May Broadcasting Co. v. Commissioner

¶1concurring: Here the petitioner filed its return for 1942 on March 15, 1943, and paid a substantial portion of its excess profits tax on October 13, 1944. On November 30, 1944, it filed an application for relief and refund pursuant to section 722 of the Internal Revenue Code of 1939. The claim was disallowed in part on February 23, 1954, and from such disallowance the petitioner filed a petition with this Court. In such situation, section 732 provides, the disallowance shall be deemed a notice of deficiency for all purposes relating to the assessment and collection of taxes or the refund or credit of overpayments.

¶2In the application for relief the. petitioner set forth as grounds for refund only those peculiar to the application of section 722. However, in its petition to this Court the petitioner raised an entirely different issue, namely, whether its invested capital should be increased. The parties have stipulated that “[i]f petitioner filed a timely claim for refund of 1942 excess profits tax based on its finally determined invested capital, it would have been entitled to a refund based upon the use of equity invested capital in the amount of $412,231.91.”

¶3Even though, as held by several circuit Courts of Appeals, we may have jurisdiction to consider the separate issue relating to invested capital and to find an overpayment based thereon, our duty does not stop there.1 The general statute of limitations on refunds is set forth in section 322(b) of the Code and the effect of section 322(d) is to make the same general principles applicable to the refund of overpayments found by us. Thus, section 322(d) states that if this Court finds that there has been an overpayment, no credit or refund shall be made of any portion of the tax unless this Court determines as part of its decision that such portion was paid:

(A) within two years before the filing of the claim, the mailing of the notice of deficiency, or the execution of an agreement by both the Commissioner and the taxpayer pursuant to section 276(b) to extend beyond the time prescribed in section 275 the time within which the Commissioner might assess the tax, whichever is earliest, or (B) within three years before the filing of the claim, the mailing of the notice of deficiency, or the execution of the agreement, whichever is earliest, if the claim was filed, the notice of deficiency mailed, or the agreement executed within three years from the time the return was filed by the taxpayer …

¶4There was no agreement pursuant to section 276(b) and it is clear that the tax was not paid within either 2 or 3 years before the mailing of the notice of deficiency (namely, the rejection of the claim). Thus, we are concerned only with the claim for refund — and the question is whether such claim based upon the limited grounds relating to section 722 relief, was sufficient to suspend the running of the statute of limitations against refund based upon other grounds.

¶5It is well established by Supreme Court authority, as stated in the majority opinion, that no refund may be made pursuant to a claim unless such claim was timely filed and then only upon the grounds stated in such timely filed claim. A claim asserting one or more specific grounds may not be amended after the expiration of the statute of limitations prescribed with respect to refund claims so as to assert a new or unrelated ground. In addition to the cases cited in the majority opinion, see United States v. Henry Prentiss & Co., 288 U.S. 73. Therefore, the application for relief was a valid claim for refund only to the extent of the grounds asserted therein, namely, matters peculiar to section 722, and was not a valid claim for refund of any overpayment based upon an increase in its invested capital. Refund of any overpayment based upon such ground was barred by the time the issue was raised before this Court. Accordingly, we cannot determine as part of our decision that payment was made within the time prescribed in section 322(d). Such a determination would be tantamount to a holding that refund is not barred.

¶6Our opinion in H. Fendrich, Inc., 25 T.C. 262, thoroughly discusses the problem in the light of the statutory history and it is my opinion that it clearly demonstrates that Congress did not intend to abrogate the usual statute of limitations on refunds in cases coming before us on the disallowance of a section 722 claim. With all due deference to the Court of Appeals for the Seventh Circuit which reversed our decision in the Fendrich case, I think we should adhere to our opinion in that case.

¶8dissenting: It is, I hope, unnecessary to review the legislation presently involved and its history. See Mutual Lumber Co., 16 T.C. 370; H. Fendrich, Inc. v. Commissioner, (C.A. 7) 192 F. 2d 916; Commissioner v. Pittsburgh & Weirton Bus Co., (C.A. 4) 219 F. 2d 259, reversing 21 T.C. 888; Martin Weiner Corp. v. Commissioner, (C.A. 2) 223 F. 2d 444, reversing 21 T.C. 470; Packer Pub. Co. v. Commissioner, (C.A. 8) 211 F. 2d 612, reversing 17 T.C. 882; H. Fendrich, Inc. v. Commissioner, (C.A. 7) 242 F. 2d 803, reversing 25 T.C. 262; Willys-Overland Motors, Inc. v. Commissioner, (C.A. 6) 219 F. 2d 251. But I regret to say that in my view the present opinion appears to disi’egard both.

¶9Section 729(a), I.R.C. 1939, provides:

All provisions of law … applicable in respect of the taxes imposed by Chapter 1, shall, insofar as not inconsistent with this subchapter, be applicable in respect of the [excess profits] tax imposed by this subchapter.

¶10Section 322(d), I.R.C. 1939, in chapter 1 states:

If the Board finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax in respect of the taxable year in respect of which the Commissioner determined the deficiency, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, he credited or refunded to the taxpayer. [Emphasis added.]

¶11As my brother Murdock concludes in his concurring opinion, “the Tax Court … can find an overpayment if a proceeding is initiated on a determination by the Commissioner of a deficiency in that [excess profits] tax.”

¶12But by section 732(a), I.R.C. 1939, it is made clear that if a claim for refund under section 722 is disallowed, and if notice thereof is given to the taxpayer, he “may file a petition with the Board of Tax Appeals for a redetermination of the [excess profits] tax under this subchapter. If such petition is so filed, such notice of disallowance shall he deemed to he a notice of deficiency for all purposes relating to … the refund or credit of overpayments.” (Emphasis added.)

¶13It has never been assumed that a claim for refund is necessary for a determination by the Tax Court of an overpayment under such circumstances pursuant to the provisions of section 322(d); and in no case to which reference is made has it been so held. It seems to me to follow that not only does the Tax Court have jurisdiction of the issue in this proceeding, namely, the “redetermination of the [excess profits] tax under this subchapter,” but that, in fact, it is obliged to consider the question, and if there has been an overpayment, to make its determination accordingly. As to the existence of an overpayment, there is apparently no dispute between the parties so that the conclusion would seem to be necessary and obvious.

¶14The opinion scarcely even mentions section 322(d) and it is perhaps gratuitous to discuss the later provisions of that subsection here. But it may, nevertheless, be commented in passing that those provisions have always been considered to be a subject for decision under Rule 50 rather than in the opinion; that the petitioner has no burden here to show that part or all of the tax may be refundable under that subsection; that for all that appears, at least part of it and perhaps all of it is so refundable; and finally, that section 322(d) is administrative and refers to respondent’s legal authority to make the refund and concerns the Tax Court only to the extent that it is required “as part of its decision” to make findings with respect to the times when certain acts took place. (Emphasis added.)

¶15It is in my view especially unfortunate for the Tax Court to take the present position since in the only two circuits which have considered the question,1 the opposite conclusion has been reached. H. Fendrich, Inc. v. Commissioner, supra; Commissioner v. F. W. Poe Mfg. Co., (C.A. 4) 245 F. 2d 8, affirming on other grounds 25 T.C. 691. We are not presently concerned with the related question of whether it is left open to respondent to assert a deficiency on other grounds, see Commissioner v. S. Frieder & Sons Co., (C.A. 3) 247 F. 2d 834, affirming T.C. Memo. 1956-93, or whether that case can be reconciled with the second Fendrich case, and Commissioner v. F. W. Poe Mfg. Co., supra. But it may be observed that respondent has claimed an increased deficiency in income tax if we determine the excess profits tax question in petitioner’s favor; apparently thereby assuming that we have jurisdiction, see section 734,1.K.C. 1939, to impose even an income tax deficiency for the same year with respect to which an excess profits tax question remains open.

¶16While it is not clear from the opinion whether the question of jurisdiction has been considered, it seems evident that not only does jurisdiction exist under the present facts, Packer Pub. Co. v. Commissioner, supra, but also that the Tax Court is authorized and, in fact, required to determine whether there has been an overpayment, and if so, the amoimt thereof. I am forced to note my respectful dissent.