Opinion
Arthur W. Machen, Jr., of Baltimore, Md., for plaintiffs.
John A. Rees, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Plaintiffs overpaid the estate taxes due on the estate of Joseph W. Jenkins, Jr., deceased, in the amount of $134,212.25 in excess of the amount refunded by the Commissioner of Internal Revenue and bring this suit to recover the same with interest. The Commissioner refused to refund this portion of the overpayment on the ground that the refund claim was not filed within four years from the payment of this portion of the total estate tax demanded and paid upon the net estate of the decedent.
Special Findings of Fact.
1. Joseph W. Jenkins, Jr., died intestate June 6, 1921, and plaintiffs were duly appointed administrators of, and granted letters of administration on, his estate, which letters are yet in full force and effect.
The administrators filed an estate tax return showing a net estate of $1,934,161.15 on which an estate tax of $153,599.34 was duly assessed and paid June 6, 1922. Thereafter the Commissioner of Internal Revenue investigated the estate of the decedent, audited the return, determined a net estate of $2,767,157.90 and a deficiency in tax of $115,302.77, and, also, a further deficiency of $2,700.22, which deficiencies were duly assessed and payment was demanded. After notice and demand for these deficiencies on July 21, 1925, they were paid August 19, 1925, under protest.
January 14, 1928, the estate filed a claim for refund on which the Commissioner determined and allowed an overassessment of $60,989.78. A second claim for refund was filed July 6, 1929. Before the second claim was acted upon the Commissioner refunded the overpayment previously determined and, on November 5, 1929, rejected the second claim for refund. The estate applied for a reopening and reconsideration of the refund claim and such application was granted by the Commissioner within two years prior to the institution of this suit, and the claim was reopened, reconsidered, and subsequently allowed to the extent of $191,225.46. This amount constituted an overpayment but the Commissioner of Internal Revenue refused to refund the amount of $134,212.25 thereof on the ground that this portion of the overpayment was barred by section 3228 of the Revised Statutes (as amended; 26 USCA § 157 and note) for the reason that the claim for refund was not filed within four years from the date on which that portion of the total estate tax assessed and demanded was paid. The balance of the overpayment of $57,013.21 was refunded with interest. Both of the claims for refund filed by the executors were filed within four years from the date on which the total of the estate tax assessed and demanded by the Commissioner was paid, the final payments having been made August 19, 1925.
2. From and after the amendment of section 3228 of the Revised Statutes by section 1316 of the Revenue Act of 1921, 42 Stat. 314, effective as of November 23, 1921, it has been the consistent practice of the Commissioner, when acting upon a claim for refund of estate tax collected under the provisions of revenue acts prior to the Revenue Act of 1926, to certify for allowance and payment only such portion of the amount claimed refundable as was not in excess of the total payments made within four years immediately preceding the date upon which that refund claim was filed, and that practice has continued without change at all times since and to the date hereof. Refunds of estate tax collected under the provisions of the Revenue Act of 1926 and later revenue acts have similarly been limited to an amount which did not exceed total payments made within three years prior to the date on which the refund claim was filed. The Commissioner followed such practice in certifying for allowance and payment the refund to plaintiffs of $57,013.21 appearing on the schedule of estate tax overassessments, abatements, and refunds, signed July 30, 1921. Under that practice he held that the portion of $134,212.25 involved in this suit, of the total overassessment, was barred by section 3228 of the Revised Statutes since such portion had been paid more than four years prior to the date on which the claim for refund was filed.
The aforementioned practice was not publicly announced or known through any published regulation, decision, or opinion by the Bureau of Internal Revenue prior to March 26, 1925, which was more than nine months after the enactment of the Revenue Act of 1924 which, in section 281(b), 26 USCA § 1065 note, limited the amount refundable in the case of income tax, except as provided in subdivisions (c) and (e), to that portion of the income tax paid during the four years immediately preceding the filing of the claim. However, the Revenue Act of 1924 (section 1012 [26 USCA § 157 and note]), while re-enacting section 3228 of the Revised Statutes, which governs the filing of claims for and the refund of estate taxes, and all other internal revenue taxes, made no change therein which is material to the question involved in this case. Article 99, Reg. 68, approved March 26, 1925, was the first public announcement that refunds of estate taxes were limited to that portion of such tax paid within four years preceding the filing of a claim. This regulation provided that 'Claims for refund must be presented to the Commissioner within four years next after the payment of the amount sought to be refunded.'
LITTLETON, Judge.
The overpayment which the plaintiffs seek to recover in this case constitutes a part of the total of the estate tax determined by the Commissioner of Internal Revenue subsequently audited the return An estate tax return was duly filed and the tax assessed thereon was paid. The Commissioner subsequently audited the return and determined, assessed, and demanded deficiencies of $115,302.77 and $2,700.22, which were paid on August 19, 1925, and constituted the final payment on account of the total tax determined and demanded from the estate. Thereafter, within three years after the total tax had been determined and paid, the estate filed claims for refund which were allowed in part and rejected in part and later reopened and reconsidered. Thereafter the Commissioner determined that there had been a further overpayment of $191,225.46 in respect of the tax of the estate but refused to refund the amount of $134,212.25 thereof with interest, on the ground that this portion of the total estate tax collected had been paid more than four years prior to the filing of the claim for refund.
The only issue presented in this case is one of law and is exactly the same as the question considered and decided by this court November 5, 1934, in Jessie Norwell Hills, Executrix, v. United States, 8 F.Supp. 849, and in Haebler v. United States, 8 F.Supp. 855. For the reasons stated in these opinions we hold that the overpayment in question is not barred by the statute of limitation and that plaintiffs are entitled to recover. Judgment will be entered accordingly. It is so ordered.