COMMISSIONER OF INTERNAL REVENUE v. ACKER
Legal provision: Internal Revenue Code
Argument of Ralph S. Spritzer
Chief Justice Earl Warren: Number 13, Commissioner of Internal Revenue, Petitioner, versus Fred N. Acker.
Mr. Ralph S. Spritzer: Mr. Chief Justice, may it please Your Honors.
This case comes here from the Sixth Circuit and involves construction of provisions of the Internal Revenue Code of 1939.
Shortly after the decision below came down, the identical issue came before three other Courts of Appeals those of the Third, Fifth and Ninth Circuits and all three of those courts have expressly disagreed with the result which was reached in the instant case.
And presumably to resolve that conflict, this Court granted the writ.
The issue is a narrow one and the facts of this case are very simple and I take it undisputed.
For the years 1947 through 1940, respondent taxpayer, who incidentally is an attorney, failed to file a declaration or estimate, as it is sometimes called, of income tax, pursuant to the now familiar requirements under our scheme of pay-as-you-go income taxation.
This failure to file the declaration was willful and without any reasonable cause or excuse in the statutory sense.
There are specific findings as to that by both the Tax Court and the Court of Appeals at record 8 and 16, respectively.
I pause to mention in fairness to taxpayer that there is no suggestion that the reason for the failure to file the declaration was a tax evasion or a fraudulent motive, rather it appears from this and from other cases as well in which the taxpayer has been involved, that the reason for non-filing was a desire to bring a test case in which taxpayer might challenge the constitutionality of the federal income tax laws in their present form.
In any event, taxpayer was liable for taxes in fairly -- in substantial amounts in each of the years involved.
And the question here is simply what additions, what additions to tax were properly imposed by the Commissioner by virtue of the taxpayer's delinquency in the respect I've indicated.
The Government's position, which, as I say, has the support of three circuits and the Tax Court, is that respondent was liable under the statutory scheme for two distinct additions to tax in each of the years involved.
Whereas, taxpayer's position, which was adopted below and has also been followed by a number of District Courts, is that the statutes permit but a single addition each year.
And that brings me, of course, to the statutory provisions themselves and to the pertinent Treasury Regulation.
They are set out in our brief --
Justice John M. Harlan: (Voice Overlap) presented issue does not involve as such or anything?
Mr. Ralph S. Spritzer: No.
Not as such.
The question is whether the 6% and --
Justice John M. Harlan: It was on top of it.
Mr. Ralph S. Spritzer: On top of the 10%, yes.
I think to give the scheme, I -- I need to indicate the various addition provisions though only one of them is here in dispute.
Those provisions are set out beginning at page 29 of the Government's brief.
The first one in point, Section 294 (d) (1) (A) which is at the bottom of 29 under the caption, “failure to file declaration,” that provision provides in substance that if there is no filing of the declaration unless such non-filing is excused by reasonable cause, there shall be added to the tax 5% of the amount due, but unpaid.
And then the provision goes on to state that each additional month of that delinquency continues, there shall be an additional 1%, but not to exceed an aggregate of more than 10%.
And that provision I shall refer to as the 10% penalty provision.
I used the term penalty because this addition is intended to apply as the statute says.
Only where there is fault where there is lack of excuse a -- a willful or defiant failure to file the declaration and also of course, because the 10% figure is itself, obviously a -- a penalty kind of figure.
It has not been an ordinary interest charge.
Subparagraph (B), which immediately follows on page 30, is not involved in this case as such, but perhaps calls for a brief word to give the full picture.
And it provides in substance, that if a declaration of estimated tax has been filed, unlike the situation here.
If one has been filed, but the installments thereunder have not been paid in accordance with the declaration, that once again additions which may aggregate 10% maybe imposed.
Here again, the breach of duty is excused, if it's shown that there was reasonable cause for the non-payment.
And this provision is of course, alternative to (A).
This applies when there's a declaration and no payment thereunder.
(A) covers the situation where there has been no declaration.
I come now, then to the third addition provision which is set forth in a separate section.
This is 294 (d) (2), which is captioned, “substantial underestimate of estimated tax.”
And it is the application of this provision which -- which gives rise to the exact dispute that we have here.
As the caption indicates, this deals with the situation where there has been a substantial understatement in the declaration or a “substantial underestimate”.
A -- an underestimate incidentally, is deemed substantial under this statute, if the final tax as figured at the end of the year, exceeds by more than 20%, the amount which the taxpayer has estimated.
Now, if there is such an understatement, the statute provides that there is to be added to the tax 6% of the difference between the final tax and the estimate.
In short, if a taxpayer's final tax liability of $1000 and he has estimated $800, he has satisfied the provision.
If he estimated $500, the provision would call for an addition of 6% of the difference between $500 and $1000.
Now this addition, as we view it, is in the nature of an interest charge, though it is designated like the other, an addition to tax.
The important consideration to note here, I think, is that this provision applies irrespective of whether there is fault or no fault.
There's no provision in -- in this section for excusing the addition to tax.
Justice Potter Stewart: Well -- perhaps not on this very section that there is a provision, is there not, that provides as follows, if my tax last year amounted to $500, even if my tax this year is going to amount to $40,000, if I filed a declaration based on last year's estimate, I'm completely insulated from this penalty or this interest, I'm I not?
Mr. Ralph S. Spritzer: Yes, Your Honor.
But that is not a -- the answer to the reason that is so, is because that is not a substantial understatement as defined in the tax effect.
Justice Potter Stewart: (Voice Overlap) definition.
But this -- this is also true even if I -- it's irrelevant even -- that -- that I had knowledge that this year my tax was going to be $40,000, is it not?
It's to the -- after the Government to show that even.
Mr. Ralph S. Spritzer: Well, this -- the provision to which Your Honor refers is designed to give taxpayers who find difficulty in estimating.
A means of meeting the requirement and if they estimate last year's tax, they have satisfied for purposes of this addition provision statute.
Similarly, a taxpayer can elect to file an estimate every three months on the basis of his experience for that quarter of the year.
He can annualize his tax.
The point I was making is that if there is a substantial underestimate as defined in the statute, then there is no defense of reasonable cause or over side or mistake, or other form of excuse.
Justice Potter Stewart: Well, it's part of my question only went to your argument that this amounts to interest, because under my supposititious case, I could knowingly be withholding $38,500 of money due the Government for a substantial portion -- period of time and -- and be liable for no interest whatsoever, isn't that true?
Mr. Ralph S. Spritzer: That is true under these addition provisions.
And that is so because I think --
Justice Potter Stewart: Because the definition of --
Mr. Ralph S. Spritzer: Because of the definition and because Congress wanted to take care of the taxpayer who -- whose business was such that he had special difficulty in estimating.
I think if in fact, a taxpayer can estimate and he knows that his income in the current year is going to be substantial -- substantially higher, I think it's questionable whether he should take advantage of this provision.
Because he is required to set out his estimate over a declaration that these facts are true to the best of his knowledge and belief and while the addition provision doesn't apply in terms, I doubt if that provision is intended for his benefit.
The point I was attempting to stress is that I think the 10% provision is designed to deal with the situation where there has been a specified breach of a particular requirement and that breach has been knowing and willful.
Hence, it applies only where there is fault for willfulness.
Whereas, the other provision is apparently designed to compensate the Government in the situation where has not received a reasonably accurate estimate and according -- and payments in accordance therewith.
And that latter provision would apply to a taxpayer who perhaps had a perfectly good excuse for not filing a declaration.
The 6% addition would apply.
Similarly, the 6% addition applies to the taxpayer who has filed a declaration, but one which is inadequate, even though there was no willfulness or willful neglect in making the inadequate estimate.
I'd like to refer the Court at this point to the regulation.
I -- I might perhaps say, one word first.
The taxpayer's argument is essentially this.
That where a taxpayer doesn't file a declaration or estimate, there can be no underestimate -- having been no estimate, there can be no underestimate.
Now, the -- the regulation --
Justice Potter Stewart: What is the, in that connection, what -- well, I'm asking this for information on page 30 of your brief, this statute is set out --
Mr. Ralph S. Spritzer: Yes, sir.
Justice Potter Stewart: I'm -- I'm interested in the meaning of the sentence beginning toward the top of that page, “For the purposes of this subparagraph, the amount and due date of each installment shall be the same as if the declaration had been filed within the time prescribed, showing an estimated tax equal to the correct tax reduced by the credit under Sections 32 and 35.
And this is in the statute relating to failure to file any declaration at all.
Mr. Ralph S. Spritzer: You're reading at the end of that paragraph, Your Honor?
Justice Potter Stewart: At the end of that paragraph, yes, on the top -- toward the top of page 30.
Mr. Ralph S. Spritzer: Yes.
The 32 and 35 refer to the withholdings and other credits and that would enter into the base to which this 10% was applied.
It's -- it's 10 -- the 10% has to be applied to a figure, of course, the correct tax figure and that is reduced by these credits.
So that to the extent there has been a withholding, this 10% penalty would not take hold of that portion of the taxpayer --
Justice Potter Stewart: It had been withheld?
Mr. Ralph S. Spritzer: -- and the tax laws and other portion that's been withheld.
Justice Potter Stewart: So, what troubled or what interested me about this language was the fact that it was contained in that part of the statute which relates the failure to file any declaration.
And it says that for certain purposes, it will be assumed that this -- the result will be the same as though a declaration had been filed.
Mr. Ralph S. Spritzer: Yes.
And that is done, I think, to take care of the problems of credits and withholdings, and to bring that into the -- into the computation.
The -- as if the declaration had been filed that it comes into play more -- more precisely in the regulation itself, to which I was about to refer the Court.
And the crucial sentence in that regulation is the last sentence appearing on page 34, “In the event of a failure to file the required declaration, the amount of the estimated tax for the purposes of this provision is zero.”
Now, this regulation was adopted in 1943, very promptly after Congress in the Current Tax Payment Act of that year, adopted the scheme of pay-as-you-go income taxation.
It remained in the regulations from that time until the new Code of -- was adopted in 1954.
Justice Potter Stewart: Incidentally, under that Code this problem doesn't arise?
Mr. Ralph S. Spritzer: It does not.
The importance of this case such as it has is that there are several thousand cases still pending under the 1939 Code.
I referred the Court to the sentences or regulation which takes care of this case precisely.
The Sixth Circuit viewed that aspect of the regulation as invalid.
It said that it didn't consider the regulation to be consistent with the statute.
Now, we urge that it is at least a permissible interpretation of this statute that the concept of substantial underestimation is broad enough to cover the case of the taxpayer who has substantial income, but fails to estimate that any tax at all, is due.
And the three other circuits which have passed upon the question have said, “The statute is not free from ambiguities.
That it is necessary and proper to refer to the history and to the consistent administrative practice.”
And they have concluded that that history in practice compelled the conclusion that Congress contemplated that the 6% addition was applicable in situations where no estimate was filed as well as to situations where an inadequate estimate was filed.
Now, in that premise, let me refer the Court very briefly to the relevant history which we set out at 19 and 20, of our brief.
I would call the Court's attention particularly to one sentence which is quoted on page 20 and appears in both the House Committee Report and the Senate Committee Report on the Current Tax Payment Act.
And that sentence is this, “In the event of a failure to file any declaration where one is due, the amount of the estimated tax for the purposes of this provision,” And the discussion there was the addition for substantial under estimation.
“For purposes of this provision, will be zero.”
And so, we have a case here in which the Treasury Regulation was adopted verbatim from the Committee Reports of the two Houses of Congress.
Justice Felix Frankfurter: Mr. Spritzer, may I ask you to tell me what the setting of that sentence in the reports was.
Mr. Ralph S. Spritzer: Yes, if Your Honor will go back to page 19, the Committee Reports begin with the quotation toward the bottom of that page.
These paragraphs contain sanctions relating to the filing of declarations, payments of installments of estimated tax and to the proper estimate of tax.
Justice Felix Frankfurter: You say it was directed towards I think, to the enforcing provision that was part of the elucidation of the enforcing --
Mr. Ralph S. Spritzer: Yes.
After saying that there are three additions to tax, the Committee Reports have a brief discussion of each paragraph.
And when they come to the substantial underestimate, one they say in effect, no declaration is for purposes of this provision tantamount to a declaration of no tax due.
Between 43, when this provision went into the regulations in 1954, numerous changes we're made from time to time in the additions provisions.
At no time, was there any disapproval implied or otherwise, of the Treasury Regulation.
When the 1954 Code was adopted, Congress made a change which does away with this problem and in doing so, it observed and we quote the passage on page 23 of their brief, “It observed that under the 1939 Code, the charge for non-filing and the charge for failure to file a declaration or paying installment of estimated tax may run concurrently.”
Justice Hugo L. Black: What change is made?
Mr. Ralph S. Spritzer: There is now a single addition for all types of delinquency in connection with declarations and payments thereunder.
Justice Hugo L. Black: What amount?
Mr. Ralph S. Spritzer: 6%, Your Honor.
There is a single 6% whether the failure is non-fling of the declaration, inadequate estimate or non-payment.
And it is measured from each quarter what the new law provides is that you determine what the correct figure is, then you take one-quarter of that and if that quarter wasn't paid when that installment was due, you compute six -- you add 6%, measured from that due date.
Justice Hugo L. Black: It cannot run from Government.
Mr. Ralph S. Spritzer: There is no provision for a concurrent addition of any kind in the 1954 Code.
This applies strictly to cases arising under the 1939 Code.
Congress in the 1954 Code continued the existing provisions in effect, until a specified date -- that date, until January 1, 1955.
So this set of additions -- the set of additions provided for in the 1939 Code, must be applied to all cases up to all tax cases arising prior to January 1 of 1955.
I would like to point out by two examples quite briefly that this isn't the case of two additions for the same thing depending on the same elements.
And I can illustrate that by pointing out to the Court that there are cases in which the 10% addition applies and the 6% does not.
There are cases in which the 6% addition applies and the 10% does not.
First case, suppose that a taxpayer fails to file a declaration and makes no payment during the tax year.If this was the result of a mistake or passive neglect, the failure is excused.
The 6% addition nonetheless, applied in our view.
Indeed, if it did not apply, the taxpayer who was ignorant of the filing requirement would be better off from the taxpayer who complied with the filing requirement, but submitted in estimate that was too low.
The reverse situation is covered by this example.
X again fails to file a declaration.
However, he's a salaried employee and the portion of his pay is withheld under the withholding provisions by his employer each week and transmitted in due course to the Commissioner.
His final return let us suppose is $1000 -- shows a correct tax of $1000 and withholdings during the year amounted to $800.
Now, in that event there is no 6% addition to tax, because there has been no substantial underestimate, because under Section 294 (d) (2) credits or withholdings are taken into account in determining whether there has been a substantial understatement.
On the facts I gave, the withholdings amounted to 80% of the ultimate tax liability, hence no statutory understatement.
Justice John M. Harlan: Is it used for a purpose contrary to enforce this understatement penalty or understatement addition or do they --
Mr. Ralph S. Spritzer: The 10% provision?
Justice John M. Harlan: No, the 6% provision, or do they --
Mr. Ralph S. Spritzer: I am --
Justice John M. Harlan: -- used to it, when they get a taxpayer that -- been in trouble with them.
Mr. Ralph S. Spritzer: I think they have attempted to enforce --
Justice John M. Harlan: To cross the board --
Mr. Ralph S. Spritzer: -- consistently in recent years.
I understand that in the early years when the scheme was a novel one, that there was very little effective enforcement of these additions to tax, if that may have proceeded from a billing that the country needed a certain amount of time to accustom itself to the new scheme.
But apparently, the -- the cases didn't begin to come into the courts until some years after pay-as-you-go taxation started.
Justice Charles E. Whittaker: Mr. Spritzer, it's not true that an entirely -- Section 294 (d) (2) alone, there could be no means of confusing the amount -- the addition for the amount would not be ascertained, upon which the computation should be made.
And in order therefore to make the computation, you have to look to the regulation which fixes the estimate, when none was filed at zero.
And is it not the holding of the Fifth Circuit that because of that fact, it is not the statute, but the regulation that imposes this penalty.
Mr. Ralph S. Spritzer: Well, our question I think is whether a filing of no declaration at all can be deemed to be equivalent to an estimate of no tax due.
Justice Charles E. Whittaker: When Congress didn't speak on the subject.
Mr. Ralph S. Spritzer: Congress used the term in the statute, substantial understatement.
Now, I think it's open to argument whether one can be said to have substantially underestimated, when he has filed nothing.
Justice Charles E. Whittaker: Well --
Mr. Ralph S. Spritzer: But I don't think it's foreclosed -- that were foreclosed from determining what Congress meant by underestimate.
Justice Charles E. Whittaker: Well, doesn't -- do we not say the word, substantial underestimate appear only in the subheading of that subsection, the section starts off saying at 80% of the tax in the case of individuals, etcetera, exceeds the estimated tax, there shall be added to the tax --
Mr. Ralph S. Spritzer: Yes.
Justice Charles E. Whittaker: -- an amount.
Mr. Ralph S. Spritzer: Well, has a man who has filed no piece of paper and not estimated pay zero tax.
I think that's certainly, the -- the statute doesn't foreclose that interpretation.
I'm not saying that it compels it, but I think that the statute is at least sufficiently ambiguous, so that resort maybe held to legislative history.
And in this case, we have Committee Reports of both Houses, which contain a statement which shows that Congress necessarily contemplated that the non-filing would be treated as a declaration of zero.
Those are the very words that both Houses used.
We have combined with that a Treasury Regulation which has been in effect from the beginning of pay-as-you-go taxation and has been followed for 11 years until the Code has been revised, a -- a more concrete and persuasive history I -- I think is hard to find.
Chief Justice Earl Warren: Mr. Acker.
Argument of Fred N. Acker
Mr. Fred N. Acker: Mr. Chief Justice, Associate Justices of the Supreme Court, may it please.
I would first address myself a little out of order.
Justice Stewart asked a question where a man had a return or an income of $2500 in a certain year and the following year he had $50,000.
Under the law as it is enforced now, there would be no penalty.
Now, if I understand correctly and I'm willing to be corrected on the proposition, because the statute requiring a declaration involved a prophecy, that is a main at the beginning of the economic year, had to prophesy two things.
He had to prophesy what his taxable income would be and that involved a double guess, it involved a guess by him as to what his income would be and it also involved a much more difficult guess as to what the tax rate would be when Congress got around to enacting the tax for that particular year.
Therefore, the courts in interpreting this provision, this reasonableness provision ignored the expressed wording of the statute and they said that, “We, as a court, won't construe any man who does that as having complied with the statute.”
In other words, this was a case where the statute itself was so extreme that the Court by a long series of decisions avoided or voided the effect of this statute in that situation.
And finally, after they magnified and buildup and multiplied, I think the Commissioner then said, “That we will accept that definition and I think that that is the history of that situation.”
Now, I want to go to a point that counsel was making his very last point that he made.
And he was saying there that there would be a situation in which a man could be in complete default and he wouldn't pay any penalty and that situation grows about in this situation.
The man files no return at all, that is no estimate.
And therefore, strictly speaking, he should pay a 10% penalty.
But if he could show that that was reasonable, he would escape that penalty.
Then we come to the second provision, the so-called 6% provision and since he had filed no estimate and since it's very difficult to underestimate something that he didn't file at all, that you can't file an estimate and not file at -- you cannot file an estimate and file an estimate that's an understatement at one of the same time, this man would be excused from the 6% penalty under my definition.
Now, counsel says that that is an ambiguity, but in that he airs, “Because that is not an ambiguity, it is an omission by the drafter of the Act.”
It's some omission to cover it.
It's not an ambiguity, it's an omission.
And of course, you can't create a liability, because the drafter of the Act created an omission.
So he calls it by the wrong name.
He didn't cover all of the possible situations that could exist.
And therefore, what he's complaining about is not an ambiguity, he is complaining about an omission.
Justice Felix Frankfurter: Suppose that Congress had put that census that Mr. Spritzer quoted on top of page 20, into the Act itself --
Mr. Fred N. Acker: Then my answer would be, Your Honor, is this.
That Congress would find itself in the very irrational proposition of having two penalties for one and the same thing.
And one of them would be 10% and the other one would be 6%, and with all due deference that sometimes Congress does do things that are irrational, I don't think that they would do a thing so completely irrational as that.
In any event, they didn't do it.
Justice Felix Frankfurter: Well, the question is whether the definition in the report has in the illegal significance to a definition or in a statute.
Mr. Fred N. Acker: It does not unless there is an ambiguity in the statute.
Now, we -- we get down to --
Justice Felix Frankfurter: And -- and Congress and they don't see, will say now, we can use this place and the statute living in this (Inaudible)
Mr. Fred N. Acker: Yes, they can, up to a point -- up to a point.
But since they didn't say it, we don't need to --
Justice Felix Frankfurter: (Voice Overlap) needed a report, didn't they?
Mr. Fred N. Acker: In the Conference Report, there is such language, Your Honor.
Now, let's get down to the essence of this case.
Here, we have an exceedingly simple statute, an abstract legal question.
And we have a requirement on the Income Tax Law that said, “That you must file a declaration and they created two kinds of penalties, just two kinds of penalties for two possible situations.”
The man who says, “I will make no report” and the other man who makes a faulty report.
And judging the weight of those two defaults, they'd say for the major default which is in defiance of the law itself, we'll make it 10, but the man who does it just badly, we will make it 6.
Now, if you will read the statute, I defy anyone to get any other conclusion out of it or any other possibility.
The wording is plain, it is unmistakable, it is -- I go so far is to say, it is inescapable.
And therefore, I say, Your Honor, there can be no resort either to the Conference Report or to the regulations because there is, in fact, no ambiguity and the entire brief, some 27 pages or some 34 pages of the Government's brief, turns entirely around the proposition that there is an ambiguity.
But they fail in any respect to point out what the ambiguity is.
What is the ambiguity?
Where is the ambiguity?
There might be an -- an omission in a very extraordinary situation, but there is no ambiguity.
And therefore, if I understand the law of the land as interpreted by this Court and by all of the state courts' interpreting statutes, if there is no ambiguity in itself, if we can get it from the four corners of the statute, then we have no resort either the Conference Reports or the regulations of any kind and that is the essence.
And therefore, this Court after examining the expressed language of that statute, before it could begin to examine the Conference Report, or to examine the regulations, or to examine any of -- of the arguments, would've first have to find that there was in truth and in fact, an ambiguity.
Justice Felix Frankfurter: You have to go beyond that, it seems to me.
You have to establish that a Conference Report as waiting a report and any I believe, much more waiting for me than an individual -- report of an individual committee of either House, that a Conference Report can't write a definition of that which without it, would be unambiguous your way.
As far as I'm concerned, it would be unambiguous your way without the Conference Report.
Mr. Fred N. Acker: All I am (Voice Overlap) --
Justice Felix Frankfurter: Are you saying --
Mr. Fred N. Acker: Pardon.
Justice Felix Frankfurter: -- are you saying that a Conference Report which says, we mean by underestimated that if nothing is given at zero and therefore, whatever beyond that is the range of underestimation.
Mr. Fred N. Acker: I have a double answer for that, Your Honor, or I think I have a double answer for it.
Justice Felix Frankfurter: I'd be very hospitable to -- to have --
Mr. Fred N. Acker: Yes.
Justice Felix Frankfurter: -- to --
Mr. Fred N. Acker: Now --
Justice Felix Frankfurter: (Voice Overlap) --
Mr. Fred N. Acker: -- if that was -- if it was in the Conference Report and therefore in the mind of the Congress that they wanted to do that, that they wanted to create a liability, a second liability, they would have said so, they would have said so, if that was the mind of the Congress.
Justice Felix Frankfurter: Would you be good enough you would solve a -- you take a lot of difficulties out of or wait for me -- to tell me how I can find out the mind of Congress except to the expression of its authoritative organs?
Mr. Fred N. Acker: Its authority statement is only in the statute.
Justice Felix Frankfurter: Well, but this Court has go on way beyond that.
That -- that would be a perfect argument in England.
We said that reports -- above all reports (Inaudible) by authoritative spokesman on the floor of either House and report and I say especially a Conference Report is a gloss and the only authoritative expression of mind that I know, is what those who are authorized to speak to Congress say.
Mr. Fred N. Acker: But, Your Honor, while every enactment is the result of a give and take theoretically on the floor of Congress or in the Committee, its final conclusion can only be construed from the statute itself, if the statute is plain and unambiguous.
Justice Felix Frankfurter: Doesn't the Conference Report has to be adopted by each House?
Mr. Fred N. Acker: Well now, I'm not familiar with the rules of Congress.
Justice Felix Frankfurter: Well, that's what -- evidently, there were differences and they then each -- the Conference Committee submitted this report to each House and they have to act on it.
Mr. Fred N. Acker: And, Your Honor, let me say this.
That the fact that you don't find language in the statute, you can construe either way.
You can construe that they therefore understood it in the light that the Government now contends for or that you can construe it in the light that they intended to avoid that conclusion by the omission of it.
In other words, that's an argument that can work both ways.
You can work that argument both ways either way.
It's just as logical to argue.
One conclusion as it is to argue the other conclusion.
And secondly, I -- I'm a little bit puzzled when it comes to holding and what Congress did or didn't do when -- when or what their thought was, when you regard the Internal Revenue Act which is a -- a document of about 900 pages.
And I am sure there isn't a congressman -- there isn't any congressman or any senator that understands what's in it.
He got a general conception --
Justice Felix Frankfurter: And we ought to throw out the whole statute.
Mr. Fred N. Acker: Oh, no.
I don't agree with that.
Justice Felix Frankfurter: Because we got no mind of Congress -- we got no mind of Congress.
Mr. Fred N. Acker: But when you are trying to reach in -- have been searching to the mind of what the Congress was, you have to pay some attention to the type of an enactment that it was, when you have a single statute or a simplified statute that's one thing.
But when you have a large comprehensive statute, which even the Internal Revenue department doesn't understand, then you got a definite situation.
Now, they make another contention that the enactment has stood there and that is that -- their interpretation has stood there, all of these intervening years and of course it has stood there in these intervening years, but not without controversy.
Now, they contend that since Congress has let it there, that we should interpret it in the light that the Government has interpreted it.
But there is another doctrine of the law that follows along that, that the Congress pays attention to what the courts are deciding on the same subject, so we have parent -- parent thoughts that are running along parallel one to another.
And of course, if that is true, if the Congress pays attention to that, they will find that the Tax Court was making decisions more or less supporting the Government's contention while the District Courts were not doing it.
And it is only recently that it has got into the circuits.
So that I don't see how you can come to any conclusion that might go to another proposition that the Internal Revenue Act is a very hot subject.
And Congress is constantly saying we will -- we will examine, we will examine it, but they don't.
At least they do not go into it in the very thoroughgoing manner and next November 5th, theoretically for about the eighth or ninth time, we are supposed to have a further thoroughgoing revision or study of the Internal Revenue Act.
But we'll have to see how thorough that is, but you can't give any great conclusion from that.
Now, let's go to the cases.
Well, when this first came up, I made a very thorough digest of the cases and what did I find?
I found out that there was absolutely no meaning in any of the cases.
In other words, the cases were about something else.
They were about fraud.
They were about technicalities.
They were about bookkeeping.
And then at the very end of the decision, the Court would say, “10% penalty inflicted, 6% penalty inflicted.”
No meaning, no explanation, no reason why.
And to show you that that is so even in the decisions, let's take the Sixth Circuit.
The Sixth Circuit on three occasions, sustained the double penalty, the 10% and 6%, and then reversed themselves in the instant case.
So this was called to there attention in the Patchen case, which was decided after the instant case.
So the Court took a look why they did this and they looked at the records and they found out that it was in the pleadings, but not in the briefs and counsel didn't argue it, so as a matter of course.
And therefore, that means nothing.
Now, let's get down to the instant case.
The Government attacks, be it 767% in one year, 83% in another and I was objecting.
And the Government's contention was that they had a right to tax even though it was confiscatory, even though it was destructive, even though it was excessive.
Now, that is a quotation not from me.
They were -- are not words that I pulled out, but they were the substance of the Government's brief.
And they were adopted by the Tax Court.
And when the thing was argued in the Circuit Court, they repeated that contention.
Chief Justice Earl Warren: We'll --
Mr. Fred N. Acker: And --
Chief Justice Earl Warren: -- recess now.
Argument of Fred N. Acker
Chief Justice Earl Warren: -- you may -- you may proceed, Mr. Acker.
Mr. Fred N. Acker: If the Court please, I was -- at the recess I was taking what I thought was the very extravagant claim of the Government as to their right to tax and I was countering that with the famous statement that the power to tax is not the power to confiscate, and several other things that are associated with that which I think this Court is familiar with and therefore I will not digress to go into that.
The question of the penalties was not even argued.
It was not even mentioned so far as the oral argument was concerned and in the briefs, I think it was given three or four lines and I was greatly amazed when the opinion was handed down that the Court spent an extravagant amount of time almost in discussing this subject.
I suppose their reason for this was that while they had agreed with me in principle in unmistakable language that the power of the Government to tax was not as extravagant as they claimed it was not as great as they claimed, they gave no relief on that subject.
And I thought a leap, or in a summersault that was greater than any leap since Brodie jumped off the Brooklyn bridge, but they did though to a great extent to eluciate a little-- elucidate the -- their reasons for being with the respondent in that action.
Now on the affirmative side of my case as to how I would interpret the statute, I think immediately upon reading it after looking at the context of it and format of the statute and the way it is set up and it provides one penalty for not doing a thing and another penalty for not doing a thing, but we have the classic interpretation, the express mention of one thing is the exclusion of another.
Now if there was ever a classic principle of interpretation for statutes or for anything for that matter, it is that great principle.
In other words where one thing is expressly mentioned that is conclusive and not only do we need to go to that most apparent and evident principle of interpretation, but we can -- we can almost go to Mathematics and in using the word Mathematics, I would direct the Court's attention that that is a branch of philosophy.
In other words, the whole includes all of the parts.
So when I fail to do one thing, it already included all of the parts.
Now it seems to me this is so evident and so apparent on logic that I stand amazed that anyone should be contending to the contrary.
Now the Government's counsel had said something about the history of this case and he thought from the history of the case, they should be sustained.
Well now the very fact that it was constantly changed during these intervening years, the 1943 and on itself indicates that there was a freedom out of trouble with this and when the Congress' got to 1954, our present Revenue Act, they eliminated it entirely which shows the type of public opinion that was operating at that instance.
Now therefore, I want to resume and sort it somehow.
I therefore think on the constructive side that the ordinary principles of interpretation would show that it should not be enlarged.
I try to show that there was no ambiguity if you will read the statutes.
Plainly and unmistakably, there isn't a single ambiguity in it, and all that there is, is an omission and you cannot supply an omission.
It was simply something that was overlooked (Inaudible).
Now I've learned a very, very long time ago, Your Honor, when you have said what you wanted to say, it is a most excellent time to sit down.