United States v. Consolidated Edison Company of New York, Inc.

PETITIONER: United States
RESPONDENT: Consolidated Edison Company of New York, Inc.
LOCATION: Alabama General Assembly

DOCKET NO.: 357
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 366 US 380 (1961)
ARGUED: Apr 24, 1961
DECIDED: May 22, 1961

Facts of the case

Question

Media for United States v. Consolidated Edison Company of New York, Inc.

Audio Transcription for Oral Argument - April 24, 1961 in United States v. Consolidated Edison Company of New York, Inc.

Earl Warren:

-- United States, Petitioner, versus Consolidated Edison Company of New York Incorporated.

Mr. Jones, you may proceed with your argument.

John B. Jones, Jr.:

Thank you very much Mr. Chief Justice, may it please the Court.

For the second Monday in a row, this Court is faced with a difficult question on the interrelationship of the accrual accounting and the federal income tax.

William O. Douglas:

Are you restricted to Mondays?

John B. Jones, Jr.:

But, it was last Monday Mr. Justice Douglas that this Court considered the American Automobile Association case.

And I was trying to recall to the Court that some of the matters which are relevant here will be considered just one week ago.

At 17 years ago, this Court in the Dixie Pine Products case and in the Security Flour Mills case laid a rule which was -- which has been universally followed to the effect that when the taxpayer contest a tax which is deductible for federal income tax purpose and does not pay that tax.

That it would be contrary to the principles of accrual accounting in our federal income tax law to permit him to deduct that tax.

The question today is in a sense of refinement to that question.

What is the rule to be followed where the taxpayer pays the tax?

Perhaps, under -- as in this case, under violent protest but nonetheless pays the tax, but then -- and then goes on to contest in the appropriate forum his liability for that tax.

Position which the Government is urging is that payment is a very important matter, one that is not made likely in the business world.

And that ones payment is made, the position of the parties has changed considerably.

That change should be reflected in the tax accounting.

In this case, the respondent has been described by the Second Circuit as a well-known public utility.

It has large real estate holdings in New York City.

For the years 1946 through 1950, the respondent contested the liability alleged to be owing one hundredths of parcels of real estate which he owned.

The settlement for all five of these years, which reached in 1951, this case presents to the Court the question of the tax treatment for 1951.

However, if this Court will determine what was the appropriate accounting at the end of the tax year in question all of the other questions ini the case were fall into place.

Now, I call to the Court's attention a stipulated example which is printed in perfusion.

It's in the record page 5, petitioner's brief page 5, respondent's brief page 7.

This example has -- has been agreed by all parties and by all the courts which have considered this matter to be one which brings out with full clarity the true issues in the case.

The stipulated example takes the year 1949, but this would -- the same thing would be true as to any of the other years of the tax years in question.

On January 25, the respondent would receive a notice from the City Tax Commission that he owed in respect of certain property a tax of $100.

Within a short period thereafter, the respondent was required to file what amounted to a -- a protest.

And in this protest, which is admittedly a bona fide protest of the tax liability.

The respondent would admit that on his estimated value, a true tax would be $85.

But, respondent denied any liability in excess of that.

Now, in terms of the stipulated example, it's assumed that this administrative protest was unsuccessful which at by and large was.