1. Stockholders who have received the assets of a dissolved
corporation may be compelled to discharge therefrom the unpaid
federal taxes on the income and excess profits of the corporation.
P.
283 U. S.
592.
2. Under the Revenue Act of 1926, § 280(a)(1), and Act of May
29, 1928, this liability of the transferee, "at law or in equity,"
may be enforced summarily in the same manner as that of any
delinquent taxpayer, as well as by proceedings to enforce the tax
lien or by actions at law or in equity.
Id.
3. The rule that the United States may collect its internal
revenue by summary administrative proceedings if adequate
opportunity be afforded for a later determination of legal rights
applies to taxes assessed against transferees of corporate
property. P.
283 U. S.
593.
4. The procedure provided in § 280(a)(1) satisfies the
requirements of due process because two alternative methods of
eventual judicial review are available to the transferee: (a) he
may contest his liability by bringing an action, either against the
United States or the Collector, to recover the amount paid, or (b)
he may avail himself of the provisions for immediate
redetermination of the liability by the Board of Tax Appeals, and,
if dissatisfied, may have a further review by the Circuit Court of
Appeals, and possibly by this Court on certiorari. P.
283 U. S.
597.
Page 283 U. S. 590
5. The review by the Board of Tax Appeals and the Circuit Court
of Appeals is not to be deemed constitutionally inadequate because
the tax may be collected while the case is before that court unless
a bond is filed, or because the Board's findings of fact are to be
treated by that court as final if there is any evidence to support
them. P.
283 U. S.
599.
6. The right of the taxpayer to stay payment pending immediate
judicial review, by filing a bond, is a privilege granted by the
sovereign as an act of grace.
Id.
7. Save as there may be an exception for issues presenting
claims of constitutional right, such administrative findings on
issues of fact are accepted by the court as conclusive if the
evidence was legally sufficient to sustain them and there was no
irregularity in the proceedings. P.
283 U. S.
600.
8. The method of assessment and collection permitted by §
280(a)(1) was intended to apply, and is constitutionally
applicable, where the transfer of assets occurred before the
enactment of the Revenue Act, of 1926. P.
283 U. S.
601.
9. Assuming that the liability "at law and in equity" of the
transferees of corporate assets to meet federal taxes incurred by
their corporation may vary according to the laws of the States of
incorporation, this does not make the tax provision invalid either
as an unconstitutional delegation of federal taxing power to the
States or as a departure from the requirement of geographical
uniformity. P.
283 U. S.
602.
10. The time within which the summary proceeding to enforce
liability for the tax of a corporation may be taken against a
stockholder transferee of its assets is determined by the federal
Act, and not by the state statute of limitations on suits against
stockholders. P.
283 U. S.
602.
11. One who receives corporate assets upon dissolution of the
corporation is severally liable, to the extent of the assets
received, for the payment of income and excess profits taxes of the
corporation. P.
283 U. S.
603.
12. In a summary proceeding under § 280, Revenue Act of 1926, to
collect such taxes from one such transferee, the Government is not
obliged to join other transferees and marshal the assets of the
corporation so as to adjust the rights of the various stockholders.
P.
283 U. S.
604.
42 F.2d 177, affirmed.
Page 283 U. S. 591
CERTIORARI, 282 U.S. 828, to review a judgment affirming the
action of the Board of Tax Appeals, 15 B.T.A. 1218, in sustaining
certain deficiency tax assessments.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
In 1919, the Coombe Garment Company, a Pennsylvania corporation,
distributed all of its assets among its stockholders, and then
dissolved. Thereafter, the Commissioner of Internal Revenue made
deficiency assessments against it for income and profits taxes for
the years 1918 and 1919. A small part of these assessments was
collected, leaving an unpaid balance of $9,306.36. I. L. Phillips,
of New York City, had owned one-fourth of the company's stock, and
had received $17,139.61 as his distributive dividend. Pursuant to §
280(a)(1) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 61, the
Commissioner sent due notice that he proposed to assess against,
and collect from, Phillips the entire remaining amount of the
deficiencies. No notice of such deficiencies was sent
Page 283 U. S. 592
to any of the other transferees, and no suit or proceedings for
collection was instituted against them. Upon petition by Phillips'
executors for a redetermination, the Board of Tax Appeals held that
the estate was liable for the full amount. 15 B.T.A. 1218. Its
order was affirmed by the United States Circuit Court of Appeals
for the Second Circuit. 42 F.2d 177. Because of conflict in the
decisions of the lower courts, [
Footnote 1] a writ of certiorari was granted. 282 U.S.
828.
Stockholders who have received the assets of a dissolved
corporation may confessedly be compelled, in an appropriate
proceeding, to discharge unpaid corporate taxes.
Compare Pierce
v. United States, 255 U. S. 398.
Before the enactment of § 280(a)(1), such payment by the
stockholders could be enforced only by bill in equity or action at
law. [
Footnote 2] Section
280(a)(1) provides that the liability of the transferee for such
taxes may be enforced in the same manner as that of any delinquent
taxpayer. [
Footnote 3]
The procedure prescribed for collection of the tax from a
stockholder is thus the same as that now followed when payment is
sought directly from the corporate taxpayer. This procedure is now
generally known, and some parts of it will later be considered in
detail. As applied directly to the taxpayer, its constitutionality
is not now assailed.
Compare Old Colony Trust Co. v.
Commissioner, 279 U. S. 716. But
it is contended that to apply it to stockholder transferees
violates several constitutional guaranties; that
Page 283 U. S. 593
additional obstacles are encountered if it is applied to
transfers made before the enactment of § 280(a)(1); that the
specific liability here sought to be enforced is governed by the
law of Pennsylvania and barred by its statute of limitations, and
that in no event can the stockholder be held liable for more than
his
pro rata share of the unpaid corporate tax.
First. The contention mainly urged is that the summary
procedure permitted by the section violates the Constitution
because it does not provide for a judicial determination of the
transferee's liability at the outset. The argument
Page 283 U. S. 594
is that such liability (except where a lien had attached before
the transfer) is dependent upon questions of law and fact which
have heretofore been adjudicated by courts; that to confer upon the
Commissioner power to determine these questions in the first
instance offends against the principle of the separation of the
powers, and that the inherent denial of due process is not saved by
the provisions for deferred review in a suit to recover taxes paid,
or, in the alternative, for an immediate appeal to the Board of Tax
Appeals with the right to review its determination in the courts,
because there are limitations and conditions in either method of
judicial review.
Section 280(a)(1) provides the United States with a new remedy
for enforcing the existing "liability at law or in equity." The
quoted words are employed in the statute to describe the kind of
liability to which the new remedy is to be applied, and to define
the extent of such liability. The obligation to be enforced is the
liability for the tax.
Russell v. United States,
278 U. S. 181,
278 U. S. 186;
United States v. Updike, 281 U. S. 489,
281 U. S. 493.
The proceeding is one to collect the revenue. That Congress deemed
the section necessary in order to make the tax collecting system
more effective is established not only by the fact of enactment,
but also by the reports of the committees. [
Footnote 4]
Page 283 U. S. 595
The right of the United States to collect its internal revenue
by summary administrative proceedings has long been settled.
[
Footnote 5] Where, as here,
adequate opportunity is afforded for a later judicial determination
of the legal rights, summary proceedings to secure prompt
performance of pecuniary obligations to the government have been
consistently sustained.
Compare Cheatham v. United States,
92 U. S. 85,
92 U. S. 85,
92 U. S. 89;
Springer v. United States, 102 U.
S. 586,
102 U. S. 594;
Hagar v. Reclamation District No. 108, 111 U.
S. 701,
111 U. S.
708-709. Property rights must yield provisionally to
governmental need. Thus, while protection of life and liberty from
administrative action alleged to be illegal may be obtained
promptly by the writ of habeas corpus,
United States v. Woo
Jan, 245 U. S. 552;
Ng Fung Ho v. White, 259 U. S. 276, the
statutory prohibition of any "suit for the purpose of restraining
the assessment or collection of any tax " postpones redress
Page 283 U. S. 596
for the alleged invasion of property right if the exaction is
made under color of their offices by revenue officers charged with
the general authority to assess and collect the revenue. [
Footnote 6]
Snyder v. Marks,
109 U. S. 189;
Dodge v. Osborn, 241 U. S. 118;
Graham v. du Pont, 262 U. S. 234.
This prohibition of injunctive relief is applicable in the case of
summary proceedings against a transferee. Act of May 29, 1928, c.
852, § 604, 45 Stat. 791, 873. Proceedings more summary in
character than that provided in 280, and involving less directly
the obligation of the taxpayer, were sustained in
Murray's
Lessee v. Hoboken Land & Improvement Co., 18
How. 272. It is urged that the decision in the
Murray case
was based upon the peculiar relationship of a collector of revenue
to his government. The underlying principle in that case was not
such relation, but the need of the government promptly to secure
its revenues.
Where only property rights are involved, mere postponement of
the judicial enquiry is not a denial of due
Page 283 U. S. 597
process, if the opportunity given for the ultimate judicial
determination of the liability is adequate.
Springer v. United
States, 102 U. S. 586,
102 U. S. 593;
Scottish Union & National Ins. Co. v. Bowland,
196 U. S. 611,
196 U.S. 631. Delay in the
judicial determination of property rights is not uncommon where it
is essential that governmental needs be immediately satisfied. For
the protection of public health, a State may order the summary
destruction of property by administrative authorities without
antecedent notice or hearing.
Compare North American Cold
Storage Co. v. Chicago, 211 U. S. 306;
Hutchinson v. Valdosta, 227 U. S. 303;
Adams v. Milwaukee, 228 U. S. 572,
228 U. S. 584.
Because of the public necessity, the property of citizens may be
summarily seized in wartime.
Central Union Trust Co. v.
Garvan, 254 U. S. 554,
254 U. S. 566;
Stoehr v. Wallace, 255 U. S. 239,
255 U. S. 245;
United States v. Pfitsch, 256 U.
S. 547,
256 U. S. 553.
Compare 78 U. S. United
States, 11 Wall. 268,
78 U. S. 296;
International Paper Co. v. United
States, 282 U. S. 399;
Russian Volunteer Fleet v. United States. 282 U.
S. 481. And, at any time, the United States may acquire
property by eminent domain without paying, or determining the
amount of the compensation before the taking.
Compare Kohl v.
United States, 91 U. S. 367,
91 U. S. 375;
United States v. Jones, 109 U. S. 513,
109 U. S. 518;
Crozier v. Fried. Krupp Aktiengesellschaft, 224 U.
S. 290,
224 U. S. 306.
[
Footnote 7]
The procedure provided in § 280(a)(1) satisfies the requirements
of due process because two alternative methods of eventual judicial
review are available to the transferee. He may contest his
liability by bringing an action, either against the United States
or the collector, to recover the amount paid. This remedy is
available where the transferee does not appeal from the
determination of
Page 283 U. S. 598
the Commissioner, and the latter makes an assessment and
enforces payment by distraint; or where the transferee voluntarily
pays the tax and is thereafter denied administrative relief.
Compare United States v. Emery, Bird, Thayer Realty Co.,
237 U. S. 28,
237 U. S. 31;
Wickwire v. Reinecke, 275 U. S. 101,
275 U. S. 105;
Williamsport Wire Rope Co. v. United States, 277 U.
S. 551,
277 U. S. 560.
Or the transferee may avail himself of the provisions for immediate
redetermination of the liability by the Board of Tax Appeals, since
all provisions governing this mode of review are made applicable by
§ 280.
Compare Routzahn v. Tyroler, 36 F.2d 208, 209.
Thus, within sixty days after the Commissioner determines that the
transferee is liable for an unpaid deficiency and gives due notice
thereof, the latter may file a petition with the Board of Tax
Appeals. Act of February 26, 1926, c. 27, § 274(a), 44 Stat. 9, 55;
Act of May 29, 1928, c. 852, § 272(a), 45 Stat. 791, 852. Formal
notice of the tax liability is thus given; the Commissioner is
required to answer, and there is a complete hearing
de
novo according to the rules of evidence applicable in courts
of equity of the District of Columbia. Act of May 29, 1928, c. 852,
§ 601, 45 Stat. 791, 872.
Compare International Banding Machine
Co. v. Commissioner, 37 F.2d 660. This remedy may be had
before payment, without giving bond (unless the Commissioner in his
discretion deems a jeopardy assessment necessary). The transferee
has the right to a preliminary examination of books, papers, and
other evidence of the taxpayer, and the burden of proof is on the
Commissioner to show that the appellant is liable as a transferee
of property, though not to show that the taxpayer was liable for
the tax. Act of May 29, 1928, c. 852, § 602, 45 Stat. 791, 873.
[
Footnote 8] A review by the
Circuit Court of Appeals of an adverse determination may be had,
and assessment
Page 283 U. S. 599
and collection meanwhile may be stayed by giving a bond to
secure payment. Act of February 26, 1926, c. 27, § 1001, 44 Stat.
9, 10; Act of May 29, 1928, c. 852, § 603, 45 Stat. 791, 873. There
may be a further review by this Court on certiorari. These
provisions amply protect the transferee against improper
administrative action.
Compare Hurwitz v. North,
271 U. S. 40.
It is argued that such review by the Board of Tax Appeals and
Circuit Court of Appeals is constitutionally inadequate because of
the conditions and limitations imposed. Specific objection is made
to the provision that collection will not be stayed while the case
is pending before the Circuit Court of Appeals, unless a bond is
filed, and also to the rule under which the Board's findings of
fact are treated by that court as final if there is any evidence to
support them. [
Footnote 9] As
to the first of these objections, it has already been shown that
the right of the United States to exact immediate payment and to
relegate the taxpayer to a suit for recovery is paramount. The
privilege of delaying payment pending immediate judicial review by
filing a bond was granted by the sovereign as a matter of grace
solely for the convenience of the taxpayer. [
Footnote 10]
Page 283 U. S. 600
Nor is the second objection of weight. It has long been settled
that determinations of fact or ordinary administrative purposes are
not subject to review.
Johnson v. Drew, 171 U. S.
93,
171 U. S. 99;
Public Clearing House v. Coyne, 194 U.
S. 497,
194 U. S. 508;
United States v. Ju Toy, 198 U. S. 253,
198 U. S. 263;
Red "C" Oil Co. v. North Carolina, 222 U.
S. 380,
222 U. S. 394;
Mutual Film Co. v. Industrial Commission, 236 U.
S. 230,
236 U. S. 246.
Compare Williamsport Wire Rope Co. v. United States,
277 U. S. 551,
277 U. S. 560.
Save as there may be an exception for issues presenting claims of
constitutional right, such administrative findings on issues of
fact are accepted by the court as conclusive if the evidence was
legally sufficient to sustain them and there was no irregularity in
the proceedings.
Reetz v. Michigan, 188 U.
S. 505,
188 U. S. 507;
Lieberman v. Van De Carr, 199 U.
S. 552,
199 U. S. 562;
Douglas v. Noble, 261 U. S. 165,
261 U. S. 167;
Tagg Bros. & Moorhead v. United States, 280 U.
S. 420,
280 U. S. 443.
[
Footnote 11] The adequacy
of the scope of review offered by the Revenue Act of 1926 in the
case of a deficiency determined directly against the taxpayer was
assumed in
Old Colony Trust Co. v. Commissioner,
279 U. S. 716, and
this procedure is now thoroughly established. [
Footnote 12] Questions of fact involved in
proceedings against transferees are no different or more complex
than those often encountered in determining the direct liability of
a taxpayer. [
Footnote
13]
Page 283 U. S. 601
The alternative judicial review provided is adequate in both
cases.
Second. It is urged by
amici curiae that the
method of assessment and collection permitted by § 280(a)(1) cannot
be applied where, as in the case at bar, the transfer of assets,
upon which the transferee's liability is based, occurred prior to
the enactment of the Revenue Act of 1926, and, moreover, that, if
applied retroactively to such transfer, the section would be
unconstitutional. The power of Congress to provide an additional
remedy for the enforcement of existing liabilities is clear.
Compare Grahm & Foster v. Goodcell, 282 U.
S. 409,
282 U. S. 427.
It is clear also that Congress intended that the section should be
available for enforcing the liability of a transferee in respect to
taxes "imposed . . . by any prior income, excess profits, or
war-profits tax Act," irrespective of the time at which the
transfer was made. The need for a more effective and expedient
remedy was not limited to liabilities of transferees thereafter
arising. To have so limited the operation of the section would, at
least as to earlier Acts, have seriously impaired the value of the
new remedy. [
Footnote
14]
Page 283 U. S. 602
Third. It is contended that § 280(a)(1) is invalid
because the liability at law or in equity of a transferee is
dependent upon the law of the State of incorporation, and that,
thus, the section improperly delegates the federal taxing power to
the state legislatures; and, further, that the tax liability of the
transferee, as thus assessed and collected, violates the
constitutional requirement of uniformity because differences in
state laws may affect such liability. The extent and incidence of
federal taxes not infrequently are affected by differences in state
laws; but such variations do not infringe the constitutional
prohibitions against delegation of the taxing power or the
requirement of geographical uniformity.
Florida v. Mellon,
273 U. S. 12,
273 U. S. 17;
Crooks v. Harrelson, 282 U. S. 55;
Poe v. Seaborn, 282 U. S. 101,
282 U. S. 117.
Compare Head Money Cases, 112 U.
S. 580,
112 U. S. 594;
Clark Distilling Co. v. Western Maryland Ry. Co.,
242 U. S. 311,
242 U. S. 327.
We have, therefore, no occasion to decide whether the right of the
United States to follow transferred assets is limited by any state
laws.
Fourth. It is contended that summary proceeding by the
United States to enforce the liability for the tax is barred by the
six-month statute of limitations on suits against stockholders
provided by the Pennsylvania statute. Laws 1874, c. 32, § 15;
Penn.Stat. (1920) § 5728. The United States is not bound by state
statutes of limitation
Page 283 U. S. 603
unless Congress provides that it shall be.
United States v.
Nashville, Chattanooga & St. Louis Ry. Co., 118 U.
S. 120;
Chesapeake & Delaware Canal Co. v.
United States, 250 U. S. 123,
250 U. S. 125;
E. I. du Pont de Nemours & Co. v. Davis, 264 U.
S. 456,
264 U. S. 462.
The detailed limitation periods specified in § 280 evidence the
intention that they alone shall be applicable to the proceedings
therein authorized.
Fifth. It is contended that, even if petitioners are
liable, the amount determined is excessive, and that the findings
of the Board of Tax Appeals in the present case are insufficient to
support an assessment of the entire balance of the deficiencies. It
is first urged that the estate of Phillips can be assessed only for
its
pro rata share of the deficiency, according to the
ratio which the stock held by him bore to the total outstanding
stock of the corporate taxpayer at the time of dissolution. The
argument is that the federal Equity Rules require that all
stockholders be brought in as necessary parties and be
proportionately subjected to liability. While it is permissible for
a respondent to bring in other stockholders or transferees by a
cross-bill, [
Footnote 15]
this procedure is founded upon the desire not to burden the courts
with a multiplicity of suits.
Compare Hatch v. Dana,
101 U. S. 205,
101 U. S. 211.
Such rule of convenience is not applicable in summary
administrative proceedings like that provided by § 280(a)(1). One
who receives corporate assets upon dissolution is severally liable,
to the extent of assets received, for the payment of taxes of the
corporation, and other stockholders or transferees need not be
joined. [
Footnote 16]
Page 283 U. S. 604
Nonjoinder cannot affect or diminish the several liability of
the stockholder or transferee sued.
Compare Benton v. American
National Bank, 276 Fed. 368. [
Footnote 17] The individual several liability of Phillips
may be fully enforced by the United States in the present
proceeding. Whatever the petitioners' right to contribution may be
against other stockholders who have also received shares of the
distributed assets, the Government is not required, in collecting
its revenue, to marshal the assets of a dissolved corporation so as
to adjust the rights of the various stockholders. There is nothing
in § 280 to indicate that Congress intended to limit the procedure
in this way. And any such requirement would seriously impair the
efficiency of the summary method provided.
Petitioners assert also that the finding of the Board that the
total assets of the corporation, amounting to $68,588.35, were paid
"to its stockholders between July 25, 1919, and September 27,
1919," is insufficient to support the assessment against the estate
of the entire remaining deficiency of $9,306.36. The argument is
that there may have been several distributions within this period;
that, since there was no finding as to the existence of other
creditors, it must be assumed that, until the assets had been
depleted below the amount due for taxes, the corporation was
solvent, and that, thus, the stockholder-transferees did not become
liable until the final $9,306.36 of assets was distributed. Hence,
it is claimed
Page 283 U. S. 605
that Phillips' liability for the tax is limited to a
pro
rata share of the assets finally distributed, that is, to one
quarter of the unpaid deficiency. But the plain import of the
findings is that there was a single distribution which took several
months to complete, and there is no question that the entire assets
were thereby distributed. Moreover, such argument, urged for the
first time here, comes too late. For while the burden was on the
Commissioner to prove before the Board that Phillips was liable as
a transferee, the facts in the case at bar were stipulated, and it
was agreed that the date of complete liquidation was September 27,
1919, by which time petitioners' decedent had received his full
share of the distributed assets. Since it was stipulated that the
final transfers of assets were without consideration; that they
completely exhausted the corporate assets; that the balance of the
deficiencies, assessed against the corporation, remains unpaid, and
that the distributive dividend received by Phillips was in excess
of the remaining tax liability, the burden resting upon the
Commissioner was sustained.
Affirmed.
[
Footnote 1]
Compare Owensboro Ditcher & Grader Co. v.
Lewis, 18 F.2d
798;
Mid-Continent Petroleum Corp. v. Alexander, 35
F.2d 43;
Rotzahn v. Tyroler, 36 F.2d 208.
See also
Felland v. Wilkinson, 33 F.2d
961;
Cappellini v. Commissioner, 14 B.T.A. 1269.
[
Footnote 2]
Such proceedings to obtain payment of corporate income and
profits taxes from stockholders or other transferees have been
frequently brought.
See United States v. McHatton, 266
Fed. 602;
Updike v. United States, 8 F.2d 913,
certiorari denied, 271 U. S. 661;
United States v. Capps Mfg. Co., 9 F.2d 79,
affirmed, 15 F.2d 528;
United States v. Fairall,
16 F.2d 328;
United States v. Klausner, 25 F.2d 608;
United States v. Armstrong, 26 F.2d 227;
United States
v. Garbutt, 27 F.2d 1000,
modified, 35 F.2d 924;
United States v. Pann, 23 F.2d
714,
affirmed, 44 F.2d 321.
Compare United States
v. Boss & Peake Automobile Co., 285 Fed. 410,
affirmed, 290 Fed. 167;
Dreyfuss Dry Goods Co. v.
Lines, 18 F.2d 611,
reversed, 24 F.2d 29;
United
States v. Snook, 24 F.2d
844,
reversed sub. nom. Austin v. United States, 28
F.2d 677;
United States v. Updike, 25 F.2d
746,
affirmed, 32 F.2d 1,
281 U.
S. 489;
People's Industrial Life Ins. Co. v. United
States, 29 F.2d 650.
Where the transferee took property subject to the tax lien of
the United States, the lien could be enforced by summary
proceeding. Rev.Stat. §§ 3185-3205;
Mansfield v. Excelsior Rfg.
Co., 135 U. S. 326,
135 U. S. 336;
Blacklock v. United States, 208 U. S.
75,
208 U. S. 87. Or
by an action in equity. Rev.Stat. 3207.
Compare 26 U.S.C.
§§ 115, 136;
Heyward v. United States, 2 F.2d 467;
In
re Glover-McConnell Co., 9 F.2d 683,
686.
See also United States v. Capital City Dairy Co., 252
Fed. 900, 904;
United States v. Haar, 27 F.2d 250, 251,
certiorari denied, 278 U.S. 634.
[
Footnote 3]
"The liability, at law or in equity, of a transferee of property
of a taxpayer, in respect of the tax . . . imposed . . . by any
prior income, excess-profits, or war profits tax Act"
shall
"be assessed, collected, and paid in the same manner . . . as a
deficiency in a tax imposed by this title (including the provisions
in case of a delinquency in payment after notice and demand, the
provisions authorizing distraint and proceedings in court for
collection, and the provisions prohibiting claims and suits for
refunds)."
44 Stat. 61. This remedy is in addition to proceedings to
enforce the tax lien or actions at law and in equity. Act of
February 26, 1926, c. 27, § 1122(b), 44 Stat. 9, 121; Act of May
29, 1928, c. 852, § 617(b), 45 Stat. 791, 877.
Compare United
States v. Greenfield Tap & Die Corp., 27 F.2d
933;
United States v. Updike, 25 F.2d
746, 747,
affirmed, 32 F.2d 1, 4,
281 U.
S. 489.
[
Footnote 4]
Conference Report to accompany H.R. 1, H.Rep. No. 356, 69th
Cong., 1st Sess., February 22, 1926, p. 44, states that the
section
"makes the procedure for the collection of the amount of the
liability of transferees conform to the procedure for the
collection of taxes . . . for procedural purposes the transferee is
treated as a taxpayer would be treated."
Compare H.Rep. No. 2, 70th Cong., 1st Sess., December
7, 1927, pp. 31-32:
"Section 280 of the 1926 Act has proved a very effective and
necessary method of stopping tax evasion through the various
favorite methods recognized by everyone prior to the 1926 Act. The
enforcement of the liability through court process had been
ineffective, and the amount of revenue lost through
mala
fide transfers or through corporate distribution of assets was
admittedly large."
[
Footnote 5]
Cheatham v. United States, 92 U. S.
85,
92 U. S. 89;
State Railroad Tax Cases, 92 U. S.
575,
92 U. S. 615;
Springer v. United States, 102 U.
S. 586,
102 U. S. 593;
Dodge v. Osborn, 240 U. S. 118,
240 U. S. 120;
Graham v. du Pont, 262 U. S. 234,
262 U. S. 255.
The earliest federal excise tax acts contained provisions for suit,
or levy by distraint and sale.
E.g., Act of March 3, 1791,
c. 15, § 23, 1 Stat. 199, 204; Act of December 21, 1814, c. 15, §
5, 3 Stat. 152, 154; Act of January 9, 1815, c. 21, § 26, 3 Stat.
164, 173; Act of January 18, 1815, c. 22, § 5, 3 Stat. 180, 182;
id. c. 23, § 9, 3 Stat. 186, 188. Similarly, a tax lien on
lands and chattels was early introduced. Act of July 22, 1813, c.
16, § 19, 3 Stat. 22, 30; Act of January 9, 1815, c. 21, § 24, 3
Stat. 164, 172.
Compare Act of March 3, 1815, c. 100, §§
12-15, 3 Stat. 239, 241.
For the ancient English practise of summary seizure of the
property of a debtor of a Crown debtor, by means of an immediate
extent in the second degree,
see West, The Law and
Practice of Extents, cc. 1 3, 24; Chitty, Laws of the Prerogative
of the Crown, pp. 261, 303-07; Price, Laws and Course of the
Exchequer, c. XIV; Robertson, Civil Proceedings By and Against the
Crown, c. III, pp. 203-04, 206-07. As to the adoption of the writ
in this country,
see Hackett v. Amsden, 56 Vt. 201,
206-07.
Compare McMillen v. Anderson, 95 U.
S. 41.
[
Footnote 6]
Rev.Stat. § 3224. There is no substantial relaxation of this
principle in the provision that, while an appeal is pending before
the Board of Tax Appeals, no proceeding by distraint may be taken,
and, notwithstanding Rev.Stat. § 3224, such proceeding may be
enjoined. Act of February 26, 1926, c. 27, § 274(a), 44 Stat. 9,
55; Act of May 29, 1928, c. 852, § 272(a), 45 Stat. 791, 852;
Peerless Woolen Mills v. Rose, 28 F.2d 661. For even in
such case, if the Commissioner believes the assessment or
collection of the tax will be endangered by delay, he may make an
immediate jeopardy assessment and collect by distraint unless the
taxpayer files a bond. Act of February 26, 1926, c. 27, § 279, 44
Stat. 9, 59; Act of May 29, 1928, c. 852, § 273, 45 Stat. 791, 854;
Salikoff v. McCaughn, 24 F.2d 434.
Compare Burnet v.
Chicago Ry. Equip. Co., 282 U. S. 295,
282 U. S. 303.
The paramount right of the United States to require immediate
payment, or surety therefor, is not diminished.
[
Footnote 7]
The same rule is applied to eminent domain proceedings by a
State.
Sweet v. Rechel, 159 U. S. 380;
Backus v. Fort Street Union Depot Co., 169 U.
S. 557;
Williams v. Parker, 188 U.
S. 491;
Bragg v. Weaver, 251 U. S.
57,
251 U. S. 62;
Hays v. Port of Seattle, 251 U. S. 233,
251 U. S. 238;
Joslin Mfg. Co. v. Providence, 262 U.
S. 668,
262 U. S.
677.
[
Footnote 8]
It is asserted that these latter provisions, added by the
Revenue Act of 1928, could not render valid an assessment void
under § 280 of the 1926 Act. But as the objection relates only to
the remedy and the hearing before the Board was not held until
November, 1928, that is, after the 1928 Act was in effect, any
alleged defect was cured.
[
Footnote 9]
Avery v. Commissioner, 22 F.2d 6, 7;
Geo. Feick
& Sons Co. v. Blair, 26 F.2d 540, 542;
Bishoff v.
Commissioner, 27 F.2d 91, 92;
Conklin-Zoone-Loomis Co. v.
Commissioner, 29 F.2d 698, 700;
E. G. Robichaux Co. v.
Commissioner, 32 F.2d 780, 781;
Meinrath Brokerage Co. v.
Commissioner, 35 F.2d 614, 616. The further objection that
this mode of review may deprive the taxpayer of a jury trial
contrary to the Seventh Amendment, is unfounded. Even in the
alternative action to recover taxes alleged to have been illegally
collected, the right
"to a jury . . . is not to be found in the Seventh Amendment . .
. , but merely arises by implication from the provisions of § 3226,
Revised Statutes, which has reference to a suit at law."
Wickwire v. Reinecke, 275 U. S. 101,
275 U. S.
105.
[
Footnote 10]
See Williamsport Wire Rope Co. v. United States,
277 U. S. 551,
277 U. S. 562,
Note 7;
Russell v. United States, 278 U.
S. 181,
278 U. S.
186-87;
Old Colony Trust Co. v. Commissioner,
279 U. S. 716,
279 U. S.
721.
[
Footnote 11]
Compare Davis v. Massachusetts, 167 U. S.
43,
167 U. S. 48;
Gundling v. Chicago, 177 U. S. 183,
177 U. S. 187;
Fischer v. St. Louis, 194 U. S. 361,
194 U. S.
371.
[
Footnote 12]
By November 1, 1930, 644 petitions for review under the Revenue
Act of 1926 had been decided by the various circuit court of
appeals, and 671 petitions were pending.
See statement of
the Chairman of the Board of Tax Appeals in Hearing Before the
Subcommittee of House Committee on Appropriations, 71st Cong., 3d
Sess., January 7, 1931, pp 19, 26.
[
Footnote 13]
Compare Lonsdale v. Commissioner, 32 F.2d 537;
Hoosier Casualty Co. v. Commissioner, 32 F.2d 940;
Jacobs v. Commissioner, 34 F.2d 233;
O'Meara v.
Commissioner, 34 F.2d 390;
Insurance & Title Guarantee
Co. v. Commissioner, 36 F.2d 842;
Penney & Long, Inc.
v. Commissioner, 39 F.2d 849;
Barde Steel Products Corp.
v. Commissioner, 40 F.2d 412.
[
Footnote 14]
There is no suggestion in the Committee Reports on the 1926 Act
that § 280 was to be so limited. A contrary intention is perhaps
indicated by subdivision (b)(2), which provided that, where
"the period of limitation for assessment against the taxpayer
expired before the enactment of this Act, but assessment against
the taxpayer was made within such period,"
the Commissioner should have six years in which to make an
assessment against the transferee, provided he could do so within
one year after the enactment of the 1926 Act. Moreover, in all
cases, an additional period of one year after the expiration of the
period for assessing the taxpayer, was given.
Compare
H.R.Rep. No. 356, 69th Cong., 1st Sess., February 22, 1926, p. 44.
Subdivision (c) provides that, in the case of corporations which
had been dissolved, the period for assessment of the transferee was
to be the same as if such "termination of existence had not
occurred." These provisions clearly contemplated a dissolution and
transfer of assets prior to the passage of the Act.
Compare
United States v. Updike, 281 U. S. 489,
281 U. S. 494.
In the case at bar, two assessments against the corporate taxpayer
had been made prior to 1926.
[
Footnote 15]
Compare Equity Rules 25, 39, 42;
Watson v. National
Life & Trust Co., 162 Fed. 7.
[
Footnote 16]
Benton v. American National Bank, 276 Fed. 368;
McWilliams v. Excelsior Coal Co., 298 Fed. 884.
Compare United States v. Boss & Peake Automobile Co.,
285 Fed. 410,
affirmed, 290 Fed. 167;
Capps Mfg. Co.
v. United States, 15 F.2d 528;
Pann v. United States,
44 F.2d 321.
See also Adams v. Perryman & Co., 202
Ala. 469, 80 So. 853;
Singer v. Hutchinson, 183 Ill. 606,
620, 56 N.E. 388;
Kimbrough v. Davies, 104 Miss. 722, 61
So. 697;
Bartlett v. Drew, 57 N.Y. 587.
[
Footnote 17]
It was conceded below that, if the other stockholders are
insolvent, or absent from the jurisdiction, or cannot be
ascertained, they need not be joined.
Compare 75 U.
S. Gibson, 8 Wall. 498,
75 U. S. 506;
Second National Bank of Erie v. Georger, 246 Fed. 517,
520;
United States v. Armstrong, 26 F.2d 227, 233.