281 F. 539 | S.D. Ill. | 1922
Plaintiff seeks to recover from the
defendant, collector of internal revenue for the Eighth district of Illinois, $1,165.13, paid under protest as taxes levied and collected under the Revenue Acts of 1917 and 1919. The action is based upon the theory that plaintiff comes within the exempted class specified in paragraph 10, § 11, tit. 1, of the Act of September 8, 1916 (39 Stat. 756, 766, 767 [Comp. St. § 6336k]). This same provision was re-enacted by reference in Act Oct. 3, 1917 (40 Stat. 300, 315, 316) § 504, tit. 5 (Comp. St. 1918, § 6309J4a), and was re-enacted by section 231 of the Revenue Act of 1918 (Act Feb. 24, 1919 [40 Stat. 1057, 1076 (Comp. St. Ann. Supp. 1919, § 6336%°)]), and was referred to in paragraph D, §• 503, tit. 5, of the same act (40 Stat. 1104 [Comp. St. Ann. Supp. 1919, § 6309%d]).
Paragraph 10 of section 231, supra, is almost identically the same as paragraph 10, tit. 1, of the Act of September 8, 1916. The latter provision was effective until the passage of the Revenue Act of 1918, and the former provision was in effect for the residue of the time covered by the tax sought to be recovered from the date of the passage of the Revenue Act of 1918 (February 24, 1919). Paragraph 10 is as follows:
“Farmers’ or other mutual hail, cyclone, or fire insurance companies, mutual or irrigation companies, mutual or co-operative telephone companies, or like organisations of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting expenses.”
[ 1 ] These Revenue Acts are laws passed by Congress for the purpose of raising revenue to meet the expenses of the war. Notwithstanding that fact, it is the duty of courts, in construing statutes, to observe the fundamental rule, to ascertain and give effect to the intention of Congress. Eidman v. Martinez, 184 U. S. 578, 583, 22 Sup. Ct. 515, 46 L. Ed. 697; Hartranft v. Weigmann, 121 U. S. 609, 7 Sup. Ct. 1240, 30 L. Ed. 1012; Amer. N. & T. Co. v. Worthington, 141 U. S. 468, 12 Sup. Ct. 55, 35 L. Ed. 821; Lynch v. Union Trust Co., 164 Fed. 161, 90 C. C. A. 147; Disston v. McClain, 147 Fed. 114, 77 C. C. A. 340; Niles v. Central Mfg. Co., 252 Fed. 564, 165 C. C. A. 14.
“ * * * We are led to the general rule of law, which has always prevailed, and become consecrated almost as a maxim in the interpretation of statutes, that where the enacting clause is general in its language and objects, and a proviso is afterwards introduced, that proviso is construed strictly, and takes no case out of the enacting clause which does not fall fairly within its terms. In short, a proviso carves special exceptions only out of the enacting clause; and those who set up any such exception, must establish it as being within the words as well as within the reason thereof.”
A claim of exemption from taxation must be clearly made out. Bank of Commerce v. Tennessee, 161 U. S. 134, 146, 16 Sup. Ct. 456, 40 L. Ed. 645; Perry Co. v. Norfolk, 220 U. S. 472, 31 Sup. Ct. 465, 55 L. Ed. 548; Vicksburg R. Co. v. Dennis, 116 U. S. 665, 6 Sup. Ct. 625, 29 L. Ed. 770. This controversy exhibits no disagreement as to the general rule with reference to the interpretation of revenue statutes being in favor of the citizen as against the government. However, the disagreement arises as to the manner of construing and applying paragraph 10, supra; the plaintiff contending that it should be construed most favorably to the citizen as against the government.
*542 "The rule regarding exemptions from general laws imposing taxes may be different. Cooley on Taxation, 146, In re Enston, 113 N. Y. 174, 177 (sub nom. People v. Sherwood, 3 L. R. A. 464, 21 N. E. 87)”
—demonstrating the purpose of the Supreme Court not to disturb the well-established rule observed by the court and announced in United States v. Dickson, supra.
In our judgment, the Supreme Court in Swann v. Finch, 190 U. S. 143, 23 Sup. Ct. 702, 47 L. Ed. 984, thoroughly settled the law on this subject. There it was sought to recover a “drawback” under a tariff law granting exemption from import duties upon imports brought into the country for treatment and manufacture and afterwards exported. In other words, Congress, by the provisions contained in the tariff law, then before the court, granted a privilege to importers to draw back the tariff paid upon goods” imported which were afterwards exported, within the provisions of the law. The reasons for the provision of that tariff law, of course, are immaterial to the courts. So with reference to paragraph 10, supra. Therefore we believe there can be. no doubt that in a case such as the present one, there can ,be no recovery unless the plaintiff brings itself fairly within the exemption provisions.
Indeed, reading the statute as here repunctúated, a flood of light is shed upon the purpose of ‘Congress in the preceding lines of that paragraph. To read the words “or like organizations of a purely local character,” as distinguished from the preceding words, any hail, cyclone, or fire insurance company that is operated by farmers and upon a mutual plan would be exempted; any telephone company organized upon the mutual or co-operative basis would be exempted, and that even though it operate oyer an extensive portion of the couhtry. But we believe it was the intention to exempt those organizations .which are of the classes named and also of a purely local character. Farmers’
We know of no judicial determination that the words “like organizations of a purely local character” mean anything different in a federal statute than they would when used in a state statute, yet this is the contention of the plaintiff here. In writing the statutes under which the tax was levied and collected, the enacting clauses were very far-reaching and inclusive in their scope; but Congress concluded that there were certain local neighborhood community activities throughout the United States which were not operated for profit and should not be taxed. It attempted to describe those things in paragraph 10, supra, by the use of the English language usually and customarily used to describe them. To hold otherwise would be to open the field for the great life insurance companies now doing business throughout the United States upon the mutual plan, to apportion certain portions of the United States amounting to less than the whole for their operations, and thus bring themselves within the meaning of the exemption.
But it is claimed by the plaintiff that its income consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting expenses. The same is true of the great mutual companies, for at the close of each year, if the premiums amount to more than enough to meet the expenses, etc., the remainder is returned to the policy holders under the guise of a “dividend.” We feel that the plaintiff is not clearly within the provisions of paragraph 10, so as to be entitled to exemption from taxation.
In the light of these views the court will find the issues for the defendant, and judgment may be entered accordingly.