sequently upheld as proper in view of the confusion and injustice which would result if the corporation paid the tax."

Refunds

After a tax has been paid and a taxpayer believes that it was unlawfully or wrongfully assessed or collected he may make claim for refund (on form 46). Generally speaking, the government imposes no restrictions against claims for refund and such claims are considered on their merits. This practice must not be confused with the procedure in case of suit against the government. When suit is brought the government interposes all the legal obstacles at its command.

The following regulation sets forth the details of procedure in claims for refund.

Refund of taxes erroneously collected.

REGULATION. Claims by the taxpayer for the refunding of taxes and penalties erroneously or illegally collected shall be made on form 46. In this case, as in that of claims for abatement, the burden of proof rests upon the claimant. All the facts relied upon in support of the claim should be clearly set forth under oath. It should be accompanied by the collector's receipt or the cancelled check showing payment of the tax. In the case of a taxpayer's death, certified copies of the letters of administration or letters testamentary, or other similar evidence, should be annexed to the claim to show the

authority of the administrator or executor. The affidavit may be made by an agent of the person assessed, but in such a case a power of attorney must accompany the claim. Warrants in payment of claims allowed will be drawn in the names of the persons entitled to the money and shall unless otherwise directed be sent by the Treasurer of the United States directly to the proper persons or their duly authorized attorneys or agents. In certain cases of overpayment by taxpayers the collector may repay the excess after allowance by the Commissioner of a claim for refund made by the collector on form 751. . . . . The Commissioner has no authority to refund on equitable grounds penalties legally collected.15 (Art. 1036, as amended by T. D. 2871, June 21, 1919.) (For copy of form 46, see Appendix.)

"Brushaber v. Union Pacific Ry. Co., 240 U. S. 1; Stanton v. Baltic Mining Co., 240 U. S. 163.

15 For cases in which refund is made through collectors, see page 217.

It will be noted that claim for refund should be accompanied by the collector's receipt or by the canceled cheque showing payment of the tax.

If claim for abatement was not made the claim for refund should be supported by satisfactory evidence as described on page 202. If claim for abatement was made and denied it cannot be expected that the claim for refund will be allowed, but the taxpayer has nothing to lose by attempting to improve his case and by securing any new evidence which will strengthen it.

Claims for refund may be filed with Commissioner direct.—

RULING. I have been advised by the Claim Department of your office that claims for refund should be sent direct to Washington provided there is attached thereto the actual receipt of the collector. On the other hand I note that form 46, revised March, 1918, has printed on the face of it:

"Important

"This claim should be forwarded to the Collector of Internal Revenue to whom the tax was paid and must be accompanied by collector's receipt therefor."

(Answer.) Replying to your letter of March 22, 1919, you are advised that claims for refund may be forwarded direct to the Commissioner of Internal Revenue, Claims Division, Income Tax. (Letter from H. C. Hopson, New York, N. Y., and the reply thereto, signed by J. H. Callan, Assistant to the Commissioner, and dated March 29, 1919.)

Claims for refund must be filed within five years.-As has been pointed out in a preceding section, the government is required under the 1918 law to make any additional assessments arising from examinations within five years from the date when the return was due, unless fraud is established. Likewise taxpayers, in order to secure credits or refunds of taxes overpaid, must file their claims before the expiration of five years from the dates when the returns were made.

LAW. Section 252. That if, upon examination of any return of income made pursuant to this Act, the Act of August 5, 1909, entitled "An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes," the Act of

October 3, 1913, entitled "An Act to reduce tariff duties and to provide revenue for the Government, and for other purposes," the Revenue Act of 1916, as amended, or the Revenue Act of 1917, it appears that an amount of income, war-profits or excess-profits tax has been paid in excess of that properly due, then, notwithstanding the provisions of section 322816 of the Revised Statutes, the amount of the excess shall be credited against any income, war-profits or excess-profits taxes, or installment thereof, then due from the taxpayer under any other return, and any balance of such excess shall be immediately refunded to the taxpayer: Provided, That no such credit or refund shall be allowed or made after five years from the date when the return was due, unless before the expiration of such five years a claim therefor is filed by the taxpayer.

The foregoing section does not apply to claims for abatement and does not operate so as to take away the rights which taxpayers have to file claims for refunds when their accounts have been reopened by the government, or when amended returns have been filed to correct erroneous returns of any prior years. (See "Amended returns" page 114.)

Payment of refunds.

LAW. Section 1316. (a) That section 3220 of the Revised Statutes is hereby amended to read as follows:

"Section 3220. The Commissioner of Internal Revenue, subject to regulations prescribed by the Secretary of the Treasury, is authorized to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected; . . . . "17

Suits against the collector for recovery may be started after six months from date of appeal.-An appeal to the Commissioner is the first step in seeking relief by an aggrieved taxpayer. If the Commissioner delays action on claim for refund or abatement suit may be brought against the collector after six months have elapsed, without waiting for the Commissioner's decision.

Section 3228, Rev. Stat., limits the period to two years. "Section 1316 also amends section 3225 of the Revised Statutes, so as to limit refunds to cases in which the return was not willfully false.

LAW. Section 3226. [Rev. Stat.] 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, according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof, and a decision of the Commissioner has been had therein: Provided, That if such decision is delayed more than six months from the date of such appeal, then the said suit may be brought, without first having a decision of the Commissioner at any time within the period limited in the next section.

Article 1037 adds little to the above section.

REGULATION. No suit shall be maintained in any court for the recovery of any tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, until an appeal by a claim for credit or refund shall have been duly made to the Commissioner and a decision of the Commissioner has been had therein, unless such decision is delayed more than six months. The cause of action accrues upon an unfavorable decision by the Commissioner or at the expiration of six months after an appeal without action thereon, and no suit may be brought after two years from the time the cause of action accrued. No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court. "Restraining" is used in its broad, popular sense of hindering or impeding, as well as prohibiting or staying, and the provision is not limited in its application to suits for injunctive relief. The prohibition of such suits cannot be waived by any officer of the Government. . . . . (Art. 1037.)

....

Suit for recovery must be started within two years after rejection of claim.-If the Commissioner of Internal Revenue finally rejects the claim, an action against the collector to whom the tax was paid may be brought within two years after rejection.

LAW. Section 3227. [Rev. Stat.] No suit or proceeding for the recovery of any internal tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, shall be maintained in any court unless the same is brought within two years next after the cause of action accrued: . . .

....

There are two objections to waiting the full two years allowed by law: one is that evidence in support of a claim is easier to secure while facts are fresh in mind; the other is that if the tax paid is substantial in amount, it is the part of wisdom to get it back as soon as possible.

To sum up one may bring suit in six months or less. after payment. Claim for refund may be filed as soon as payment is made and, if an unfavorable decision is given, suit may be commenced forthwith. If no decision is made within six months, suit may be commenced without waiting for a decision by the Commissioner of Internal Revenue. This limits the delay to six months if one is in a hurry. If not in a hurry, one may wait five years to file claim, and then wait two years more after the decision of the Commissioner before bringing suit. If the Commissioner should wait two years or more before rendering a decision, one might wait six years or more in all before bringing suit.

The following decisions relate to the foregoing procedure.

DECISIONS. When suit is brought by a taxpayer against the collector for recovery of the tax, the burden of proof is upon him to show that his appeal to the Commissioner has been taken and decided, or else that decision was delayed more than six months from the date of appeal.18

The best evidence of the appeal is the written appeal itself, so that it, or a certified copy thereof, must be produced in evidence, or its loss sufficiently accounted for.19

The suits provided for by the statute against the collector or deputy collector, as they arise under the Constitution and laws of the United States, may be maintained in a district court of the United States, irrespective of the amount involved.20

A suit for recovery of taxes erroneously or illegally assessed can be brought only against the collector who collected the taxes and not his successor.21

18 Lauer v. U. S. 5 Ct. Cl. 447.

"Hubbard v. Kelby, 8 W. Va. 46.

20

Ames v. Hagar, 1 L. R. A. 377; 36 Fed. 129.

"Philadelphia, Harrisburg & Pittsburg R. R. Co. v. Lederer, 242 Fed. 492, May 26, 1917.