RUSSELL v. UNITED STATES(1929)
[278 U.S. 181, 182] Messrs. Douglas Arant and Wm. S. Pritchard, both of Birmingham, Ala., for petitioners.
The Attorney General and Mr. E. G. Davis, of Washington, D. C., for the United States.
Mr. Justice McREYNOLDS delivered the opinion of the Court.
The United States, by bill filed January 23, 1925, sought to recover from petitioners, stockholders of the Pine Lumber Company, additional income and profit taxes for the year 1918 assessed against that corporation in March, 1924. The company made a return to the collector for 1918 on June 12, 1919, and afterwards paid the amount indicated thereby.
Petitioners claimed the suit was barred under the limitation specified by the applicable statute. They succeeded in the District Court; but the Circuit Court of Appeals held another view, and reversed the decree dismissing the bill.
The statutory provisions which require special consideration are printed below:
Revenue Act 1918, c. 18, 40 Stat. 1057, 1083:
Revenue Act 1921, c. 136, tit. II, 'Income Tax,' 42 Stat. 227, 265:
Revenue Act 1924, c. 234, tit. II (effective January 1, 1924) 43 Stat. 253, 299, 300, 301, 303, 352:
[278 U.S. 181, 184] '(2) The amount of income, excess-profits, and war-profits taxes imposed by ... the Revenue Act of 1918, and by any such Act as amended, shall be assessed within five years after the return was filed, and no proceeding in court for the collection of such taxes shall be begun after the expiration of such period.' 26 USCA 1057, note.
Sec. 278 (a) ... (b) ... (c) ...
From the foregoing it appears: Under the act of 1918, both assessment and suit within five years were necessary. The act of 1921 required that taxes imposed thereby should be assessed within four years; that taxes payable under the act of 1918, and earlier ones, should be assessed within five years; and it limited the period within which any suit might be brought to five years after the return. With the exceptions specified by section 278, the act of 1924 requires that assessment of taxes laid by it or the act of 1921 and any suit to collect the same shall come within four years after the return; also, in respect of taxes due [278 U.S. 181, 186] under the acts of 1918, etc., that no assessment or suit shall be permitted later than five years after the return.
The exceptions to the general rule of section 277, which are specified by section 278, and here important, relate to those cases only where there has been assessment but no suit; and petitioners aver that these exceptions do not apply where the assessment was made prior to June 2, 1924.
According to the general limitations contained in the acts of 1918, 1921, and 1924, the time within which suit might have been brought upon the assessment of March, 1924, against the Pine Lumber Company expired June 12, 1924-five years after the return date. And, unless the act of 1924 repealed the old limitation and established another, petitioners must prevail. The United States claim that section 278, Act of 1924, extended the limitation to March, 1930-six years after the assessment. Petitioners deny that the act of June 2, 1924, should be so construed. They maintain that it did not extend the period for suit where an assessment had been made prior to its passage, and say that section 278(e) (2), expressly negatives the contrary theory.
When the Revenue Act of 1924 passed, many parties were liable for taxes imposed by former acts-1921, 1918, etc. Against some there were assessments; others had not been assessed. It made provision concerning taxes thereafter to accrue; also for those already due. It distinguished between existing assessments and those which were to follow. It established a Board of Tax Appeals and gave the right of appeal thereto whenever thereafter the Commissioner should propose to assess for deficiency. It thus created a radical distinction between assessments prior to June 2, 1924, and later ones which, generally at least, if objected to, could not be made without assent of the Board. To secure proper action by the Board might require considerable time, and this was provided for by extending the limitation to six years after assessment. [278 U.S. 181, 187] But the taxpayer was afforded protection against any improper action by the Commissioner through an appeal before any assessment could be actually imposed-a new and valuable right.
Section 1100, Act of 1924, kept in force 'except as provided in sections 280 and 316 (316 is unimportant here) and except as otherwise specifically provided in this Act' those parts of the act of 1921 which provided for assessment and collection of taxes imposed by that act or earlier ones. Section 280 plainly relates only to assessments made subsequent to June 2, 1924; but counsel for the United States maintain that, within the meaning of section 1100, modification of the act of 1921 was specifically provided by sections 277 and 278 when read in conjunction.
Section 277, as above shown, limits suits for taxes imposed by the act of 1918 to five years after the return, except (section 278) in certain cases where an assessment has been made. In the excepted cases the period for suit is extended to six years after the assessment. But section 278 further provides that it shall not authorize the collection of a tax after the same has been actually barred by the applicable statute, and further that it shall not affect any assessment made prior to June 2, 1924.
Manifestly, but for section 278, petitioners would be free from liability under the five-year limitation in the act of 1918, continued by the act of 1921. If section 278 refers only to assessments made after June 2, 1924, petitioners are not liable.
If an assessment made before that date comes within the ambit of section 278, its effect would be retroactive; and certainly it would produce radical change in the existing status of the claim against the petitioners-would extend for some five years a liability which had almost expired. United States v. Magnolia Petroleum Co., 276 U.S. 160 , 48 S. Ct. 236, declares, 'Statutes are not to be given retroactive effect or construed to change the status of claims fixed in [278 U.S. 181, 188] accordance with earlier provisions unless the legislative purpose so to do plainly appears.' No plain purpose to change the status of the claim against petitioners as it existed just before June 2, 1924, can be spelled out of the words in section 278 or otherwhere.
Paragraph (e)(2) of section 278 expressly directs that that section shall not affect any assessment made before June 2, 1924. Counsel for the United States maintain that to extend the time for bringing suit thereon does not 'affect' an assessment within the meaning of the paragraph. We cannot agree. Some real force must be given to the words used-they were not employed without definite purpose. The rather obvious design, we think, was to deprive section 278 of any possible application to cases where assessment had been made prior to June 2, 1924.
The legislative history of the act of 1924 lends support to the conclusion which we have reached. The changes introduced into the act of 1926 cannot authorize construction of the earlier one not consonant with the language there employed.
The judgment is reversed. The cause will be remanded to the Circuit Court of Appeals for further proceedings in conformity with this opinion.