reenacted as § 272(d) of the 1939 Code, does not sanction waivers prior to the issuance of a 90-day letter, because it is that event which brought the Board's, and now brings the Tax Court's, jurisdiction to review deficiencies into play. To read the passage-the obscurity of which has previously been judicially noted -so as to apply the clause in question to waivers executed before the issuance of a notice of deficiency would require a holding that, despite a waiver, the issuance by the Commissioner of a notice of deficiency remains a prerequisite to assessment and collection. But since, as the taxpayer acknowledges, it is inconceivable that a waiver would be effective to stop the running of interest, and at the same time be ineffective to permit the Government immediately to assess and collect the deficiency to which the waiver referred, the necessary result of respondent's reading of the Senate Committee Report would be to infer that a taxpayer was to be without power to stop the running of interest until a formal notice of deficiency had issued, often involving not inconsiderable periods of delay. Such an inference does not jibe either with the 'right' the statute gives a taxpayer to file a waiver 'at any time,' or with the purposes of the waiver provisions. Moreover, had Congress desired to require the issuance of a notice of deficiency prior to assessment and collection in all circumstances, it more likely would have accomplished that result directly, as it did in the instance of jeopardy assessments. See Revenue Act of 1926, § 279(b), 44 Stat. 59 (now § 6861(b) of the 1954 Code, 26 U.S.C.A. § 6861(b)).

Nor do we think that subsequent legislative developments change the view we have of the statute. Several years after the enactment of the 1926 statute, the Court of Appeals for the Ninth Circuit expressed views similar to those which formed the basis for the decision below. Mutual Lumber Co. v. Poe, 66 F.2d 904; McCarthy Co. v. Commissioner, 80 F.2d 618. In 1938, Congress considered various suggested revisions in the revenue statutes, and a House of Representatives Subcommittee recommended an express repudiation of those decisions. This recommendation was not adopted, and from the failure to act, respondent would have us infer an acceptance by Congress of the Ninth Circuit's position. Such non-action by Congress affords the most dubious foundation for drawing positive inferences. Moreover, the Subcommittee's discussion, which is set out in full in the margin, does not support the meaning sought to be derived from it. While certain isolated passages can be so read, taken as a whole what the Subcommittee said appears to us to espouse the position that the Commissioner's long-standing interpretation of the statute was correct, and that clarification was called for only because of the doubts caused by the Ninth Circuit's decisions, which this Court had declined to review. Mutual Lumber Co. v. Poe, 290 U.S. 706, 54 S.Ct. 373, 78 L.Ed. 606; McCarthy v. Commissioner, 298 U.S. 655, 56 S.Ct. 675, 80 L.Ed. 1381. Whether Congress thought the proposal unwise, as respondent argues, or unnecessary, we cannot tell; accordingly, no inference can properly be drawn from the failure of the Congress to act.

Finally, we are similarly unable to find support for respondent's position in the history of the 1954 Code. While the recodification settled (for taxable years covered by that Act) the question before us by expressly authorizing a waiver prior to the issuance of a 90-day letter, the reports contain no clear statement as to Congress' view of then existing law. What light there is, however, tends to favor the Government's contentions. The new statute amended another subsection of the section containing the waiver provision, and the reports refer to that amendment as the 'only material change from existing law.' Respondent argues that the change regarding waiver was probably thought not 'material.' Inferences from legislative history cannot rest on so slender a reed. Moreover, the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one. See United States v. United Mine Workers, 330 U.S. 258, 282, 67 S.Ct. 677, 690, 91 L.Ed. 884.

The legislative history, then, does not call for a result contrary to that indicated by the language of the Act. We hold that a waiver given pursuant to § 272(d) of the Internal Revenue Code of 1939 or its predecessor sections, although executed prior to the issuance of a notice of deficiency, is a fully effective instrument.

Reversed and remanded.

Mr. Justice DOUGLAS, whom Mr. Justice STEWART joins, dissenting.

Mutual Lumber Co. v. Poe, 9 Cir., 66 F.2d 904, decided in 1933, states in my view the correct rule-one that was early criticized and challenged, yet one that Congress did not undertake to change. I would therefore affirm this judgment.