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System of taxation based upon voluntary assessment and payment, not upon
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U.S. Supreme Court

Flora v. United States, 357 U.S. 63 (1958)

Flora v. United States

No. 492

Argued May 20, 1958

Decided June 16, 1958

357 U.S. 63

CERTIORARI TO THE UNITED STATES COURT OF APEALS

FOR THE TENTH CIRCUIT

Syllabus

A taxpayer must pay the full amount of an income tax deficiency assessed by
the Commissioner of Internal Revenue before he may challenge its correctness
by a suit in a federal district court for refund under 28 U.S.C. §
1346(a)(1). P P. <http://supreme.justia.com/us/357/63/case.html> 63-76.

<http://cases.justia.com/us-court-of-appeals/F2/246/929/> 246 F.2d 929,
affirmed.

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

The issue in this case is whether a taxpayer must pay the full amount of an
income tax deficiency before he may challenge its correctness by a suit for
refund under 28 U.S.C. § 1346(a)(1).

During 1950, petitioner suffered losses on the sale of certain commodities
and futures. He reported them as ordinary losses, but the Commissioner of
Internal Revenue characterized them as capital losses. A deficiency
assessment was levied in the amount of ,908.60, including interest.
Petitioner made two payments that totaled ,058.54, and then submitted a
claim for refund of that amount. The claim was disallowed. On Aug. 3, 1956,
petitioner brought this action under 28 U.S.C. § 1346(a)(1) for refund. The
United States moved to

Page 357 U. S. 64

dismiss for want of jurisdiction and for failure to state a claim upon which
relief could be granted. The district judge held that, because petitioner
had not paid the full amount of the deficiency, he "should not maintain" the
action. Because the question had not been resolved by the Court of Appeals,
however, he deemed it advisable to pass upon the merits, and, upon doing so,
entered judgment for defendant United States. 142 F.Supp. 602, 604. The
Court of Appeals for the Tenth Circuit vacated the judgment and remanded
with instructions to dismiss, holding that the complaint "failed to state a
claim" because petitioner had not paid the entire assessment for the period
in question. <http://cases.justia.com/us-court-of-appeals/F2/246/929/> 246
F.2d 929, 931. [ <http://supreme.justia.com/us/357/63/case.html#F1#F1>
Footnote 1] We granted certiorari, 355 U.S. 881, to resolve the conflict
between that decision and Bushmiaer v. United States,
<http://cases.justia.com/us-court-of-appeals/F2/230/146/> 230 F.2d 146. [
<http://supreme.justia.com/us/357/63/case.html#F2#F2> Footnote 2]

The pertinent jurisdictional statute, 28 U.S.C. § 1346(a)(1), reads as
follows:

"(a) The district courts shall have original jurisdiction, concurrent with
the Court of Claims, of:"

"(1) Any civil action against the United States for the recovery of any
internal revenue tax alleged to have been erroneously or illegally assessed
or collected, or any penalty claimed to have been collected without
authority or any sum alleged to have been excessive or in any manner
wrongfully collected under the internal revenue laws. . . ."

(Emphasis supplied.)

Page 357 U. S. 65

In matters of statutory construction, the duty of this Court is to give
effect to the intent of Congress, and, in doing so, our first reference is,
of course, to the literal meaning of words employed. The principle of strict
construction of waivers of sovereign immunity, United States v. Michel,
<http://supreme.justia.com/us/282/656/case.html> 282 U. S. 656, and the
sharp division of opinion among the lower courts on the meaning of the
pertinent statutory language suggest the presence of ambiguity in what might
otherwise be termed a clear authorization to sue for the refund of "any
sum." Consequently, a thorough consideration of the relevant legislative
history is required.

Section 1346 was originally enacted as Section 1310(c) of the Revenue Act of
1921. [ <http://supreme.justia.com/us/357/63/case.html#F3#F3> Footnote 3]
Its essential language seems to have been copied from R.S. § 3226, the
predecessor of the present claim for refund statute, 26 U.S.C. (Supp. V) §
7422(a). Those statutes use language identical to that appearing above to
provide that no suit for the refund of a "tax," "penalty," or "sum" shall be
maintained until similar relief has been sought from the Secretary or his
delegate. [ <http://supreme.justia.com/us/357/63/case.html#F4#F4> Footnote
4] The meaning that has been ascribed to this language in the claim for
refund statute provides the key to what Congress intended when it used that
language in the jurisdictional provision.

Page 357 U. S. 66

The original claim for refund statute, Section 19 of the Revenue Act of July
13, 1866, provided that no suit should be maintained in any court for the
recovery of

"any tax alleged to have been erroneously or illegally assessed or
collected, until appeal shall have been duly made to the commissioner of
internal revenue. . . . [
<http://supreme.justia.com/us/357/63/case.html#F5#F5> Footnote 5]"

On this "appeal," the Commissioner was empowered to "remit, refund, and pay
back" all taxes or penalties improperly assessed or collected. [
<http://supreme.justia.com/us/357/63/case.html#F6#F6> Footnote 6] When the
appeal requirement was restated in Section 3226 of the Revised Statutes, [
<http://supreme.justia.com/us/357/63/case.html#F7#F7> Footnote 7] Congress
added the "penalty" and "sum" clauses, bringing together for the first time
the three-way division that survives in 26 U.S.C. (Supp. V) § 7422(a) and 28
U.S.C. § 1346(a)(1). The revisers left no indication of what significance,
if any, was to be attached to this addition.

During the period of this formative legislation, refund suits could not be
brought against the United States, because of its sovereign immunity. Tax
litigation took the form of an action of assumpsit against the collector.

Page 357 U. S. 67

See <http://supreme.justia.com/us/72/720/case.html> Philadelphia v. Diehl,
5 Wall. 720. [ <http://supreme.justia.com/us/357/63/case.html#F8#F8>
Footnote 8] Such suits were, of course, subject to the provision in Section
19 of the 1866 Act that they must be preceded by "appeal" to the
Commissioner. The meaning of that command, which later became R.S. § 3226
and eventually, as amended, 26 U.S.C. (Supp. V) § 7422(a), was considered in
Cheatham v. United States, <http://supreme.justia.com/us/92/85/case.html>
92 U. S. 85. There, in response to an appeal, the Commissioner of Internal
Revenue had set aside the first assessment of taxpayer's 1864 income taxes
and directed the local assessor to make a second one. The taxpayer paid the
second assessment and sued the collector for refund. The Court held that, by
failing to appeal from the second assessment, the taxpayer failed to comply
with Section 19, and hence had no right of action. In the course of its
opinion, the Court made this careful statement of the remedies then
available to taxpayers who sought to contest the correctness of their tax:

"So also, in the Internal Revenue Department, the statute which we have
copied allows appeals from the assessor to the Commissioner of Internal
Revenue, and, if dissatisfied with his decision, on paying the tax, the
party can sue the collector; and, if the money was wrongfully exacted, the
courts will give him relief by a judgment, which the United States pledges
herself to pay."

"* * * *

Page 357 U. S. 68

"

". . . While a free course of remonstrance and appeal is allowed within the
departments before the money is finally exacted, the General Government has
wisely made the payment of the tax claimed, whether of customs or of
internal revenue, a condition precedent to a resort to the courts by the
party against whom the tax is assessed. . . . If the compliance with this
condition [that suit must be brought within six months of the Commissioner's
decision] requires the party aggrieved to pay the money, he must do it. He
cannot, after the decision is rendered against him, protract the time within
which he can contest that decision in the courts by his own delay in paying
the money. It is essential to the honor and orderly conduct of the
Government that its taxes should be promptly paid, and drawbacks speedily
adjusted, and the rule prescribed in this class of cases is neither
arbitrary nor unreasonable. . . ."

"The objecting party can take his appeal. He can, if the decision is delayed
beyond twelve months, rest his case on that decision, or he can pay the
amount claimed and commence his suit at any time within that period. So,
after the decision, he can pay at once, and commence suit within the six
months. . . . [ <http://supreme.justia.com/us/357/63/case.html#F9#F9>
Footnote 9]"

(Emphasis added.)

From this carefully considered dictum, it is unmistakably clear that the
Court understood the statutes of that time to require full payment of an
assessed tax as a condition precedent to the right to sue the collector for
a refund. This understanding of the statutory scheme appears to have
prevailed for the succeeding fifty or sixty years. It was never suggested
that the addition in R.S. § 3226 of the clause beginning "any sum" effected
any change. The Cheatham case was decided after that

Page 357 U. S. 69

addition was made, and it gave no indication that the "condition precedent"
of which it spoke had already been abrogated by Congress. Consistent with
that understanding, there does not appear to be a single case before 1940 in
which a taxpayer attempted a suit for refund of income taxes without paying
the full amount the Government alleged to be due. Court opinions that took
occasion to comment on the extent of payment are consistent with the
Cheatham declaration, [
<http://supreme.justia.com/us/357/63/case.html#F10#F10> Footnote 10] and
that case has continued to be cited with approval to the present day. [
<http://supreme.justia.com/us/357/63/case.html#F11#F11> Footnote 11] Such
was the understanding of the necessity for full payment in the suit against
the collector.

Since the statute now under consideration, 28 U.S.C. § 1346(a)(1), employs
language identical to that in the statute under which the full payment
understanding developed, R.S. § 3226, a construction requiring full payment
would appear to be more consistent with the established meaning of the
statutory language. Furthermore, the situation with respect to tax suits
against the United States at the time 28 U.S.C. § 1346(a)(1) was enacted,
the express purpose of its enactment, and subsequent

Page 357 U. S. 70

expressions of congressional intent all suggest that the principle of full
payment was to be preserved.

The jurisdictional provision that is now 28 U.S.C. § 1346(a)(1) was first
enacted in Section 1310(c) of the Revenue Act of 1921. [
<http://supreme.justia.com/us/357/63/case.html#F12#F12> Footnote 12] At that
time, the United States was already suable in the District Courts. Since
1887, the Tucker Act had allowed suit against the United States for claims
less than ,000 "founded upon . . . any law of Congress . . . ," [
<http://supreme.justia.com/us/357/63/case.html#F13#F13> Footnote 13] and
that language included suits to obtain refund of income taxes. United States
v. Emery, Bird, Thayer Realty Co.,
<http://supreme.justia.com/us/237/28/case.html> 237 U. S. 28. Since R.S. §
3226 was cast in the broadest of terms, its requirement that refund suits be
preceded by an "appeal" to the Commissioner clearly applied to the Tucker
Act cases, United States v. Michel,
<http://supreme.justia.com/us/282/656/case.html> 282 U. S. 656, and the
related requirement that full payment must be made prior to suit seems to
have been assumed to be equally applicable. For amounts in excess of the
,000 Tucker Act limitation, the taxpayer could invoke his old remedy against
the Collector.

The complementary nature of the two District Court remedies was impaired
when this Court reemphasized the rule requiring the

Collector to be sued personally. A suit against the office or the successor
in office of a deceased collector could not be maintained. Smietanka v.
Indiana Steel Co., <http://supreme.justia.com/us/257/1/case.html> 257 U. S.
1 (1921). Senator Jones of New Mexico interrupted floor debate on the
Revenue Act of 1921 to call attention to this decision. In his view, it
meant that, when the particular collector was dead, a taxpayer suing for
more than ,000 had to bring suit in the Court of Claims. In addition to the
extra expense and inconvenience of litigating in Washington, a Court of
Claims

Page 357 U. S. 71

judgment carried no interest. The Senator proposed an amendment, stating:

"What is here proposed is that we shall remedy that situation by providing
that, where the collector to whom the revenue was paid has died, then the
claimant may sue the United States. It simply brings about an equitable
situation, and prevents the taxpayer from having to suffer the hardships
which would be brought upon him simply through the accident of the death of
the collector to whom he paid the money. I offer the amendment for the
purpose of remedying that situation. [
<http://supreme.justia.com/us/357/63/case.html#F14#F14> Footnote 14]"

The amendment, which was accepted without further comment, conferred
jurisdiction on the District Court,

"Concurrent with the Court of Claims, of any suit or proceeding, commenced
after the passage of the revenue act of 1921, for the recovery of any
internal revenue tax alleged to have been erroneously or illegally assessed
or collected, or of any penalty claimed to have been collected without
authority or any sum alleged to have been excessive or in any manner
wrongfully collected under the internal revenue laws, even if the claim
exceeds ,000, if the Collector of Internal Revenue by whom such tax,
penalty, or such was collected is dead at the time such suit or proceeding
is commenced. [ <http://supreme.justia.com/us/357/63/case.html#F15#F15>
Footnote 15]"

The amendment's narrow-stated purpose refutes any suggestion that Congress
intended further to expand or even

Page 357 U. S. 72

to restate the jurisdiction of the District Court in refund suits brought
against the United States. As we have seen, the District Courts already had
such jurisdiction under the Tucker Act, and there is no indication that
Congress intended any change in the terms on which that action was made
available other than the change that was clearly set forth. The statute that
is now 28 U.S.C. § 1346(a) (1) was enacted merely to remove the
jurisdictional amount limitation of the Tucker Act in the special situation
where the Collector could not be sued. See Lowe Bros. Co. v. United States,
<http://supreme.justia.com/us/304/302/case.html> 304 U. S. 302,
<http://supreme.justia.com/us/304/302/case.html#305> 305. The House
Conference Report and a contemporary Treasury Department declaration confirm
this view of the statute's effect. [
<http://supreme.justia.com/us/357/63/case.html#F16#F16> Footnote 16]

The similarity of essential language leaves no doubt that the terms of the
jurisdictional provision were copied from the claim for refund statute, R.S.
§ 3226, as amended by Section 1318 of the Revenue Act of 1921. [
<http://supreme.justia.com/us/357/63/case.html#F17#F17> Footnote 17] The
fact that this language had for many years been considered to require full
payment before suing the Collector, and the fact that the avowed purpose of
the 1921 amendment was merely to cure an inadequacy in the suit against the
Collector, combine as persuasive indications that no change was intended in
the full payment principle declared in Cheatham v. United States, supra.

When Congress created the Board of Tax Appeals in 1924, [
<http://supreme.justia.com/us/357/63/case.html#F18#F18> Footnote 18] it
demonstrated a clear understanding that refund suits could only be
maintained upon full payment of the

Page 357 U. S. 73

tax alleged to be due. The House Committee proposing the bill explained its
purpose as follows:

"The committee recommends the establishment of a Board of Tax Appeals to
which a taxpayer may appeal prior to the payment of an additional assessment
of income, excess profits, war profits, or estate taxes. Although a taxpayer
may, after payment of his tax, bring suit for the recovery thereof, and thus
secure a judicial determination of the questions involved, he cannot, in
view of Section 3224 of the Revised Statutes, which prohibits suits to
enjoin the collection of taxes, secure such a determination prior to the
payment of the tax. The right of appeal after payment of the tax is an
incomplete remedy, and does little to remove the hardship occasioned by an
incorrect assessment. The payment of a large additional tax on income
received several years previous and which may have, since its receipt, been
either wiped out by subsequent losses, invested in nonliquid assets, or
spent, sometimes forces taxpayers into bankruptcy, and often causes great
financial hardship and sacrifice. These results are not remedied by
permitting the taxpayer to sue for the recovery of the tax after this
payment. He is entitled to an appeal and to a determination of his liability
for the tax prior to its payment. [
<http://supreme.justia.com/us/357/63/case.html#F19#F19> Footnote 19]"

Petitioner argues that the "hardship" the Board of Tax Appeals was created
to alleviate was not the taxpayer's inability to sue without paying the
whole tax -- for petitioner erroneously concludes that the 1921 amendment
conferred that right -- but the Government's power to

Page 357 U. S. 74

collect the balance due while a refund suit was in progress. But the
Committee Report quoted above clearly demonstrates that the hardship about
which the Congress was concerned was the hardship of prelitigation payment,
not post-litigation collection. Old Colony Trust Co. v. Commissioner,
<http://supreme.justia.com/us/279/716/case.html> 279 U. S. 716,
<http://supreme.justia.com/us/279/716/case.html#721> 721. [
<http://supreme.justia.com/us/357/63/case.html#F20#F20> Footnote 20]

The final step in the evolvement of 28 U.S.C. § 1346(a)(1) took place in the
Act of July 30, 1954, [
<http://supreme.justia.com/us/357/63/case.html#F21#F21> Footnote 21] which
removed the ,000 jurisdictional limitation and eliminated the condition
about the Collector's being dead or out of office. Far from indicating an
intent to allow suit without full payment of the tax due, the legislative
history of that amendment shows a clear understanding of the Cheatham
requirement, and demonstrates a narrow purpose in no way inconsistent with
that requirement. The House Report states:

"The purpose of this bill is to permit taxpayers a greater opportunity to
sue the United States in the district court of their own residence to
recover taxes which they feel have been wrongfully collected. This is done
by removing the jurisdictional limitation of ,000 now imposed on such suits.
[ <http://supreme.justia.com/us/357/63/case.html#F22#F22> Footnote 22]"

In explaining the present state of the law, the Report goes on to point out
that a taxpayer may contest a deficiency assessment by a petition in the Tax
Court. "The taxpayer

Page 357 U. S. 75

may, however," the Report continues, "elect to pay his tax, and thereafter
bring suit to recover the amount claimed to have been illegally exacted." [
<http://supreme.justia.com/us/357/63/case.html#F23#F23> Footnote 23]

The foregoing study of the legislative history of 28 U.S.C. § 1346(a)(1) and
related statutes leaves no room for contention that their broad terms were
intended to alter in any way the Cheatham principle of "pay first and
litigate later." [ <http://supreme.justia.com/us/357/63/case.html#F24#F24>
Footnote 24] For many years, that principle has been reinforced by the rule
that no suit can be maintained for the purpose of restraining the assessment
or collection of any tax. [
<http://supreme.justia.com/us/357/63/case.html#F25#F25> Footnote 25] More
recently, Congress took care to except from the operation of the Federal
Declaratory Judgments Act any controversies "with respect to Federal taxes."
[ <http://supreme.justia.com/us/357/63/case.html#F26#F26> Footnote 26] To
ameliorate the hardship produced by these requirements, Congress created a
special court where tax questions could be adjudicated in advance of any
payment. But there is no indication of any intent to create the hybrid
remedy for which petitioner contends.

It is suggested that a part-payment remedy is necessary for the benefit of a
taxpayer too poor to pay the full amount of the tax. Such an individual is
free to litigate in the Tax Court without any advance payment. Where the
time to petition that court has expired, or where for some other reason a
suit in the District Court seems more desirable, the requirement of full
payment may in some instances work a hardship. But since any hardship would
grow out of an opinion whose effect Congress in successive

Page 357 U. S. 76

statutory revisions has made no attempt to alter, if any amelioration is
required it is now a matter for Congress, not this Court.

The judgment of the Court of Appeals is

Affirmed.

MR. JUSTICE WHITTAKER, believing that Bushmiaer v. United States,
<http://cases.justia.com/us-court-of-appeals/F2/230/146/> 230 F.2d 146;
Sirian Lamp Co. v. Manning, 123 F.2d 776, and Coates v. United States, 111
F.2d 609, properly apply the statutes involved and should be followed, would
reverse the judgment below.

[ <http://supreme.justia.com/us/357/63/case.html#T1#T1> Footnote 1]

See also Suhr v. United States, 18 F.2d 81. But cf. Sirian Lamp Co. v.
Manning, 123 F.2d 776.

[ <http://supreme.justia.com/us/357/63/case.html#T2#T2> Footnote 2]

See also Sirian Lamp Co. v. Manning, 123 F.2d 776; Coates v. United States,
111 F.2d 609. But cf. Bendheim v. Commissioner,
<http://cases.justia.com/us-court-of-appeals/F2/214/26/> 214 F.2d 26, 28;
Elbert v. Johnson, 164 F.2d 421, 423-424.

[ <http://supreme.justia.com/us/357/63/case.html#T3#T3> Footnote 3]

42 Stat. 311.

[ <http://supreme.justia.com/us/357/63/case.html#T4#T4> Footnote 4]

26 U.S.C. (Supp. V) § 7422(a):

"No suit or proceeding shall be maintained in any court for the recovery of
any internal revenue tax alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected
without authority, or of any sum alleged to have been excessive or in any
manner wrongfully collected, until a claim for refund or credit has been
duly filed with the Secretary or his delegate, according to the provisions
of law in that regard, and the regulations of the Secretary or his delegate
established in pursuance thereof."

R.S. § 3226 is quoted in <http://supreme.justia.com/us/357/63/case.html>
357 U. S. infra.

[ <http://supreme.justia.com/us/357/63/case.html#T5#T5> Footnote 5]

14 Stat. 152.

[ <http://supreme.justia.com/us/357/63/case.html#T6#T6> Footnote 6]

14 Stat. 111.

[ <http://supreme.justia.com/us/357/63/case.html#T7#T7> Footnote 7]

"No suit shall be maintained in any court for the recovery of (1) any
internal tax alleged to have been erroneously or illegally assessed or
collected, or of (2) any penalty claimed to have been collected without
authority, or of (3) any sum alleged to have been excessive or in any manner
wrongfully collected, until appeal shall have been duly made to the
Commissioner of Internal Revenue. . . ."

R.S. § 3226.

This language is practically identical to that used by the 1866 Act in
giving the Commissioner his refunding powers. 14 Stat. 111, restated in R.S.
§ 3220. The first category dates back to the 1863 Act. 12 Stat. 729. The
third category was added in 1864. 13 Stat. 239. The 1866 Act rounded out the
three categories by adding the second. 14 Stat. 111. An examination of the
legislative history discloses no indication of the purpose of these
successive additions.

[ <http://supreme.justia.com/us/357/63/case.html#T8#T8> Footnote 8]

Initially, such suits depended upon diversity jurisdiction.
<http://supreme.justia.com/us/79/1/case.html> Collector v. Hubbard, 12 Wall.
1. Later, Congress created jurisdiction for "all causes arising under any
law providing internal revenue. . . ." R.S. § 629(4). With slight
modification, that provision became Section 24(5) of the Judicial Code, 36
Stat. 1092, and is presently 28 U.S.C. § 1340. See Lowe Bros. Co. v. United
States, <http://supreme.justia.com/us/304/302/case.html> 304 U. S. 302,
<http://supreme.justia.com/us/304/302/case.html#305> 305.

[ <http://supreme.justia.com/us/357/63/case.html#T9#T9> Footnote 9]

92 U.S. at <http://supreme.justia.com/us/92/85/case.html#88> 88-89.

[ <http://supreme.justia.com/us/357/63/case.html#T10#T10> Footnote 10]

Kings County Savings Institution v. Blair,
<http://supreme.justia.com/us/116/200/case.html> 116 U. S. 200,
<http://supreme.justia.com/us/116/200/case.html#205> 205 (1886) ("No claim
for the refunding of taxes can be made according to law and the regulations
until after the taxes have been paid [and] . . . no suit can be maintained
for taxes illegally collected unless a claim therefor has been made within
the time prescribed by the law."); Pollock v. Farmers' Loan & Trust Co.,
<http://supreme.justia.com/us/157/429/case.html> 157 U. S. 429,
<http://supreme.justia.com/us/157/429/case.html#609> 609 (1895) (dissenting
opinion) ("The same authorities [including the Cheatham case] have
established the rule that the proper course, in a case of illegal taxation,
is to pay the tax under protest or with notice of suit, and then bring an
action against the officer who collected it."); Dodge v. Osborn,
<http://supreme.justia.com/us/240/118/case.html> 240 U. S. 118,
<http://supreme.justia.com/us/240/118/case.html#120> 120 (1916) ("The remedy
of a suit to recover back the tax after it is paid is provided by statute. .
. ."); see <http://supreme.justia.com/us/357/63/case.html> 357 U. S. infra.

[ <http://supreme.justia.com/us/357/63/case.html#T11#T11> Footnote 11]

E.g., Phillips v. Commissioner,
<http://supreme.justia.com/us/283/589/case.html> 283 U. S. 589,
<http://supreme.justia.com/us/283/589/case.html#595> 595; United States v.
Jefferson Electric Mfg. Co.,
<http://supreme.justia.com/us/291/386/case.html> 291 U. S. 386,
<http://supreme.justia.com/us/291/386/case.html#395> 395-396; Dobson v.
Commissioner, <http://supreme.justia.com/us/320/489/case.html> 320 U. S.
489, <http://supreme.justia.com/us/320/489/case.html#496> 496.

[ <http://supreme.justia.com/us/357/63/case.html#T12#T12> Footnote 12]

42 Stat. 311.

[ <http://supreme.justia.com/us/357/63/case.html#T13#T13> Footnote 13]

24 Stat. 505, 28 U.S.C. § 1346(a)(2).

[ <http://supreme.justia.com/us/357/63/case.html#T14#T14> Footnote 14]

61 Cong.Rec. 7506-7507.

[ <http://supreme.justia.com/us/357/63/case.html#T15#T15> Footnote 15]

61 Cong.Rec. 7507. A second amendment provided that interest should be
allowed in any judgment against the United States in these refund suits.
Ibid. A special amendment in 1925 added the right to bring such refund suits
when the collector "is not in office." 43 Stat. 972.

[ <http://supreme.justia.com/us/357/63/case.html#T16#T16> Footnote 16]

H.R.Rep.No.486, 67th Cong., 1st Sess. 57; II-1 Cum.Bull. 224, 225.

[ <http://supreme.justia.com/us/357/63/case.html#T17#T17> Footnote 17]

42 Stat. 314. The 1921 Act substituted "claim for refund or credit" where
the statute formerly referred to an "appeal" to the Commissioner.

[ <http://supreme.justia.com/us/357/63/case.html#T18#T18> Footnote 18]

43 Stat. 336.

[ <http://supreme.justia.com/us/357/63/case.html#T19#T19> Footnote 19]

H.R.Rep.No.179, 68th Cong., 1st Sess. 7. The Senate Committee on Finance
made a similar explanation. S.Rep.No.398, 68th Cong., 1st Sess. 8.

[ <http://supreme.justia.com/us/357/63/case.html#T20#T20> Footnote 20]

"The Board of Tax Appeals . . . was created by Congress to provide taxpayers
an opportunity to secure an independent review of the Commissioner of
Internal Revenue's determination of additional income and estate taxes by
the Board in advance of their paying the tax found by the Commissioner to be
due. Before the act of 1924, the taxpayer could only contest the
Commissioner's determination of the amount of the tax after its payment."

[ <http://supreme.justia.com/us/357/63/case.html#T21#T21> Footnote 21]

68 Stat. 589.

[ <http://supreme.justia.com/us/357/63/case.html#T22#T22> Footnote 22]

H.R.Rep.No.659, 83d Cong., 1st Sess. 1.

[ <http://supreme.justia.com/us/357/63/case.html#T23#T23> Footnote 23]

Id. at 2. And see S.Rep.No.115, 83d Cong., 1st Sess.

[ <http://supreme.justia.com/us/357/63/case.html#T24#T24> Footnote 24]

Allen v. Regents of University System of Georgia,
<http://supreme.justia.com/us/304/439/case.html> 304 U. S. 439,
<http://supreme.justia.com/us/304/439/case.html#456> 456 (concurring
opinion).

[ <http://supreme.justia.com/us/357/63/case.html#T25#T25> Footnote 25]

14 Stat. 475 (1867), reenacted in R.S. § 3224, presently in force as 26
U.S.C. (Supp. V) § 7421.

[ <http://supreme.justia.com/us/357/63/case.html#T26#T26> Footnote 26]

49 Stat. 1027, 28 U.S.C. § 2201. See S.Rep.No.1240, 74th Cong., 1st Sess.
11.

U.S. Supreme Court

FLORA v. UNITED STATES, 362 U.S. 145 (1960)

362 U.S. 145

FLORA v. UNITED STATES.
ON REHEARING.
No. 492, October Term, 1957.
Argued May 20, 1958.
Decided June 16, 1958.

Rehearing granted June 22, 1959. Reargued November 12, 1959. Decided March
21, 1960.

Under 28 U.S.C. 1346 (a) (1), a Federal District Court does not have
jurisdiction of an action by a taxpayer for refund of a part payment made by
him on an assessment for an alleged deficiency in his income tax. The
taxpayer must pay the full amount of the assessment before he may challenge
its validity in an action under 1346 (a) (1). Flora v. United States,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
court=us&vol=357&invol=63> 357 U.S. 63 , reaffirmed. Pp. 146-177.

(a) The language of 1346 (a) (1) can more readily be construed to require
payment of the full tax before suit than to permit suit for recovery of a
part payment. Pp. 148-151.

(b) The legislative history of 1346 (a) (1) is barren of any clue to the
congressional intent on this issue; but that section is a jurisdictional
provision which is a keystone in a carefully articulated and quite
complicated structure of tax laws; since enactment of its precursor in 1921
Congress has several times acted upon the assumption that 1346 (a) (1)
requires full payment before suit; and any evidence of a contrary intent is
too weak and insubstantial to justify destroying the existing harmony of the
tax statutes. Pp. 151-158.

(c) In establishing the Board of Tax Appeals (now the Tax Court), Congress
acted upon the assumption that full payment of the tax assessed was a
condition precedent for bringing suit for refund in a District Court, and it
chose to establish the Board as a different forum where the validity of an
assessment could be litigated without prior payment in full. Pp. 158-163.

(d) To permit such a suit in a District Court would be inconsistent with the
purpose of 405 of the Revenue Act of 1935, which amended the Declaratory
Judgment Act so as to except disputes "with respect to Federal taxes." Pp.
164-165.

(e) To permit such a suit in a District Court would generate the very
problems which Congress believed it had solved by 7422 (e) of the Internal
Revenue Code of 1954. Pp. 165-167.

(f) A different conclusion is not required by the administrative practice
prior to 1940 nor by a few inconsequential exceptions to [362 U.S. 145, 146]
the otherwise uniform belief prior to 1940 that full payment had to precede
suit in a District Court for refund. Pp. 167-175.

(g) Requiring taxpayers to pay assessments in full before suing in a
District Court will not necessarily subject them to undue hardships, since
they may appeal to the Tax Court without first paying anything. Pp. 175-177.

246 F.2d 929, affirmed.

Randolph W. Thrower reargued the cause for petitioner. With him on the brief
on reargument were A. G. McClintock, William A. Sutherland and George L.
Cohen.

Assistant Attorney General Rice reargued the cause for the United States.
With him on the brief on reargument were Solicitor General Rankin, Harry
Baum and Marvin W. Weinstein.

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

The question presented is whether a Federal District Court has jurisdiction
under 28 U.S.C. 1346 (a) (1) of a suit by a taxpayer for the refund of
income tax payments which did not discharge the entire amount of his
assessment.

This is our second consideration of the case. In the 1957 Term, we decided
that full payment of the assessment is a jurisdictional prerequisite to
suit,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
court=us&vol=357&invol=63> 357 U.S. 63 . Subsequently the Court granted a
petition for rehearing.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
court=us&vol=360&invol=922> 360 U.S. 922 . The case has been exhaustively
briefed and ably argued. After giving the problem our most careful
attention, we have concluded that our original disposition of the case was
correct.

Under such circumstances, normally a brief epilogue to the prior opinion
would be sufficient to account for our decision. However, because petitioner
in reargument has placed somewhat greater emphasis upon certain contentions
than he had previously, and because our dissenting colleagues have
elaborated upon the reasons for their [362 U.S. 145, 147] disagreement, we
deem it advisable to set forth our reasoning in some detail, even though
this necessitates repeating much of what we have already said.

THE FACTS.

The relevant facts are undisputed and uncomplicated. This litigation had its
source in a dispute between petitioner and the Commissioner of Internal
Revenue concerning the proper characterization of certain losses which
petitioner suffered during 1950. Petitioner reported them as ordinary
losses, but the Commissioner treated them as capital losses and levied a
deficiency assessment in the amount of $28,908.60, including interest.
Petitioner paid $5,058.54 and then filed with the Commissioner a claim for
refund of that amount. After the claim was disallowed, petitioner sued for
refund in a District Court. The Government moved to dismiss, and the judge
decided that the petitioner "should not maintain" the action because he had
not paid the full amount of the assessment. But since there was a conflict
among the Courts of Appeals on this jurisdictional question, and since the
Tenth Circuit had not yet passed upon it, the judge believed it desirable to
determine the merits of the claim. He thereupon concluded that the losses
were capital in nature and entered judgment in favor of the Government. 142
F. Supp. 602. The Court of Appeals for the Tenth Circuit agreed with the
district judge upon the jurisdictional issue, and consequently remanded with
directions to vacate the judgment and dismiss the complaint. 246 F.2d 929.
We granted certiorari because the Courts of Appeals were in conflict with
respect to a question which is of considerable importance in the
administration of the tax laws.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f1#f1> 1 [362 U.S. 145, 148]

THE STATUTE.

The question raised in this case has not only raised a conflict in the
federal decisions, but has also in recent years provoked controversy among
legal commentators.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f2#f2> 2 In view of this divergence of expert opinion, it
would be surprising if the words of the statute inexorably dictated but a
single reasonable conclusion. Nevertheless, one of the arguments which has
been most strenuously urged is that the plain language of the statute
precludes, or at the very least strongly militates against, a decision that
full payment of the income tax assessment is a jurisdictional condition
precedent to maintenance of a refund suit in a District Court. If this were
true, presumably we could but recite the statute and enter judgment for
petitioner - though we might be pardoned some perplexity as to how such a
simple matter could have caused so much confusion. Regrettably, this facile
an approach will not serve.

Section 1346 (a) (1) provides that the District Courts shall have
jurisdiction, concurrent with the Court of Claims, of

"(1) Any civil action against the United States for the recovery of any
internal-revenue tax alleged to have been erroneously or illegally assessed
or collected, or any penalty claimed to have been collected [362 U.S. 145,
149] without authority or any sum alleged to have been excessive or in any
manner wrongfully collected under the internal-revenue laws . . . ."
(Emphasis added.)

It is clear enough that the phrase "any internal-revenue tax" can readily be
construed to refer to payment of the entire amount of an assessment. Such an
interpretation is suggested by the nature of the income tax, which is "A tax
. . . imposed for each taxable year," with the "amount of the tax"
determined in accordance with prescribed schedules.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f3#f3> 3(Emphasis added.) But it is argued that this reading
of the statute is foreclosed by the presence in 1346 (a) (1) of the phrase
"any sum." This contention appears to be based upon the notion that "any
sum" is a catchall which confers jurisdiction to adjudicate suits for refund
of part of a tax. A catchall the phrase surely is; but to say this is not to
define what it catches. The sweeping role which petitioner assigns these
words is based upon a conjunctive reading of "any internal-revenue tax,"
"any penalty," and "any sum." But we believe that the statute more readily
lends itself to the disjunctive reading which is suggested by the connective
"or." That is, "any sum," instead of being related to "any internal-revenue
tax" and "any penalty," may refer to amounts which are neither taxes nor
penalties. Under this interpretation, the function of the phrase is to
permit suit for recovery of items which might not be designated as either
"taxes" or "penalties" by Congress or the courts. One obvious example of
such a "sum" is interest. And it is significant that many old tax statutes
described the amount which was to be assessed under certain circumstances as
a "sum" to be added to the tax, simply as a [362 U.S. 145, 150] "sum," as
a "percentum," or as "costs."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f4#f4> 4 Such a rendition of the statute, which is supported
by precedent,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f5#f5> 5 frees the phrase "any internal-revenue tax" from
the qualifications imposed upon it by petitioner and permits it to be given
what we regard as its more natural reading - the full tax. Moreover, this
construction, under which each phrase is assigned a distinct meaning imputes
to Congress a surer grammatical touch than does the alternative
interpretation, under which the "any sum" phrase completely assimilates the
other two. Surely a much clearer statute could have been written to
authorize suits for refund of any part of a tax merely by use of the phrase
"a tax or any portion thereof," or simply "any sum paid under the internal
revenue laws." This Court naturally does not review congressional enactments
as a panel of grammarians; but neither do we regard ordinary principles of
English prose as irrelevant to a construction of those enactments. Cf.
Commissioner v. Acker,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
court=us&vol=361&invol=87> 361 U.S. 87 .

We conclude that the language of 1346 (a) (1) can be more readily construed
to require payment of the full tax before suit than to permit suit for
recovery of a part [362 U.S. 145, 151] payment. But, as we recognized in
the prior opinion, the statutory language is not absolutely controlling, and
consequently resort must be had to whatever other materials might be
relevant.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f6#f6> 6

LEGISLATIVE HISTORY AND HISTORICAL BACKGROUND.

Although frequently the legislative history of a statute is the most
fruitful source of instruction as to its proper interpretation, in this case
that history is barren of any clue to congressional intent.

The precursor of 1346 (a) (1) was 1310 (c) of the Revenue Act of 1921,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f7#f7> 7 in which the language with which we are here
concerned appeared for the first time in a jurisdictional statute. Section
1310 (c) had an overt purpose unrelated to the question whether full payment
of an assessed tax was a jurisdictional prerequisite to a suit for refund.
Prior to 1921, tax refund suits against the United States could be
maintained in the District Courts under the authority of the Tucker Act,
which had been passed in 1887.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f8#f8> 8 Where the claim exceeded $10,000, however, such a
suit could not be brought, and in such a situation the taxpayer's remedy in
District Court was against the Collector. [362 U.S. 145, 152] But because
the Collector had to be sued personally, no District Court action was
available if he was deceased.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f9#f9> 9 The 1921 provision, which was an amendment to the
Tucker Act, was explicitly designed to permit taxpayers to sue the United
States in the District Courts for sums exceeding $10,000 where the Collector
had died.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f10#f10> 10

The ancestry of the language of 1346 (a) (1) is no more enlightening than is
the legislative history of the 1921 provision. This language, which, as we
have stated, appeared in substantially its present form in the 1921
amendment, was apparently taken from R. S. 3226 (1878). But 3226 was not a
jurisdictional statute at all; it simply specified that suits for recovery
of taxes, penalties, or sums could not be maintained until after a claim for
refund had been submitted to the Commissioner.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f11#f11> 11

Thus there is presented a vexing situation - statutory language which is
inconclusive and legislative history which is irrelevant. This, of course,
does not necessarily mean that 1346 (a) (1) expresses no congressional
intent with respect to the issue before the Court; but it does make that
intent uncommonly difficult to divine.

It is argued, however, that the puzzle may be solved through consideration
of the historical basis of a suit to recover a tax illegally assessed. The
argument proceeds as follows: A suit to recover taxes could, before the
Tucker [362 U.S. 145, 153] Act, be brought only against the Collector. Such
a suit was based upon the common-law count of assumpsit for money had and
received, and the nature of that count requires the inference that a suit
for recovery of part payment of a tax could have been maintained. Neither
the Tucker Act nor the 1921 amendment indicates an intent to change the
nature of the refund action in any pertinent respect. Consequently, there is
no warrant for importing into 1346 (a) (1) a full-payment requirement.

For reasons which will appear later, we believe that the conclusion would
not follow even if the premises were clearly sound. But in addition we have
substantial doubt about the validity of the premises. As we have already
indicated, the language of the 1921 amendment does in fact tend to indicate
a congressional purpose to require full payment as a jurisdictional
prerequisite to suit for refund. Moreover, we are not satisfied that the
suit against the Collector was identical to the common-law action of
assumpsit for money had and received. One difficulty is that, because of the
Act of February 26, 1845, c. 22, 5 Stat. 727, which restored the right of
action against the Collector after this Court had held that it had been
implicitly eliminated by other legislation,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f12#f12> 12 the Court no longer regarded the suit as a
common-law action, but rather as a statutory remedy which "in its nature
[was] a remedy against the Government." Curtis's Administratrix v. Fiedler,
2 Black 461, 479. On the other hand, it is true that none of the statutes
relating to this type of suit clearly indicate a congressional intention to
require full payment of the assessed tax before suit.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f13#f13> 13 Nevertheless, the opinion of this Court in
Cheatham v. United States,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=92&invol=85> 92 U.S. 85 , prevents us from accepting the [362 U.S. 145,
154] analogy between the statutory action against the Collector and the
common-law count. In this 1875 opinion, the Court described the remedies
available to taxpayers as follows:

"So also, in the internal-revenue department, the statute which we have
copied allows appeals from the assessor to the commissioner of internal
revenue; and, if dissatisfied with his decision, on paying the tax the party
can sue the collector; and, if the money was wrongfully enacted, the courts
will give him relief by a judgment, which the United States pledges herself
to pay.

. . . . .

". . . While a free course of remonstrance and appeal is allowed within the
departments before the money is finally enacted, the general government has
wisely made the payment of the tax claimed, whether of customs or of
internal revenue, a condition precedent to a resort to the courts by the
party against whom the tax is assessed. . . . If the compliance with this
condition [that appeal must be made to the Commissioner and suit brought
within six months of his decision] requires the party aggrieved to pay the
money, he must do it. He cannot, after the decision is rendered against him,
protract the time within which he can contest that decision in the courts by
his own delay in paying the money. It is essential to the honor and orderly
conduct of the government that its taxes should be promptly paid, and
drawbacks speedily adjusted; and the rule prescribed in this class of cases
is neither arbitrary nor unreasonable. . . .

"The objecting party can take his appeal. He can, if the decision is delayed
beyond twelve months, [362 U.S. 145, 155] rest his case on that decision;
or he can pay the amount claimed, and commence his suit at any time within
that period. So, after the decision, he can pay at once, and commence suit
within the six months . . . ."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
ge&court=us&vol=92&page=88#88> 92 U.S., at 88 -89. (Emphasis added.)

Reargument has not changed our view that this language reflects an
understanding that full payment of the tax was a prerequisite to suit. Of
course, as stated in our prior opinion, the Cheatham statement is dictum;
but we reiterate that it appears to us to be "carefully considered dictum."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
ge&court=us&vol=357&page=68#68> 357 U.S., at 68 . Equally important is the
fact that the Court was construing the claim-for-refund statute from which,
as amended, the language of 1346 (a) (1) was presumably taken.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f14#f14> 14Thus it seems that in Cheatham the Supreme Court
interpreted this language not only to specify which claims for refund must
first be presented for administrative reconsideration, but also to
constitute an additional qualification upon the statutory right to sue the
Collector. It is true that the version of the provision involved in Cheatham
contained only the phrase "any tax." But the phrases "any penalty" and "any
sum" were added well before the decision in Cheatham;
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f15#f15> 15 the history of these amendments makes it quite
clear that they were not designed to effect any change relevant to the
Cheatham rule;
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f16#f16> 16 language in [362 U.S. 145, 156] opinions of
this Court after Cheatham is consistent with the Cheatham statement;
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f17#f17> 17 and in any event, as we have indicated, we can
see nothing in these additional words which would negate the full-payment
requirement. [362 U.S. 145, 157]

If this were all the material relevant to a construction of 1346 (a) (1),
determination of the issue at bar would be inordinately difficult. Favoring
petitioner would be the theory that, in the early nineteenth century, a suit
for recovery of part payment of an assessment could be maintained against
the Collector, together with the absence of any conclusive evidence that
Congress has ever intended to inaugurate a new rule; favoring respondent
would be the Cheatham statement and the language of the 1921 statute. There
are, however, additional factors which are dispositive.

We are not here concerned with a single sentence in an isolated statute, but
rather with a jurisdictional provision which is a keystone in a carefully
articulated and quite complicated structure of tax laws. From these related
statutes, all of which were passed after 1921, it is apparent that Congress
has several times acted upon the assumption that 1346 (a) (1) requires full
payment before suit. Of course, if the clear purpose of Congress at any time
had been to permit suit to recover a part payment, this subsequent
legislation would have to be disregarded. But, as we have stated, the
evidence pertaining to this intent [362 U.S. 145, 158] is extremely weak,
and we are convinced that it is entirely too insubstantial to justify
destroying the existing harmony of the tax statutes. The laws which we
consider especially pertinent are the statute establishing the Board of Tax
Appeals (now the Tax Court), the Declaratory Judgment Act, and 7422 (e) of
the Internal Revenue Code of 1954.

THE BOARD OF TAX APPEALS.

The Board of Tax Appeals was established by Congress in 1924 to permit
taxpayers to secure a determination of tax liability before payment of the
deficiency.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f18#f18> 18 The Government argues that the Congress which
passed this 1924 legislation thought full payment of the tax assessed was a
condition for bringing suit in a District Court; that Congress believed this
sometimes caused hardship; and that Congress set up the Board to alleviate
that hardship. Petitioner denies this, and contends that Congress' sole
purpose was to enable taxpayers to prevent the Government from collecting
taxes by exercise of its power of distraint.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f19#f19> 19

We believe that the legislative history surrounding both the creation of the
Board and the subsequent revisions of the basic statute supports the
Government. The House Committee Report, for example, explained the purpose
of the bill as follows:

"The committee recommends the establishment of a Board of Tax Appeals to
which a taxpayer may appeal prior to the payment of an additional assessment
of income, excess-profits, war-profits, or estate taxes. Although a taxpayer
may, after payment of [362 U.S. 145, 159] his tax, bring suit for the
recovery thereof and thus secure a judicial determination on the questions
involved, he can not, in view of section 3224 of the Revised Statutes, which
prohibits suits to enjoin the collection of taxes, secure such a
determination prior to the payment of the tax. The right of appeal after
payment of the tax is an incomplete remedy, and does little to remove the
hardship occasioned by an incorrect assessment. The payment of a large
additional tax on income received several years previous and which may have,
since its receipt, been either wiped out by subsequent losses, invested in
nonliquid assets, or spent, sometimes forces taxpayers into bankruptcy, and
often causes great financial hardship and sacrifice. These results are not
remedied by permitting the taxpayer to sue for the recovery of the tax after
this payment. He is entitled to an appeal and to a determination of his
liability for the tax prior to its payment."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f20#f20> 20 (Emphasis added.)

Moreover, throughout the congressional debates are to be found frequent
expressions of the principle that payment of the full tax was a precondition
to suit: "pay his tax . . . then . . . file a claim for refund"; "pay the
tax and then sue"; "a review in the courts after payment of the tax"; "he
may still seek court review, but he must first pay the tax assessed"; "in
order to go to court he must pay his assessment"; "he must pay it [his
assessment] [362 U.S. 145, 160] before he can have a trial in court"; "pay
the taxes adjudicated against him, and then commence a suit in a court";
"pay the tax . . . [t]hen . . . sue to get it back"; "paying his tax and
bringing his suit"; "first pay his tax and then sue to get it back"; "take
his case to the district court - conditioned, of course, upon his paying the
assessment."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f21#f21> 21

Petitioner's argument falls under the weight of this evidence. It is true,
of course, that the Board of Tax Appeals procedure has the effect of staying
collection,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f22#f22> 22 and it may well be that Congress so provided in
order to alleviate hardships caused by the long-standing bar against suits
to enjoin the collection of taxes. But it is a considerable leap to the
further conclusion that amelioration of the hardship of prelitigation
payment as a jurisdictional requirement was not another important [362 U.S.
145, 161] motivation for Congress' action.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f23#f23> 23 To reconcile the legislative history with this
conclusion seems to require the presumption that all the Congressmen who
spoke of payment of the assessment before suit as a hardship understood -
without saying - that suit could be brought for whatever part of the
assessment had been paid, but believed that, as a practical matter, hardship
would nonetheless arise because the Government would require payment of the
balance of the tax by exercising its power of distraint. But if this was in
fact the view of these legislators, it is indeed extraordinary that they did
not say so.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f24#f24> 24 [362 U.S. 145, 162] Moreover, if Congress'
only concern was to prevent distraint, it is somewhat difficult to
understand why Congress did not simply authorize injunction suits. It is
interesting to note in this connection that bills to permit the same type of
prepayment litigation in the District Courts as is [362 U.S. 145, 163]
possible in the Tax Court have been introduced several times, but none has
ever been adopted.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f25#f25> 25

In sum, even assuming that one purpose of Congress in establishing the Board
was to permit taxpayers to avoid distraint, it seems evident that another
purpose was to furnish a forum where full payment of the assessment would
not be a condition precedent to suit. The result is a system in which there
is one tribunal for prepayment litigation and another for post-payment
litigation, with no room contemplated for a hybrid of the type proposed by
petitioner. [362 U.S. 145, 164]

THE DECLARATORY JUDGMENT ACT.

The Federal Declaratory Judgment Act of 1934
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f26#f26> 26 was amended by 405 of the Revenue Act of 1935
expressly to except disputes "with respect to Federal taxes."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f27#f27> 27 The Senate Report explained the purpose of the
amendment as follows:

"Your committee has added an amendment making it clear that the Federal
Declaratory Judgments Act of June 14, 1934, has no application to Federal
taxes. The application of the Declaratory Judgments Act to taxes would
constitute a radical departure from the long-continued policy of Congress
(as expressed in Rev. Stat. 3224 and other provisions) with respect to the
determination, assessment, and collection of Federal taxes. Your committee
believes that the orderly and prompt determination and collection of Federal
taxes should not be interfered with by a procedure designed to facilitate
the settlement of private controversies, and that existing procedure both in
the Board of Tax Appeals and the courts affords ample remedies for the
correction of tax errors."
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f28#f28> 28 (Emphasis added.)

It is clear enough that one "radical departure" which was averted by the
amendment was the potential circumvention of the "pay first and litigate
later" rule by way of suits for declaratory judgments in tax cases.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f29#f29> 29 Petitioner [362 U.S. 145, 165] would have us
give this Court's imprimatur to precisely the same type of "radical
departure," since a suit for recovery of but a part of an assessment would
determine the legality of the balance by operation of the principle of
collateral estoppel. With respect to this unpaid portion, the taxpayer would
be securing what is in effect - even though not technically - a declaratory
judgment. The frustration of congressional intent which petitioner asks us
to endorse could hardly be more glaring, for he has conceded that his
argument leads logically to the conclusion that payment of even $1 on a
large assessment entitles the taxpayer to sue - a concession amply warranted
by the obvious impracticality of any judicially created jurisdictional
standard midway between full payment and any payment.

SECTION 7422 (e) OF THE 1954 CODE.

One distinct possibility which would emerge from a decision in favor of
petitioner would be that a taxpayer might be able to split his cause of
action, bringing suit for refund of part of the tax in a Federal District
Court and litigating in the Tax Court with respect to the remainder. In such
a situation the first decision would, of course, control. Thus if for any
reason a litigant would prefer a District Court adjudication,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f30#f30> 30 he might sue for a small portion of the tax in
that tribunal while at the same time protecting the balance from distraint
by invoking the protection of the Tax Court procedure. On the other hand,
different questions would arise if this device were not employed. For
example, would the Government be required to file a compulsory counterclaim
for the unpaid [362 U.S. 145, 166] balance in District Court under Rule 13
of the Federal Rules of Civil Procedure? If so, which party would have the
burden of proof?
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f31#f31> 31

Section 7422 (e) of the 1954 Internal Revenue Code makes it apparent that
Congress has assumed these problems are nonexistent except in the rare case
where the taxpayer brings suit in a District Court and the Commissioner then
notifies him of an additional deficiency. Under 7422 (e) such a claimant is
given the option of pursuing his suit in the District Court or in the Tax
Court, but he cannot litigate in both. Moreover, if he decides to remain in
the District Court, the Government may - but seemingly is not required to -
bring a counterclaim; and if it does, the taxpayer has the burden of proof.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f32#f32> 32 If we [362 U.S. 145, 167] were to overturn the
assumption upon which Congress has acted, we would generate upon a broad
scale the very problems Congress believed it had solved.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f33#f33> 33

These, then, are the basic reasons for our decision, and our views would be
unaffected by the constancy or inconstancy of administrative practice.
However, because the petition for rehearing in this case focused almost
exclusively upon a single clause in the prior opinion - "there does not
appear to be a single case before 1940 in which a taxpayer attempted a suit
for refund of income taxes without paying the full amount the Government
alleged to be due,"
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
ge&court=us&vol=357&page=69#69> 357 U.S., at 69 - we feel obliged to comment
upon the material introduced upon reargument. The [362 U.S. 145, 168]
reargument has, if anything, strengthened, rather than weakened, the
substance of this statement, which was directed to the question whether
there has been a consistent understanding of the "pay first and litigate
later" principle by the interested government agencies and by the bar.

So far as appears, Suhr v. United States, 18 F.2d 81, decided by the Third
Circuit in 1927, is the earliest case in which a taxpayer in a refund action
sought to contest an assessment without having paid the full amount then
due.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f34#f34> 34 In holding that the District Court had no
jurisdiction of the action, the Court of Appeals said:

"None of the various tax acts provide for recourse to the courts by a
taxpayer until he has failed to get relief from the proper administrative
body or has paid all the taxes assessed against him. The payment of a part
does not confer jurisdiction upon the courts. . . . There is no provision
for refund to the taxpayer of any excess payment of any installment or part
of his tax, if the whole tax for the year has not been paid." Id., at 83.
[362 U.S. 145, 169]

Although the statement by the court might have been dictum,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f35#f35> 35 it was in accord with substantially
contemporaneous statements by Secretary of the Treasury A. W. Mellon, by
Under Secretary of the Treasury Garrard B. Winston, by the first Chairman of
the Board of Tax Appeals, Charles D. Hamel, and by legal commentators.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f36#f36> 36 [362 U.S. 145, 170]

There is strong circumstantial evidence that this view of the jurisdiction
of the courts was shared by the bar at least until 1940, when the Second
Circuit Court of Appeals rejected the Government's position in Coates v.
United States, 111 F.2d 609. Out of the many thousands of refund cases
litigated in the pre-1940 period - the Government [362 U.S. 145, 171]
reports that there have been approximately 40,000 such suits in the past 40
years - exhaustive research has uncovered only nine suits in which the issue
was present, in six of which the Government contested jurisdiction on
part-payment grounds.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f37#f37> 37 The Government's failure to [362 U.S. 145, 172]

raise the issue in the other three is obviously entirely without
significance. Considerations of litigation strategy may have been thought to
militate against resting upon such a defense in those cases. Moreover, where
only nine lawsuits involving a particular issue arise over a period of many
decades, the policy of the Executive Department on that issue can hardly be
expected to become familiar to every government attorney. But most
important, the number of cases before 1940 in which the issue was present is
simply so inconsequential that it reinforces the conclusion of the prior
opinion with respect to the uniformity of the pre-1940 belief that full
payment had to precede suit.

A word should also be said about the argument that requiring taxpayers to
pay the full assessments before bringing suits will subject some of them to
great hardship. This contention seems to ignore entirely the right of the
taxpayer to appeal the deficiency to the Tax Court without paying a cent.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f38#f38> 38 If he permits his time for filing such an appeal
to expire, he can hardly complain that he has been unjustly treated, for he
is in precisely the same position as any other person who is barred by a
statute of limitations. On the other hand, the Government has a substantial
interest in protecting the public purse, an interest which would be
substantially impaired if a taxpayer could sue in a District Court without
paying his tax in full. It is instructive to note that, as of June 30, 1959,
tax cases pending in the Tax Court involved $920,046,748, and refund suits
in other courts involved $446,673,640.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f39#f39> 39 [362 U.S. 145, 176] It is quite true that
the filing of an appeal to the Tax Court normally precludes the Government
from requiring payment of the tax,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f40#f40> 40 but a decision in petitioner's favor could be
expected to throw a great portion of the Tax Court litigation into the
District Courts.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f41#f41> 41 Of course, the Government can collect the tax
from a District Court suitor by exercising its power of distraint - if he
does not split his cause of action - but we cannot believe that compelling
resort to this extraordinary procedure is either wise or in accord with
congressional intent. Our system of taxation is based upon voluntary
assessment and payment, not upon distraint.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f42#f42> 42A full-payment requirement will promote the
smooth functioning of this system; a part-payment rule would work at
cross-purposes with it.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#f43#f43> 43

In sum, if we were to accept petitioner's argument, we would sacrifice the
harmony of our carefully structured twentieth century system of tax
litigation, and all that [362 U.S. 145, 177] would be achieved would be a
supposed harmony of 1346 (a) (1) with what might have been the nineteenth
century law had the issue ever been raised. Reargument has but fortified our
view that 1346 (a) (1), correctly construed, requires full payment of the
assessment before an income tax refund suit can be maintained in a Federal
District Court.

Affirmed.

Footnotes

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t1#t1> Footnote 1 ] The decision of the Court of Appeals in
Flora conflicted with Bushmiaer v. United States, 230 F.2d 146 (C. A. 8th
Cir.). Cf. Coates v. United States, 111 F.2d 609 (C. A. 2d Cir.); Sirian
Lamp [362 U.S. 145, 148] Co. v. Manning, 123 F.2d 776 (C. A. 3d Cir.);
Suhr v. United States, 18 F.2d 81 (C. A. 3d Cir.), semble.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t2#t2> Footnote 2 ] As will appear later, prior to 1940 the
general view was that full payment was a jurisdictional prerequisite. But a
substantial difference of opinion arose after 1940, when the Court of
Appeals for the Second Circuit decided Coates v. United States, 111 F.2d
609, against the Government. See Riordan, Must You Pay Full Tax Assessment
Before Suing in the District Court? 8 J. Tax. 179; Beaman, When Not to Go to
the Tax Court: Advantages and Procedures in Going to the District Court, 7
J. Tax. 356; Rudick and Wender, Federal Income Taxation, 32 N. Y. U. L. Rev.
751, 777-778; Note, 44 Calif. L. Rev. 956; Note, 2 How. L. J. 290.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t3#t3> Footnote 3 ] See I. R. C. (1954), 1 (a), 1 (b) (1),
68A Stat. 5, 6. The same general pattern has existed for many years. See, e.
g., 116, 117, of the Act of June 30, 1864, c. 173, 13 Stat. 281-282.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t4#t4> Footnote 4 ] Revenue Act of 1924, c. 234, 275 (a), 43
Stat. 298; Revenue Act of 1918, c. 18, 250 (e), 40 Stat. 1084; Act of June
6, 1872, c. 315, 21, 17 Stat. 246; Act of June 30, 1864, c. 173, 119, 13
Stat. 283. See also Helvering v. Mitchell,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
court=us&vol=303&invol=391#405> 303 U.S. 391, 405 .

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t5#t5> Footnote 5 ] Lower courts have given this
construction to the same three phrases in certain claim-for-refund and
limitations provisions in prior tax statutes. United States v. Magoon, 77
F.2d 804; Union Trust Co. v. United States, 5 F. Supp. 259, 261 ("The
natural definition of `tax' comprehends one `assessment' or one tax in the
entire amount of liability"), aff'd, 70 F.2d 629, 630 ("We agree with the
District Court that `tax,' `penalty,' and `sum' refer to distinct categories
of illegal collections and `tax' includes the entire tax liability as
assessed by the Commissioner"); United States v. Clarke, 69 F.2d 748; Hills
v. United States, 50 F.2d 302, 55 F.2d 1001 (Ct. Cl.); cf. Blair v.
Birkenstock,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=271&invol=348> 271 U.S. 348.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t6#t6> Footnote 6 ] In the prior opinion we stated that,
were it not for certain countervailing considerations, the statutory
language "might . . . be termed a clear authorization" to sue for the refund
of part payment of an assessment.
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&navby...
ge&court=us&vol=357&page=65#65> 357 U.S., at 65 . It is quite obvious that
we did not regard the language as clear enough to preclude deciding the case
on other grounds. Moreover, it could at that time be assumed that the terms
of the statute favored the taxpayer, because eight members of the Court
considered the extrinsic evidence alone sufficient to decide the case
against him. Although we are still of that opinion, we now state our views
with regard to the bare words of the statute because the argument that these
words are decisively against the Government has been urged so strenuously.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t7#t7> Footnote 7 ] 42 Stat. 311.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t8#t8> Footnote 8 ] 24 Stat. 505, as amended, 28 U.S.C.
1346, 1491. See United States v. Emery, Bird, Thayer Realty Co.,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=237&invol=28> 237 U.S. 28 .

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t9#t9> Footnote 9 ] Smietanka v. Indiana Steel Co.,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=257&invol=1> 257 U.S. 1 .

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t10#t10> Footnote 10 ] See H. R. Conf. Rep. No. 486, 67th
Cong., 1st Sess. 57; remarks of Senator Jones, 61 Cong. Rec. 7506-7507.
Another amendment was added in 1925 giving the right to bring refund suits
against the United States where the Collector was out of office. 43 Stat.
972. And in 1954, both the $10,000 limitation and the limitation with
respect to the Collector being dead or out of office were eliminated. 68
Stat. 589.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t11#t11> Footnote 11 ] The text of R. S. 3226 is set forth
in note 16, infra, together with a more detailed account of the origin and
development of the pertinent statutory language. The successor of R. S. 3226
is I. R. C. (1954), 7422 (a), 68A Stat. 876.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t12#t12> Footnote 12 ] See Cary v. Curtis, 3 How. 236.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t13#t13> Footnote 13 ] E. g., Act of Feb. 26, 1845, c. 22, 5
Stat. 727; Act of Mar. 3, 1863, c. 74, 12 Stat. 729; Act of June 30, 1864,
c. 173, 44, 13 Stat. 239-240.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t14#t14> Footnote 14 ] See note 16, infra.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t15#t15> Footnote 15 ] Cheatham was decided in O. T. 1875,
while the phrases in question were added to the statute on June 6, 1872. See
note 16, infra, for a discussion of the statute involved in Cheatham and its
amendment.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t16#t16> Footnote 16 ] Section 19 of the Act of July 13,
1866, c. 184, 14 Stat. 152, was involved in Cheatham. That section provided:
"SEC. 19. . . . [N]o suit shall be maintained in any court for the recovery
of any tax alleged to have been erroneously or illegally [362 U.S. 145, 156]
assessed or collected, until appeal shall have been duly made to the
commissioner of internal revenue . . . ." The phrases "any penalty" and "any
sum" were first introduced into the statute in 44 of the Act of June 6,
1872, c. 315, 17 Stat. 257-258, which read as follows: "SEC. 44. That all
suits and proceedings for the recovery of any internal tax alleged to have
been erroneously assessed or collected, or any penalty claimed to have been
collected without authority, or for any sum which it is alleged was
excessive, or in any manner wrongfully collected, shall be brought within
two years next after the cause of action accrued and not after; and all
claims for the refunding of any internal tax or penalty shall be presented
to the commissioner of internal revenue within two years next after the
cause of action accrued and not after . . . ." (Emphasis added.) A careful
reading of this statute discloses the absurd result which would flow from
construing the addition of the "any sum" language to affect the full-payment
rule, which, under this argument, would be based upon the "any tax" phrase
in the 1866 statute. That is, since the "any sum" phrase occurs only in the
statute of limitations portion of the 1872 statute, and not in the
claim-for-refund provision, a person would be able to bring a suit for part
payment without filing a claim for refund. There were no material changes in
R. S. 3226, which provided: "SEC. 3226. No suit shall be maintained in any
court for the recovery of any internal tax alleged to have been erroneously
or illegally assessed or collected, or of any penalty claimed to have been
collected without authority, or of any sum alleged to have been excessive or
in any manner wrongfully collected, until appeal shall have been duly made
to the Commissioner of . . . Internal Revenue . . . ." It is no doubt true,
as petitioner says, that these various amendments were designed to require
submission of all litigable claims to the Commissioner; but, as we have
explained, this indicates no more than an intent to cover taxes, penalties,
and sums which might, strictly speaking, be neither taxes nor penalties.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t17#t17> Footnote 17 ] Kings County Savings Institution v.
Blair,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=116&invol=200#205> 116 U.S. 200, 205 (1886) ("No claim for the refunding
of taxes can be made according [362 U.S. 145, 157] to law and the
regulations until after the taxes have been paid. . . . [N]o suit can be
maintained for taxes illegally collected unless a claim therefore has been
made within the time prescribed by the law"); Pollock v. Farmers' Loan &
Trust Co.,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=157&invol=429#609> 157 U.S. 429, 609 (1895) (dissenting opinion) ("The
same authorities [including the Cheatham case] have established the rule
that the proper course, in a case of illegal taxation, is to pay the tax
under protest or with notice of suit, and then bring an action against the
officer who collected it"); Bailey v. George,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=259&invol=16#20> 259 U.S. 16, 20 (1922) ("They might have paid the amount
assessed under protest and then brought suit against the Collector . . .
."). This view of Cheatham also corresponds to that of the Court of Appeals
in this case. 246 F.2d, at 930. See also Bushmiaer v. United States, 230
F.2d 146, 152-155 (dissenting opinion).

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t18#t18> Footnote 18 ] 43 Stat. 336.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t19#t19> Footnote 19 ] I. R. C. (1954), 6331, 68A Stat. 783.
The Government has possessed the power of distraint for almost 170 years.
See Act of Mar. 3, 1791, c. 15, 23, 1 Stat. 204.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t20#t20> Footnote 20 ] H. R. Rep. No. 179, 68th Cong., 1st
Sess. 7. The Senate Committee on Finance filed a similar report. S. Rep. No.
398, 68th Cong., 1st Sess. 8. The reference to R. S. 3224 in the House
Report clearly was meant simply to demonstrate that a determination prior to
payment by way of an injunction suit was not possible because of the
statutory bar to such a suit. This anti-injunction provision has been law
for many decades. See Act of Mar. 2, 1867, c. 169, 10, 14 Stat. 475. It is
now 7421 of the Internal Revenue Code of 1954, 68A Stat. 876.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t21#t21> Footnote 21 ] See 65 Cong. Rec. 2621, 2684, 8110;
67 Cong. Rec. 525, 1144, 3529, 3755. As we have indicated, some of these
remarks were made during debates over proposed changes in the Board of Tax
Appeals legislation during the middle of the 1920's, but they all reflect
Congress' understanding of the pre-1924 procedure and of the changes which
were made by establishment of the Board. For example, shortly after the
Board legislation was passed, Congress considered and rejected a proposal to
make appeal to the Board and then to a Circuit Court of Appeals the
taxpayer's sole remedy. In the course of the debate, a number of Senators
discussed at length the taxpayer's right to bring a refund action in court.
Some of the cited quotations are taken from that debate. The following
remark of Senator Fletcher is also illuminating: "Mr. FLETCHER. . . . I
think the most important right that is preserved here . . . is the right to
go into the district court by the taxpayer upon the payment of the tax. I do
not think that we ought to allow him to do that unless he does pay the tax;
but when he pays the tax his right to go into the district court is
preserved." 67 Cong. Rec. 3529. (Emphasis added.) See also the materials
quoted in note 24, infra.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t22#t22> Footnote 22 ] See I. R. C. (1954), 6213 (a), 68A
Stat. 771. For the pertinent 1924 legislation, see Revenue Act of 1924, c.
234, 274, 43 Stat. 297.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t23#t23> Footnote 23 ] In Old Colony Trust Co. v.
Commissioner,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=279&invol=716#721> 279 U.S. 716, 721 , this Court expressed the view that
the Board "was created by Congress to provide taxpayers an opportunity to
secure an independent review . . . in advance of their paying the tax found
by the Commissioner to be due. Before the Act of 1924 the taxpayer could
only contest the Commissioner's determination of the amount of the tax after
its payment."

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t24#t24> Footnote 24 ] There are a few interchanges among
Senators which might be construed to indicate that they were thinking in
terms of preventing distraint, but the same passages demonstrate even more
clearly that these Senators also intended to eliminate the necessity of full
payment as a prerequisite to suit. For example, the following debate
occurred when Senator Reed, who was a member of the Committee on Finance,
proposed an amendment which would have permitted a taxpayer to refuse to pay
the deficiency even after the Board had ruled against him and which would
have required the Government to sue in a District Court. "Mr. REED of
Missouri. . . . . . . . . "The practice, as I understand it, has been to
require the taxpayer to pay in the amount of the increased assessment, and
then to allow him to get it back if he can. In addition to this, distraints
frequently have been issued seizing the property of the citizen . . . . . .
. . . "Mr. SWANSON. What are the processes by which a citizen who has
overpaid can get back his money under the existing law? "Mr. REED of
Missouri. As I understand it, he pays his tax. Then he makes an application
for a return of it. That is heard [362 U.S. 145, 162] through the long,
troublesome processes which exist . . . . When the Treasury is satisfied . .
. the taxpayer can go into court at that time. In the meantime, however, he
has had to pay his money. . . . . . "Mr. SWANSON. Does the Senator mean that
if there is a dispute, the tax is not assessed permanently against him until
the board reaches its final decision? "Mr. SMOOT. Until the board of appeals
finally passes upon it, and after that if he wants to go to court he can do
so, but in order to go to court he must pay his assessment. "Mr. REED of
Missouri. He must pay it before he can have a trial in court. . . . . . "Mr.
WALSH of Montana. Mr. President, the hardships . . . in connection with the
collection of these taxes is a very real one. . . . At least two or three
instances have come under my notice, and my assistance has been asked in
cases where the assessing officers have . . . assessed against the
[taxpayer] delinquent taxes of such an amount that he found it impossible to
pay in advance and secure redress through the ordinary proceeding in a court
of law, simply because it would bankrupt him to endeavor to raise the money.
He was therefore obliged to suffer a distraint. . . . . . . . . ". . . After
the board of review determines the matter, it seems to me, that is as far as
the Government ought to be interrupted in the matter of the collection of
its revenues. Then the taxpayer would be obliged to pay the tax and take his
ordinary action at law to recover whatever he claims was enacted of him
illegally." 65 Cong. Rec. 8109-8114. A somewhat similar exchange occurred
during the 1926 debate over a proposal to prohibit refund suits where an
appeal had been taken to the Board. "Mr. REED of Missouri. . . . Now just
one further question: "Why is it that a taxpayer can not be given his day in
court by direct action, without first requiring him to pay the tax that is
assessed? I know I shall be met with the statement that it would [362 U.S.
145, 163] mean interminable delay to the Government; but it frequently
happens that the tax that is assessed is ruinous, and that the taxpayer can
not raise the money. . . . . . . . . "In my own personal experience I have
had two clients who were absolutely ruined by assessments that were unjust
and that could not have stood up in a court of justice. . . . [A]nd it was
no protection to them to say, `Pay your taxes and then go into court,'
because they did not have the money to pay the taxes and could not raise the
money to pay the taxes and be out of the money two or three years. . . . . .
". . . I think the bill needs just one more amendment in this particular,
and that is a provision that any citizen can go into court without paying
any tax and resist the payment. In the meantime I agree that the Government
for its own protection ought to be allowed, perhaps, in such a case as that
to issue a distraint. But the idea that a man must first pay his money and
then sue to get it back is anomaly in the law." 67 Cong. Rec. 3530-3533.
Senator Reed later proposed that the appeal from the Board be to the
District Court instead of to the Circuit Court of Appeals, and Senator
Wadsworth, a member of the Finance Committee, asked: "Does the Senator not
think that other provision in the bill which permits the taxpayer to take
his case to the district court - conditioned, of course, upon his paying the
assessment - meets the situation?" 67 Cong. Rec. 3755.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t25#t25> Footnote 25 ] S. 1569, 81st Cong., 1st Sess.; S.
384, 82d Cong., 1st Sess.; H. R. 150 and H. R. 246, 83d Cong., 1st Sess.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t26#t26> Footnote 26 ] 48 Stat. 955, as amended, 28 U.S.C.
2201, 2202.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t27#t27> Footnote 27 ] 49 Stat. 1027.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t28#t28> Footnote 28 ] S. Rep. No. 1240, 74th Cong., 1st
Sess. 11.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t29#t29> Footnote 29 ] "Should the Declaratory Judgment Act
be held to apply to tax cases it will mean a complete reversal of our
present scheme of taxation. The principle of `pay first and litigate later'
will be changed to `litigate first and pay later.' This principle has never
before been departed from." Wideman, Application of the Declaratory Judgment
Act to Tax Suits, 13 Taxes 539, 540.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t30#t30> Footnote 30 ] For some practitioners' views on the
desirability of litigating tax cases in Federal District Courts, see
Dockery, Refund Suits in District Courts, 31 Taxes 523; Yeatman, Tax
Controversies, 10 Tex. B. J. 9.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t31#t31> Footnote 31 ] These problems have already occurred
to the bar. See Riordan, Must You Pay Full Tax Assessment Before Suing in
the District Court? 8 J. Tax. 179, 181.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t32#t32> Footnote 32 ] " 7422. CIVIL ACTIONS FOR REFUND. . .
. . . "(e) STAY OF PROCEEDINGS. - If the Secretary or his delegate prior to
the hearing of a suit brought by a taxpayer in a district court or the Court
of Claims for the recovery of any income tax, estate tax, or gift tax (or
any penalty relating to such taxes) mails to the taxpayer a notice that a
deficiency has been determined in respect of the tax which is the subject
matter of taxpayer's suit, the proceedings in taxpayer's suit shall be
stayed during the period of time in which the taxpayer may file a petition
with the Tax Court for a redetermination of the asserted deficiency, and for
60 days thereafter. If the taxpayer files a petition with the Tax Court, the
district court or the Court of Claims, as the case may be, shall lose
jurisdiction of taxpayer's suit to whatever extent jurisdiction is acquired
by the Tax Court of the subject matter of taxpayer's suit for refund. If the
taxpayer does not file a petition with the Tax Court for a redetermination
of the asserted deficiency, the United States may counterclaim in the
taxpayer's suit, or intervene in the event of a suit as described in
subsection (c) (relating to suits against officers or employees of the
United States), within the period of the stay of proceedings notwithstanding
that the time for such pleading may have [362 U.S. 145, 167] otherwise
expired. The taxpayer shall have the burden of proof with respect to the
issues raised by such counterclaim or intervention of the United States
except as to the issue of whether the taxpayer has been guilty of fraud with
intent to evade tax. This subsection shall not apply to a suit by a taxpayer
which, prior to the date of enactment of this title, is commenced,
instituted, or pending in a district court or the Court of Claims for the
recovery of any income tax, estate tax, or gift tax (or any penalty relating
to such taxes)." 68A Stat. 877. The possibility of dual jurisdiction in this
type of situation was confirmed by cases such as Camp v. United States, 44
F.2d 126, and Ohio Steel Foundry Co. v. United States, 69 Ct. Cl. 158, 38
F.2d 144. See H. R. Rep. No. 1337, 83d Cong., 2d Sess. 109, A431; S. Rep.
No. 1662, 83d Cong., 2d Sess. 148, 610.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t33#t33> Footnote 33 ] For additional evidence of recent
congressional understanding of the jurisdictional requirement of 1346 (a)
(1), see the House Report which explained the 1954 amendment abolishing the
$10,000 limitation on tax suits against the United States, 68 Stat. 589.
After explaining the taxpayer's right to contest a deficiency in the Tax
Court, the report states: "The taxpayer may, however, elect to pay his tax
and thereafter bring suit to recover the amount claimed to have been
illegally enacted." H. R. Rep. No. 659, 83d Cong., 1st Sess. 2.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t34#t34> Footnote 34 ] Petitioner cites two earlier cases in
which the Government failed to raise the jurisdictional issue. Bowers v.
Kerbaugh-Empire Co.,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=271&invol=170> 271 U.S. 170 (1926); Cook v. Tait,
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?friend=nytimes&court...
l=265&invol=47> 265 U.S. 47 (1924). The Government distinguishes these cases
on the ground that, although the total tax for the year had not been paid,
the full amount due at the time of suit had been paid. This situation
occurred because under 250 (a) of the Revenue Act of 1921, c. 136, 42 Stat.
264, the tax was paid in four installments, and the plaintiffs in Cook and
Bowers apparently had paid the due installments. While we do not suggest
that the statute will support this type of distinction, adoption of it by
the Government or by the bar would not in any way impair the substantial
consistency of the view that full payment has for many decades been a
prerequisite to suit in District Court. An error as to the applicability of
a principle to a unique factual situation does not mean that the principle
itself has been rejected.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t35#t35> Footnote 35 ] The ground for the decision may have
been that the District Court had no jurisdiction because the taxpayer was
contesting the legality of the balance of the assessment before the Board of
Tax Appeals.

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t36#t36> Footnote 36 ] In welcoming the members of the Board
of Tax Appeals on July 16, 1924, Under Secretary Winston described the
difficulties which had arisen in the past. ". . . Under the law a tax once
assessed had to be paid by the taxpayer and then his remedy was to sue for
its recovery. He must first find the cash for a liability for which he may
not have provided. . . . The first interest of all of the people is, of
course, that the Government continue to function, and to do this it must
have the means of prompt collection of the necessary supplies to keep it
going, that is, taxes. The method was, therefore, the determination by the
Commissioner of the amount of tax due, its collection and suit to recover. .
. . [T]he tax as assessed had to be paid and the taxpayer was left to his
remedy in the courts. The payment of the tax was often a great hardship on
the taxpayer, meaning in general that he had to raise the cash for an
unexpected liability which might not be lawfully due." Treas. Dept. Press
Release, July 16, 1924. See also remarks by Under Secretary Winston in
addressing the Seventeenth Annual Conference of the National Tax Association
in September 1924, Proceedings of Seventeenth National Conference 271. In
commenting upon the Board of Tax Appeals legislation, which contemplated
leaving the taxpayer to his District Court remedy if the decision of the
Board was adverse, Secretary of the Treasury Mellon stated: "The taxpayer,
in the event that decision [of the Board] is against him, will have to pay
the tax according to the assessment and have recourse to the courts . . . ."
67 Cong. Rec. 552. On September 17, 1924, the first Chairman of the Board,
Charles D. Hamel, read a paper before the Seventeenth Annual Conference [362
U.S. 145, 170] of the National Tax Association on Taxation which contained
the following remark: "Prior to the enactment of the Act of 1924 . . . [i]f
the decision on the appeal [to the Commissioner] was in favor of the
government, the taxpayer, only after payment of the tax, had the right to
protest the correctness of the decision in the courts. . . ." Proceedings
277-278. One of the clearest statements of the rule by a commentator is to
be found in Bickford, Court Procedure in Federal Tax Cases (Rev. ed. 1929)
3, 7-8, 9, 119. "There are, however, certain other conditions which must be
complied with before a suit is maintainable under this section. Briefly
stated, these are as follows: "1. The tax must have been paid. "2. After
payment, the taxpayer must have filed with the Commissioner . . . a
sufficient claim for the refund of the taxes sued for. . . . . . "The first
requirement is obvious. We have, in the preceding portions of this volume,
found that a proceeding commenced in the Board of Tax Appeals is the only
exception to the rule that no review by the courts is permissible at common
law or under the statutes, until the tax has been paid and the Government
assured of its revenue." Id., at 119. See also Hamel, The United States
Board of Tax Appeals (1926), 10; Klein, Federal Income Taxation (1929),
1372, 1642, 1643; Mellon, Taxation: The People's Business (1924), 62-63;
Ballantine, Federal Income Tax Procedure, Lectures on Taxation, Columbia
University Symposium (1932), 179, 192-193; Caspers, Assessment of Additional
Income Taxes for Prior Years, 1 Nat. Income Tax Mag. (Oct. 1923), 12;
Graupner, The Operation of the Board of Tax Appeals, 3 Nat. Income Tax Mag.
(1925), 295. But see Smith, National Taxes, Their Collection, and Rights and
Remedies of the Taxpayer, 8 Geo. L. J. 1, 3 (Apr. 1920). See also Beaman,
When Not to Go to the Tax Court: Advantages and Procedures in Going to the
District Court, 7 J. Tax. (1957), 356 [362 U.S. 145, 171] ("[T]he
Bushmiaer case [permitting suit for part of the tax] . . . runs counter to a
long tradition of administrative practice and interpretation . . . .");
Rudick and Wender, Federal Income Taxation, 32 N. Y. U. L. Rev. (1957), 751,
777-778 ("It is generally said that a taxpayer has two remedies if he
disagrees with a determination of the Commissioner. He may pay the
deficiency, file a claim for refund, and sue for the tax in the district
court . . . . Alternatively, the taxpayer may petition the Tax Court for
review of a deficiency prior to payment. The recent Bushmiaer case is a
third alternative. . . . [T]he Bushmiaer case conflicts with more than
thirty years of experience in the administration and collection of taxes.").
(Footnote omitted.)

[
<http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=362&inv...
&friend=nytimes#t37#t37> Footnote 37 ] Petitioner cites a number of cases in
support of his argument that neither the bar nor the Government has ever
assumed that full payment of the tax is a jurisdictional prerequisite to
suit for recovery. The following factors rob these cases of the significance
attributed to them by the petitioner: (a) A number of them, although cited
by petitioner in his petition for rehearing, were later conceded by him,
after his examination of government files, not to be in point. (b) A number
of the cited cases involved excise taxes. The Government suggests - and we
agree - that excise tax deficiencies may be divisible into a tax on each
transaction or event, and therefore present an entirely different problem
with respect to the full-payment rule. (c) The cases arising after 1940 are
insignificant. Once the Second Circuit Court of Appeals had ruled against
the Government in Coates, taxpayers would naturally be much more inclined to
sue before full payment, and the Government might well decide not to raise
the objection in a particular case for reasons relating to litigation
strategy. (d) In some of the cases the only amount remaining unpaid at the
time of suit was interest. As we have indicated, the statute lends itself to
a construction which would permit suit for the tax after full payment
thereof without payment of any part of the interest. (e) In some of the
cases the Government was not legally entitled to collect the unpaid tax at
the time of suit, either because the tax [362 U.S. 145, 172] system at the
time permitted installment payment (see note 34, supra), because the unpaid
portion had not yet been assessed, or for some other reason. Although the
statute may not support any distinction based on facts of this nature, it is
quite understandable that a taxpayer might have predicated a suit upon the
theory that the distinction was ...