160 F.2d 614 | 1st Cir. | 1947
. This case is here on cross appeals from the judgment of the district court. The question involves the application of Revised Statutes, § 3466 (1898),
The lower court held that the United States had priority as to its capital stock taxes, its Title VIII taxes, and 10 per cent of its Title IX taxes, but that it could not recover 90 per cent of its Title IX taxes, stating that the taxpayer or his assignee had the alternative right to pay the 90 per cent of his obligation under Title IX to an approved state unemployment fund. It cited Illinois ex rel. Gordon v. United States, 1946, 328 U.S. 8, 66 S.Ct. 841, in support of its decision as to capital stock taxes and Title VIII taxes but said that the Supreme Court had no occasion in that case to consider the problem whether as to the 90 per cent of the amount due for Title IX taxes the statute had not given the taxpayer the option of making payment to a state instead of to the United States.
Since the lower court handed down its decision in the instant case, the Supreme Court in People of State of Illinois ex rel. Gordon v. Campbell, 67 S.Ct. 340, restated its position as follows: “Illinois ex rel. Gordon v. United States, 328 U.S. 8, 66 S.Ct. 841, held that in circumstances which called into application Rev.Stat. § 3466, 31 U.S.C. § 191, 31 U.S.C.A. § 191, the claims of the United States for federal insurance contributions taxes under Title 8 of the Social Security Act, 49 Stat. 620, 636, 42 U.S.C.A. § 1001 et seq., and for federal unemployment compensation taxes under Title 9 of the Social Security Act, 49 Stat., at page 639, 42 U.S.C.A. § 1101 et seq., had priority over claims of Illinois for taxes under its Unemployment Compensation Act. That decision is controlling, of course, upon the same feature of this case iff
Under said § 3466 it is stated that where a debtor is insolvent the debts due the United States must be paid first. There is no question but what these are debts due the United States. “The words of Section 3466 are broad and sweeping and, on their face, admit of no exception to the priority of claims of the United States.” United States v. Waddill, Holland & Flinn, Inc., 1945, 323 U.S. 353, 355, 65 S.Ct. 304, 306, 89 L.Ed. 294. It has not been decided that taxes under Title IX of the Social Security Act are an exception which can be read into this statute and we do not think that they are. Nor do we think that § 902 amended by implication said § 3466. Recently the Supreme Court in United States Department of Agriculture v. Remund, 67 S.Ct. 891, 894, has said: “We reiterate what was said in United States v. Emory, 314 U.S. 423, 433, 62 S.Ct. 317, 322, 86 L.Ed. 315, ‘Only the plainest inconsistency would warrant our finding an implied exception to the operation of so clear a command as that of § 3466/ ”
“We agree that the social security legislation provides a method for accomplishing state and federal unemployment relief systems, integrated in plan, function, and purpose, and that sound state systems are essential to complete success of the Congressional plan. But we cannot agree that Congress thereby intended in effect to amend Section 3466, by making its priority provisions inapplicable to state unemployment tax claims.” Illinois ex rel. vior-
The taxpayer was clearly insolvent at the time it made the assignment for the benefit of creditors. The total amount of its assets was $1,135.11 and apart from all other claims filed with the assignee the claim of the United States alone amounted to $1,674.13. The claim for taxes under Title IX was $963.08. The payment of Title VIII taxes and capital stock taxes would leave a balance in the hands of the as-signee of only $424.06. This was clearly insufficient to pay Title IX taxes and the full amount of those taxes had to be paid before any payment could be made to the Commonwealth of Massachusetts. Under § 902 of the Act the only way in which a taxpayer may obtain a credit against Title IX taxes would be to make actual payment to a state. In this case such a payment could not be made until the United States claim was paid. By paying the United States as required under § 3466 there would be nothing left with which to pay Massachusetts. Hence there is no way by which a credit against Title IX taxes could be obtained.
The determination by the district court that the question was one of meeting alternative obligations was error. There was no such alternative obligation here. Section 3466 commanded the payment to the United States of debts due it and therefore there was no balance left to meet any state payment with which to obtain such credit.
The judgment of the District Court -is affirmed as to Title VIII taxes and capital stock taxes and is reversed as to Title IX taxes, and the case is remanded to the District Court .for judgment in conformity with this opinion.
“Sec. 3466. Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which, a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.”