United States v. Price

PETITIONER: United States
LOCATION: Superior Court of Bibb County

DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 361 US 304 (1960)
ARGUED: Dec 09, 1959
DECIDED: Jan 18, 1960

Facts of the case


Media for United States v. Price

Audio Transcription for Oral Argument - December 09, 1959 (Part 1) in United States v. Price

Audio Transcription for Oral Argument - December 09, 1959 (Part 2) in United States v. Price

Earl Warren:

Mr. McLane, you may proceed.

W. Lee McLane, Jr.:

Thank you Mr. Chief Justice.

Mr. Justice Frankfurter asked at the end of the last session whether we were relying upon the literal language of the statute and that is correct.

However, in the brief, we've attempted to add some small amount of legislative history to the literal language of the statute in an effort to aid the Court in determining how this particular section should be interpreted today.

And I would like to emphasize before I sit down a little bit of that legislative history.

In the first place, when this Section 272 (d) was first inserted into the Revenue Act of 1926, it was the act of thought not apparent.

In other words Section 272 is a procedural section by which a taxpayer is afforded a method of going to the Tax Court of the United States.

It is not a section which restricts the Commissioner from collecting the tax under certain circumstances as a matter of emphasis I understand.

But then when Section 272 (d) was added to the Act in 1926, it provided, and I'd like to read directly from the Senate Finance Committee Report, that the law provide that where deficiency is assessed, there shall be assessed at the same time interest at the rate of 6% from the time the deficiency should've been paid to the date of assessment, in order to commit the taxpayer to pay the tax and stop the running of interest.

The Committee recommends in Section 274 (d), which was the predecessor of 272 (d), of the bill that the taxpayer at any time be permitted to waive in writing the restrictions on the Commissioner against assessing and collecting the tax, but without taking away the right of the taxpayer to take the case to the Board.

Now, it is our view that since there is only one way that the taxpayer may take the case to the Board of Tax Appeals, i.e., a statutory notice of deficiency having been issued that this language simply means that a taxpayer wants to have the right to waive the restrictions against assessment and stop the running of interest after he had first received a notice of deficiency.

In 1933, the first of the decisions of the Ninth Circuit which held these waivers to be premature and invalid was handed down and that was the case filed Mutual Lumber versus Poe.

The position of the Court was reaffirmed in 1935 in a case entitled McCarthy versus Commissioner and those were the only two cases dealing with the validity of these waivers under Section 272 (d) until about 1938.

At that time, a Subcommittee of the Ways & Means Committee of the House of Representatives proposed, and I quote from the language of that report, “As the result of two decisions of the Circuit Court of Appeals for the Ninth Circuit, Mutual Lumber versus Poe, McCarthy versus Commissioner, a valid waiver cannot be given by a taxpayer prior to the formal determination of the Commissioner as evidenced by a 60 or 90-day letter that there is a deficiency in tax.”

Although that report was issued, no amendment was made in 1938.

Then in 1942, the Commissioner of Internal Revenue proposed an Administrative Procedural Code in which again, there was a provision proposed to remedy this situation.

That code or proposal was not adopted.

However, in 1954; the Congress finally did make a change in this section which is now before the Court, Section 272 (d), and they added the words whether or not a notice of deficiency has been added.

Now, the taxpayer submits that this legislative history sustains the proposition that these waivers could not be valid unless a prior notice of deficiency had first been issued.

Earl Warren:

Mr. McLane, what has been --

W. Lee McLane, Jr.:

Yes sir.

Earl Warren:

-- the practice of the -- of the Commissioner between the time this 1938 proposal was made and the 1954 change in the statute?

Did they continue to use these waivers in the manner they've been used in this case or not?

W. Lee McLane, Jr.:

Yes that is correct Your Honor, except there is one interesting feature.

I was at one time with Chief Counsel's office of the Bureau of Internal Revenue, and at that time, they were used in the manner in which they were used in this case.

However, I would like to point out to the Court that in almost every case which the Government has cited here, the waiver form was entitled at the top; waiver of right to file petition in the Tax Court of United States.

Then, as a result of some of the decisions, the form of the waiver was changed and the provision at the top provided waiver of restrictions on assessment and collection of deficiency in the tax.

So, that while it is true that the Commissioner has used these waiver forms in the manner which they were used here, I think the question was at least that the taxpayer knew, that is the taxpayer who was not represented by counsel, what he was waiving, because there is nothing in the terminology of the waiver form which advices a taxpayer who is not a lawyer that he is waiving his right to appeal to the Tax Court of the United States.

All it says is that he's waiving his right, waiving whatever restrictions there are on assessment and collection of the deficiency.

Charles E. Whittaker:

Now, why would that --