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29 U.S. Op. Atty. Gen. 217
CORPORATION TAX--RETURNS--COMPROMISE OF PENALTIES.
The PRESIDENT.
SIR:
'(1) That the plain and practical construction of the law is that corporations exempt from tax under this law on account of having a net income of less than $5,000 are not [218] compelled to file an annual report; that corporations not required to report are not subject to the penalties of paragraph '8'; and'(2) That the commissioner is without authority to compromise penalties under this act, unless such penalties are for the nonpayment of taxes.'
'The statute is founded on the war-tax law of 1898 and the income-tax law of 1894, and the text for the most part consists of a selection of language from both acts appropriate to the subject in hand. It was never claimed under either of these laws that every person and every corporation in the United States was compelled to submit an annual report to the collector of revenue to enable that officer to ascertain if the person or company was subject to the tax.'The constructions of these laws was the plain and practical one, that when a person, firm, or corporation reached the amount of income taxable under the statute, such person, firm, or corporation was bound to report that fact to the proper assessing officer.'
'SEC. 27. That every person, firm, corporation, or company carrying on or doing the business of refining petroleum, or refining sugar, or owning or controlling any pipe line for [219] transporting oil or other products, whose gross annual receipts exceed two hundred and fifty thousand dollars, shall be subject to pay annually a special excise tax equivalent to one-quarter of one per centum on the gross amount of all receipts of such persons, firms, corporations, and companies in their respective business in excess of said sum of two hundred and fifty thousand dollars.'And a true and accurate return of the amount of gross receipts as aforesaid shall be made and rendered monthly by each of such associations, corporations, companies, or persons to the collector of the district in which any such association, corporation, or company may be located, or in which such person has his place of business. Such return shall be verified under oath by the person making the same, or, in case of corporations, by the president or chief officer thereof. Any person or officer failing or refusing to make return as aforesaid, or who shall make a false or fraudulent return, shall be liable to a penalty of not less than one thousand dollars and not exceeding ten thousand dollars for each failure or refusal to make return as aforesaid and for each and every false or fraudulent return.'
'Returns, when and by whom to be made.--Every person, firm, corporation, or company liable to tax under said section 27 will hereafter render a return, on Form 420 revised, of the gross amount of all receipts each month, and not later than the fifteenth day of the following month. When the returns made include the receipts of any branch or 'constituent' company engaged in the business of refining [220] petroleum or sugar, or in operating any pipe line in the same or in another district, the name and location and the receipts of each such branch or constituent company should be stated in each return rendered.'The foregoing instructions will also apply to all such persons, firms, corporations, and companies where the gross receipts, during the period for which the return required by law is made, do not exceed the $250,000 specially exempted from tax. A monthly return will also be required during the temporary suspension of business. Where, however, the business carried on has been permanently discontinued, that fact should be noted on the last return rendered.'
'SEC. 3229 The Commissioner of Internal Revenue, with the advice and consent of the Secretary of the Treasury, may compromise any civil or criminal case arising under the internal-revenue laws instead of commencing suit thereon; and, with the advice and consent of the said Secretary and the recommendation of the Attorney General, he may compromise any such case after a suit thereon has been commenced. Whenever a compromise is made in any case there shall be placed on file in the office of the commissioner the opinion of the Solicitor of Internal Revenue, or of the officer acting as such, with his reasons therefor, with a statement of the amount of tax assessed, the amount of additional tax or penalty imposed by law in consequence of the neglect or delinquency of the person against whom the tax is assessed, and the amount actually paid in accordance with the terms of the compromise.'SEC. 3469. Upon a report by a district attorney, or any special attorney or agent having charge of any claim in favor of the United States, showing in detail the condition of such claim, and the terms upon which the same may be compromised, and recommending that it be compromised upon the terms so offered, and upon the [223] recommendation of the Solicitor of the Treasury, the Secretary of the Treasury is authorized to compromise such claim accordingly. But the provisions of this section shall not apply to any claim arising under the postal laws.'
'Every Attorney General and every court which has been called upon to pass on this section of the statutes has warned against the abuse and expressed doubt as to the construction asked for by the Executive officers referring to it as an authorization of the acts.'
'I am also unable to imply from the provisions of the law under review any intention on the part of Congress [224] that the Secretary of the Treasury should be compelled to pursue litigations out of which the United States might undoubtedly realize smaller or greater sums of money, but which, in his judgment, ought not to be further prosecuted. As an illustration, if a person has been guilty of a technical violation of the internal-revenue laws, and, upon being informed of it, offers to compromise the case by the payment of the costs, and of any other sum justly due the Government, I see no evidence in these sections of the Revised Statutes, or in the laws from which they were drafted, that Congress intended to require that suit shall be commenced and prosecuted to extort the penalty intended only for wilful violators of the law; and the same considerations would apply to a great variety of cases, some of which must be of frequent occurrence in the administration of the Tr easury Department, where the rigid enforcement of the technical legal rights of the Government would work manifest and plain injustice by taking from citizens money which, in the forum of conscience and good morals, they did not owe to it. It is not necessary to hold that the Secretary of the Treasury is, in the matter of compromises, a fountain of the compassion of the Government or an almoner of its charity. Those are considerations which do not belong to the administration of a business department. But, on the other hand, it is to my mind as clearly unnecessary to hold that the Secretary is bound to be an instrument of manifest injustice, and to ask himself only, in every case, this question: Will the prosecution of the claim in question probably bring to the Treasury more money than its compromise upon the terms proposed?'I have, therefore, to advise you that while, in considering any compromise submitted to your judgment, you are not at liberty to act from motives merely of compassion or charity, you are at liberty, until Congress sees fit to limit your authority, to consider not only the pecuniary interests of the Treasury, but also general considerations of justice and equity and of public policy.'
'The power intrusted by law to the Secretary was not a judicial one, but one of mercy, to mitigate the severity of the law. It admitted of no appeal to the Court of Claims, or to any other court. It was the exercise of his discretion in a matter intrusted to him alone, and from which there could be no appeal.' (Pp. 174, 175.)
Very respectfully,
F. W. LEHMANN,
Solicitor General.
Approved:
GEORGE W. WICKERSHAM.
November 1998 | Civil Resource Manual 11 |
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