tention of the law is that no one shall be erroneously or excessively taxed. This intention is respected by the Commissioner of Internal Revenue. Sometimes his subordinates or persons in the offices of the collectors, acting with more or less praiseworthy zeal, treat a taxpayer's claim as if it were an attempt to extract money from the United States Treasury under false pretenses. Anyone with a legitimate claim might just as well convey the impression that the United States Treasury retains some of his money, collected under false pretenses.

Both positions are wrong. The claim and its consideration should be as free from technicalities as possible and be made and treated as impartially as a business transaction. The whole matter should be as simple as the filing with a railroad company of a claim for refund of an overcharge. Business men do not hesitate to make these claims against railroad companies, but heretofore they have not been so ready to go after tax overcharges. The reference to railroad claims excludes the period during which the railroads are under government control.

It has been recommended by some authorities that all taxes reported, whether in any case they are more or less than the correct amount, should be paid under protest, not to acquire any right to claim a refund (that being possible without question), but to establish a perfect foundation for a suit against the collector if the claim for refund is rejected. The theory is that if payment is made voluntarily, in full knowledge that the tax is erroneous, the taxpayer is estopped from any right to succeed in an action at law.

If, as stated elsewhere, payment has been made without any knowledge of the illegality of the assessment, an action can be maintained for that reason. Furthermore, even where a claim has been made for abatement (before paying the tax) and it is refused, and notice is served by the collector that the tax must be paid or penalties will be enforced, it is evident that the payment is not being voluntarily made but under

duress, and the courts hold that collections in such circumstances do not estop the payer from subsequent action at law.

Should payment ever be made under protest?-In the case of an additional assessment after examination, where the facts upon which the government bases its claims are, in the opinion of the taxpayer, unfounded and illegal, there can be no harm, when making the payment, in attaching thereto a simple form of protest. For instance, little trouble is involved in attaching to the remittance this notice:

I hereby protest against the assessment of the tax levied against me as evidenced in notice dated .. on the ground that it is erroneous and illegal, and payment is hereby made solely to prevent the imposition of penalties threatened and the attachment of my property.

Protest not necessary under certain conditions.-In one class of cases it certainly is not necessary to have paid under protest—that is, where a taxpayer prepared his returns in accordance with Treasury regulations, believing them to be correct, and having been assessed thereon paid the tax in due course.

As far back as 1836, in Elliott v. Swartwout,26 the Supreme Court of the United States, in discussing the right of a consignee to recover an excess of duties, said:

A voluntary payment, which can be set up to prevent a recovery back of money paid, can only be where all the circumstances are well known to the person paying; and where no constraint exists, and a free and unlimited action is permitted, to make or refuse the payment. But in this case, the duties must be paid or bonds given for them, or the owner could not obtain his goods. . . . . The money was paid to get possession of the goods. This was involuntary.

So with income taxes paid in like circumstances. Believing the tax to be assessed with due regard to the law, the taxpayer pays because demand is made and notice is given of penalties and summary collection in case of non-payment.

2610 Peters 137.

When payment should be made under protest.-While involuntary payment need not be made under protest in order to secure a refund in the manner provided by the act, in cases where recovery of taxes alleged to be illegally exacted is sought by an action at law, the federal courts have held that the claimant must show involuntary payment. In Philadelphia v. Diehl, the United States Supreme Court said:

Where the party voluntarily pays the money he is without remedy; but if he pays by compulsion of law, or under protest, or with notice that he intends to bring suit to test the validity of the claim, he may recover it back, if the assessment was erroneous or illegal, in an action for money had and received.

Arguments in favor of paying under protest.-Although the Treasury unreservedly states that a tax, if excessive, need not have been paid under protest to be recovered, there are certain cases which indicate that a taxpayer should pay under protest to protect his right to sue for refund. They are, however, not entirely clear and it will be found that the modern tendency is to waive the formal protest.

The following cases are illustrative of past practice:

Wright v. Blakeslee, 101 U. S. 174 (1880) holds that, although no written notice or protest is required by statute of a party paying illegal taxes under the internal revenue laws, in order to recover the amount erroneously paid, he must, however, pay under protest in some form, or his payment will be deemed voluntary.

As stated by Chief Justice Fuller, in Chesebrough v. United States:28

DECISION. The rule is firmly established that taxes voluntarily paid cannot be recovered back, and payments with knowledge and without compulsion are voluntary. At the same time, when taxes are paid under protest that they are being illegally exacted, or with notice that the payer contends that they are illegal and intends to institute suit to compel their repayment, a recovery in such suit may, on occasion, be had, although generally speaking, even a protest or notice will not avail if the payment be made voluntarily, with free knowledge of all the circumstances, and without any coercion by the

actual or threatened exercise of power possessed, or supposed to be possessed, by the party exacting or receiving the payment, over the person or property of the party making the payment, from which the latter has no other means of immediate relief than such payment.

In Herold v. Kahn29 the court said:

DECISION. The proper administration of the fiscal affairs of the government, requires that the payment of taxes should not be delayed by dispute as to their legality, but that the taxes should first be paid and all questions in regard to them be determined in suits brought for their refunding. It is a wise policy, therefore, that encourages the payment under protest of disputed taxes. Though there is some conflict in the dicta of the Supreme Court, we think that the true doctrine is that, when taxes are paid under protest that they are being illegally exacted, or with notice that the payor contends that they are illegal and intends to institute suit to compel their repayment, a sufficient foundation for such suit has been established.

Procedure of Collectors

Claims for refund or abatement.

REGULATION. (1) Claims for refund or for abatement, pertaining to returns which have not at the time been posted to an assessment list, will be numbered to agree with, attached to, and made a part of, the original return so that the total tax as posted on the assessment list will be the admitted tax liability of the taxpayer. If a taxpayer submits an amended return as a claim either for refund or for abatement before the original return has been listed, such amended return will be numbered to agree with and attached to the original return in the same manner. Similarly, errors or omissions in returns discovered by the collector prior to the posting operate as an amendment to the amount of tax liability shown by the return.

In other words, all amendments or changes either increasing or decreasing the amount of tax liability and whether originated by the taxpayer or by the collector will be reflected on the face of the return itself and the posting to the assessment list will be of the correct amount. In this connection attention is called to the provisions of Mim. 2124.

(2) Amended returns showing a reduced tax liability will not be acted upon by collectors if the original return has been previously entered on the assessment list. All claims pertaining to returns which have been listed for assessment must be submitted on form 46, if the tax has been paid, or on form 47 if the tax has not been paid. (3) The following classes of claims may be included on form

751 (if for refund), or blanket form 47 (if for abatement). Separate sheets properly designated of forms 751 or blanket forms 47 must be prepared for returns on file in the Commissioner's office and those on file in the Collector's office:

(a) All claims for refund or abatement pertaining to form 1040A income returns for the calendar year 1918, or subsequent years.

(b) Errors in computation. (These include only mistakes in arithmetic.)

(c) Errors in specific exemptions on income returns. (These include such items as failure to deduct exemptions for dependents; the $2,000 exemption for corporations, etc.) (d) Payments in excess of the total amount of tax due as shown by the return. (These include such cases as a remittance of $1,500 covering payment of a tax liability of $1,300, etc.)

(e) Amount previously paid on submission of a tentative income return in excess of the total tax liability shown by the final return.

(f) Duplicate payments or assessments.

(g) All claims for refund on account of non-revenue remittances forwarded to the collector in error and deposited by him. (These include such items as state or municipal taxes sent to the collector and deposited by him as “unidentified," etc.)

(4) All claims for refund or abatement other than those enumerated above will be forwarded to the Commissioner for settlement. However, any claim may be so forwarded whenever the collector does not feel absolutely certain of the law, regulations or precedent involved, or if his disbursing bond is insufficient to enable him to procure an advance on accountable warrant of the requisite amount of funds from which to make payment.

(5) Before forwarding claims to the Commissioner for settlement certification must be made on the claim of the account number, the amount of tax originally due, the dates and amounts of all payments or other transactions affecting such amount, and the balance due as shown by the account on the list. All claims of this nature now on file in the collector's office and hereafter as received should be certified and forwarded immediately.

(6) Claims submitted by taxpayers direct to the Commissioner will in future be referred to the collector for this certificate as to the status of the account on the assessment list. Until so certified by the collector such claims will not be settled. When certifying claims for refund the collector will make a notation in the "Remarks" column of the date and amount of the refund claim, but no record will be made on the tax journals unless a credit balance exists in