Clay Products v. United States

Full title: CLAY PRODUCTS, Inc., v. UNITED STATES

Court: Court of Claims

Date published: Oct 20, 1931

52 F.2d 1033 (Fed. Cir. 1931)

Opinion

No. K-444.

October 20, 1931.

Suit by the Clay Products, Incorporated, against the United States.

Petition dismissed.

This suit was brought to recover $480, stamp tax paid upon an issue of 24,000 shares of no par value common stock in July, 1927, under Schedule A(3), title 8 (section 800 et seq.) of the Revenue Act of 1926, 44 Stat. 101 ( 26 USCA § 901, Schedule A(3).

The plaintiff insists that the provision of the statute requiring the payment of a tax of 2 cents per share upon stock having no par value is unconstitutional in that it is arbitrary and amounts to confiscation of plaintiff's property.

Special Findings of Fact.

1. Plaintiff, a Colorado corporation, was incorporated July 8, 1927, with an authorized capital stock of 24,000 shares of common stock of no par value, and 1,000 shares of preferred stock of the par value of $25 each. July 9, 1927, plaintiff issued 24,000 shares of common stock without par value, and 240 shares of preferred stock of a par value of $25 each.

February 11, 1928, plaintiff transferred legal title to the 24,000 shares of no par value common stock and drew new stock certificates, Nos. 1 and 2 in the name of Charles E. Sabin for 12,000 and 11,998 shares, respectively, No. 3 in the name of Sophia M. Ruegg for one share, and No. 4 in the name of Clyde T. Davis for one share. Plaintiff affixed no documentary stamps to the said stock certificates as required by Schedule A(3), title 8 (section 800 et seq.) of the Revenue Act of 1926. December 20, 1928, the Commissioner of Internal Revenue directed the plaintiff to purchase, affix to the stubs of said stock certificates above mentioned, and cancel documentary stamps at 2 cents per share of the total cost and value of $480, as follows:

================================================================================================= Persons to whom plaintiff transferred legal title to | Certificate | Number | Tax | Total stock | numbers | of shares | per | tax | | | share | -----------------------------------------------------|-------------|-----------|--------|-------- Chas. E. Sabin ..................................... | 1 | 12,000 | @ 2c | $240.00 Chas. E. Sabin ..................................... | 2 | 11,998 | @ 2c | 239.96 Sophia W. Ruegg .................................... | 3 | 1 | @ 2c | .02 Clyde T. Davis ..................................... | 4 | 1 | @ 2c | .02 | | | | _______ Total tax ....................................... | .......... | ......... | ...... | 480.00 ------------------------------------------------------------------------------------------------- March 25, 1925, plaintiff purchased, affixed, and canceled said stamps as directed by the Commissioner of Internal Revenue, and the sum of $480 paid therefor was turned into the Treasury of the United States in the usual and regular course of business.

2. The 24,000 shares of no par value common stock, upon the issuance of which the tax was levied, had an actual value of $1,000.

3. May 13, 1929, plaintiff filed a claim for refund of the entire tax paid upon the ground that the statute imposing the tax is unconstitutional, in that it is arbitrary and amounts to confiscation. The Commissioner rejected the claim August 20, 1929.

Frank L. Hatch, of Washington, D.C., for plaintiff.

George H. Foster, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

PER CURIAM.

Plaintiff bases its right to recover the tax levied and collected at the rate of 2 cents per share upon the issuance of its no par value common stock upon the ground that the tax is confiscatory, in that it is levied without regard to the actual value of the stock upon the issuance of which the tax is collected.

The failure of Congress to measure the tax by the actual value of the shares of stock issued affords no basis for the court to declare the tax unconstitutional. The fact that a particular tax bears heavily upon a corporation, or a class of corporations, is not, of itself, a sufficient reason for a tax to be declared unconstitutional. Veazie Bank v. Fenno, 8 Wall. 533, 19 L. Ed. 482; Flint v. Stone Tracy Co., 220 U.S. 107, 166, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. The petition is dismissed. It is so ordered.