Williamsport Wire Rope Company v. United States/Opinion of the Court

The Williamsport Wire Rope Company brought this action in the Court of Claims, on December 19, 1924, to recover the amount of an alleged overpayment of excess profits and war profits taxes for the calendar year 1918, laid under the Revenue Act of February 24, 1919, c. 18, 40 Stat. 1057. The petition alleged the following facts: The company had conceded in its return, and had paid, a total tax of $306,381.77, for the year 1918. In April, 1920, the Commissioner of Internal Revenue levied upon it an additional assessment of $89,094.85, which the company paid under protest. On June 10, 1924, a portion of the sum so paid was refunded. Four days later the company filed a claim for a further refund of $100,000. The claim alleged that for reasons there set forth, which are repeated in the petition, the company was entitled, under subdivisions (a) and (d) of section 327 of the Revenue Act of 1918, to have a special assessment made under section 328 of that act. The Commissioner having failed to make the refund within six months after demand, this suit was brought. The government demurred to the petition on the ground that the Court of Claims was without jurisdiction to grant the relief sought, and the demurrer was sustained. 63 Ct. Cl. 463. The case is here on certiorari. 275 U.S. 520, 48 S.C.t. 140, 72 L. Ed. -.

In its petition for a writ of certiorari, the Williamsport Company alleged that its rights would presumably be determined by the decision in Blair v. Oesterlein Machine Co., a case then pending in this court; and the Solicitor General, being of the same opinion, did not feel justified in opposing the granting of the writ. Decision on the petition was postponed pending decision of the Oesterlein Case. That case (275 U.S. 220, 48 S.C.t. 87, 72 L. Ed. 249) was decided November 21, 1927. We there held that the exercise of the judgment or discretion of the Commissioner to allow or deny the special assessment provided for in sections 327 and 328 was subject to review by the Board of Tax Appeals, and that therefore the taxpayer was entitled to an order compelling the Commissioner to respond to the subpoena of the Board issued under section 900(i) of the Revenue Act of 1924, c. 234, 43 Stat. 253, 338 (26 USCA § 1220; Comp. St. § 6371 5/6 b(i)), requiring him to answer interrogatories and to furnish information contained in the returns of other corporations. On November 28, the writ of certiorari in this case was granted. Thereupon the Williamsport Company moved, presumably in analogy to motions to affirm under rule 6, that the judgment against it be reversed on the authority of the Oesteriein Case. The Solicitor General, while not opposing the motion, advised us that the Court of Claims had, since the decision of the Oesterlein Case, adhered to the view that it was without power to determine whether the Commissioner of Internal Revenue had erred in refusing to make a special assessment under sections 327 and 328. We then assigned the case for oral argument, without passing on the motion to reverse and remand.

The contention here is that, since the Commissioner's action was made reviewable on appeal by the Board of Tax Appeals, it is and was always reviewable in an original proceeding before the Court of Claims. The argument is that Congress has conferred upon the Court of Claims jurisdiction over suits to recover taxes alleged to have been 'erroneously or illegally assessed or collected'; that here its jurisdiction is invoked to recover taxes claimed to have been assessed illegally, because assessed under section 301 (Comp. St. § 6336 7/16 aa), instead of under sections 327 and 328; that it must therefore have power to determine whether conditions existed which entitled the company to the special assessment provided for by sections 327 and 328; that if it finds that such conditions did exist, it must also have power to determine the true amount of the tax computed as therein directed; and that if it appears that the tax actually paid exceeds that which would have been exacted under the special assessment, the court may award judgment for the difference.

Sections 327 and 328 were intended to broaden the powers of relief first conferred by section 210 of the War Revenue Act of 1917, c. 63, 40 Stat. 300, 307 (Comp. St. § 6336 3/8 k). It was 'believed necessary to provide a special method of determining the tax for those cases in which the ordinary method of assessment would result in grave hardship or serious inequality.' Senate Report, 65th Cong. 3d Sess. No. 617, p. 14. The special assessment is to be made under paragraph (a) when the Commissioner 'is unable to determine the invested capital.' It is to be made under paragraph (d) if he 'finds and so declares of record that the tax if determined without benefit of this section would * *  * work *  *  * an exceptional hardship. * *  * ' The task imposed on the Commissioner by sections 327 and 328 was one that could only to performed by an official or a body having wide knowledge and experience with the class of problems concerned. For the requirement of a special assessment under paragraph (d) of section 327, and its computation in all cases, are dependent on 'the average tax of representative corporations engaged in a like or similar trade or business.'

To perform that task, power discretionary in character was necessarily conferred. Whether, as provided in paragraph (d) of section 327, there are 'abnormal conditions'; whether, because of these conditions, computation under section 301 would work 'exceptional hardship'; whether there would be 'gross disproportion' between the tax computed under section 301 and 'that computed by reference to the representative corporations specified in section 328'; what are 'representative corporations engaged in a like or similar trade or business'; which corporations are 'as nearly as may be, similarly circumstanced with respect to gross income, net income, profits per unit of business transacted and capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances'-these are all questions of administrative discretion.

The soundness of the judgment exercised by the individual or body to whom the task was confided would depend largely upon the extent both of the knowledge of the special subject possessed and of the experience had in dealing with this particular class of problems. The conclusions reached would rest largely upon considerations not entirely susceptible of proof or disproof. Congress did not, by the Revenue Act of 1918 (40 Stat. 1057), require the Commissioner to embody the results of his deliberation in findings of fact. The purpose of the meagre record prescribed by section 328(c) in case the Commissioner concludes to order a special assessment is apparently to protect the Treasury, not the taxpayer. For, if the Commissioner refuses to make the special assessment, he is not required to state the grounds of his refusal, or indeed, even to record the fact of such refusal. Thus the aims which induced Congress to enact sections 327 and 328, the nature of the task which it confided to the Commissioner, the methods of procedure prescribed, and the language employed to express the conditions under which the special assessment is required, all negative the right to a review of his determination by a court.

It is true that where the Commissioner's action is rviewable judicially, his findings of fact in making an assessment, as distinguished from his determinations involving administrative discretion, constitute only prima facie evidence; and that, in cases arising under the internal revenue laws, such findings are commonly reviewable by courts in appropriate proceedings in which the facts become an issue. United States v. Rindskopf, 105 U.S. 418, 422, 26 L. Ed. 1131; Wickwire v. Reinecke, 275 U.S. 101, 105, 48 S.C.t. 43, 72 L. Ed. 184. It is also true that in reviewing the Commissioner's findings on such matters as value (compare Castner, Curran & Bullitt, Inc., v. Lederer (D. C.) 275 F. 221; Little Cahaba Coal Co. v. United States (D. C.) 15 F.(2d) 863); allowances for depreciation (compare Cohen v. Lowe (D. C.) 234 F. 474; Camp Bird, Ltd. v. Howbert (C. C. A.) 262 F. 114), or the accuracy with which a taxpayer's books reflect his income (compare In re Sheinman (D. C.) 14 F.(2d) 323), courts may be confronted with problems requiring a high degree of technical knowledge for their solution. But such problems involve primarily the situation of a single taxpayer, and the controlling data can easily be made available to the court. Here the considerations which demand special assessment under section 327(d) and those which govern its computation in all cases, are facts concerning the situation of a large group of taxpayers which can only be known to an official or a body having wide experience in such matters and ready access to the means of information.

The jurisdiction of the Court of Claims, if any, rests on statutory provisions which long antedate the Revenue Act of 1918. Its jurisdiction over suits to recover taxes is based on the clause in the original Act of February 24, 1855, c. 122, 10 Stat. 612 (Comp. St. s 1136(3)), empowering it to determine 'all claims founded upon any law of Congress.' United States v. Kaufman, 96 U.S. 567, 569, 24 L. Ed. 792; Dooley v. United States, 182 U.S. 222, 21 S.C.t. 762, 45 L. Ed. 1074. Compare United States v. Emery-Bird-Thayer Co., 237 U.S. 28, 35 S.C.t. 499, 59 L. Ed. 825. But we have held that the Court of Claims is without jurisdiction where the statute creating the claim expressly refers it for final determination to an executive department. United States v. Babcock, 250 U.S. 328, 331, 39 S.C.t. 464, 63 L. Ed. 1011. And that it is equally without jurisdiction where from an examination of all the terms of the statute it appears that Congress intended to vest final authority in an administrative agency. United States v. Atchison, Topeka & Santa Fe Ry. Co., 249 U.S. 451, 39 S.C.t. 325, 63 L. Ed. 703; Silberschein v. United States, 266 U.S. 221, 45 S.C.t. 69, 69 L. Ed. 256. Long ago Congress conferred final authority upon such an agency in the enforcement of the appraisal provisions by which the amounts payable under the customs laws are determined. Compare Bartlett v. Kane, 16 How. 263, 272, 14 L. Ed. 931; Hilton v. Merritt, 110 U.S. 97, 105, 3 S.C.t. 548, 28 L. Ed. 83; Passavant v. United States, 148 U.S. 214, 13 S.C.t. 572, 37 L. Ed. 426.

Moreover, whatever jurisdiction is possessed by the Court of Claims to review determinations under sections 327 and 328, would be possessed also by the District Courts in suits against collectors and in actions against the United States, under section 24(20) of the Judicial Code (28 USCA § 41(20). Thus the determinations of the Commissioner in this delicate and complex phase of revenue administration would be subjected to review by a large number of courts, none of which have ready access to the information necessary to enable them to arrive at a proper conclusion in revising his decisions; whose experience in passing upon questions of this character would be limited; and whose varying decisions would tend to defeat, rather than promote, that equality in the application of the revenue law which sections 327 and 328 were designed to ensure. We conclude that the determination whether the taxpayer is entitled to the special assessment was confided by Congress to the Commissioner, and could not, under the Revenue Act of 1918, be challenged in the courts-at least in the absence of fraud or other irregularities.

It remains to consider whether jurisdiction to review the Commissioner's action was conferred upon the Court of Claims as a result of the Revenue Act of June 2, 1924, c. 234, 43 Stat. 253, 336, which created the Board of Tax Appeals. There is nothing in that act which purports to enlarge the jurisdiction of the Court of Claims or to extend the scope of judicial review over determinations of the Commissioner. The contention that it had this effect rests wholly on our decision in Blair v. Oesterlein Machine Co., 275 U.S. 220, 48 S.C.t. 87, 72 L. Ed. 249. The contention fails to take account of the important differences between an appeal to the Board of Tax Appeals, on the one hand, and an original suit in the Court of Claims, or in a district court, on the other. The Board of Tax Appeals was created to perform the administrative functions theretofore discharged by the Committee on Appeals and Review, which the Commissioner of Internal Revenue had established in his office. See House Report 68th Cong. 1st Sess., No. 179, p. 7; Senate Report, 68th Cong. 1st Sess., No. 398, p. 8. The Committee had regularly reviewed determinations granting or denying special assessment under sections 327 and 328. The granting of these powers of review to the Board of Tax Appeals did not change the character of the appeal. And it affords no reason to conclude that Congress intended that the Court of Claims and the District Courts should also be authorized to re-examine the decisions of the Commissioner on questions of the character here involved.

It is true that, unlike the Committee, the Board of Tax Appeals is not a part of the Bureau of Internal Revenue. The Board is an independent agency. But by specific provision of the Revenue Act of 1924, c. 234, § 900(k) (26 USCA § 1222; Comp. St. § 6371 5/6 b 43 Stat. 253, 338, it was defined as an agency 'in the executive branch of the government.' Compare Goldsmith v. Board of Tax Appeals, 270 U.S. 117, 121, 122, 46 S.C.t. 215, 70 L. Ed. 494. Its sole function consists in reviewing, on appeal, determinations of the Commissioner under the revenue laws. The fact that the Commissioner is a party to all cases before it enables the Board, by rules of procedure which it has developed, to leave to the Commissioner the initial determination of many questions requiring the use of facts not in the record. Its limited, specialized functions enable its members to acquire the extensive special knowledge and the specific experience essential to a sound exercise of judgment in dealing with questions arising under sections 327 and 328. As was said in the Oesterlein Case, supra, at page 226 (48 S.C.t. 87), there is no reason for thinking that Congress considered the Commissioner to be better qualified for making determinations under sections 327 and 328 than this administrative agency specially established to review his decisions.

Affirmed.