292 F. 633 | S.D.N.Y. | 1923
This is a suit to recover the sum of $183,-844.14, income and excess-profits taxes assessed against the plaintiff for the fiscal year ending- March 31, 1919, under sections 230, 233, and 301 of the Revenue Act of 1918 (Comp. St. Ann. Supp. 1919, §§ 6336%nn, 6336%p, 6336T/isaa),
It appears from the complaint that during the year in question the plaintiff was engaged in the business of exporting goods from the United States and of selling such goods in foreign countries. The total gross business of the plaintiff for the period was $6,435,512.69, of
In the light of the decision in Peck & Co. v. Lowe, Collector, 247 U. S. 165, 38 Sup. Ct. 432, 62 L. Ed. 1049, in which the Supreme Court held, under the Income Tax Eaw of 1913, that income of domestic corporations derived from the business of export was within the taxing power of Congress and was not in violation of article 1, section 9, clause 5, of the Constitution, plaintiff in its brief has abandoned its attack on these taxes as in violation of this provision of the Constitution. It now concentrates its attack upon the law on the ground that, as interpreted by the Attorney General (32 Op. Attys. Gen. 336), and as enforced by the Treasury it deprives the plaintiff of property without due process of law in violation of the Eifth Amendment, because it imposes upon the plaintiff’s business discriminatory and unequal burdens which are not imposed upon foreign corporations similarly situated.
It is admitted by the government that the acts of 1909 (36 Stat. 11) and 1913. (38 Stat. 166, 172), the wording of which differs slightly from that of the act of 1918, were in practice applied, at least to some extent, to foreign corporations in respect of income derived from the sale in foreign countries of goods manufactured or acquired in the United States.
There is, as is now conceded, no question as to the power of Congress to tax the net income of domestic corporations derived from their export business. The question as to how far it is wise and proper to extend our taxing laws to foreign corporations that manufacture or acquire goods in this country, and sell them abroad, involves many economic and political considerations. These are peculiarly within the province of Congress, not the courts. It is perhaps inevitable not only that the rate of taxation should vary in different countries, but that
“A case where although there was a- seeming exercise of the taxing power, the act complained of was so arbitrary as to constrain to the conclusion that it was not the exertion of taxation, but a confiscation of property; that is, a taking of the same in violation of the fifth amendment, or, what is equivalent thereto, was so wanting in basis for classification as to produce such a gross and patent inequality as to inevitably lead to the same conclusion.”
In La Belle Iron Works v. United States, 256 U. S. 377, 392, 393, 41 Sup. Ct. 528, 532 (65 L. Ed. 998) the court again points out:
“The Fifth Amendment has no equal protection clause, and the only rule of uniformity prescribed with respect to duties, imposts, and excises laid by Congress is the territorial uniformity required by article 1, § 8. * ♦ * The difficulty of adjusting any system of taxation so as to render it precisely equal in its bearing is proverbial, and such nicety is not even required of the states under the equal protection clause, much less of Congress under the more general requirement of due process of law in taxation. * * * The act treats all corporations and partnerships alike, so far as they are similarly circumstanced. * * . * If in its application the tax in particular instances may seem to bear upon one corporation more than upon another, this is due to differences in their circumstances, not to any uncertainty or want of generality in the tests applied.”
Defendant’s motion for judgment on the pleadings is granted.
The pertinent parts of the Revenue Act of 1918 here involved are:
gee. 230. (a) That, in lieu of the taxes imposed by section 10 of the Revenue Act of 1916, as amended by the Revenue Act of 1917, and by section 4 of the Revenue Act of 1917, there shall be levied, collected, and paid for each taxable year upon the net income of every corporation a tax at the following rates: ' *
(1) For the calendar year 1918, 12 per centum of the amount of the net income in excess of the credits provided in section 236; and
(2) For each calendar year thereafter, 10 per centum of such excess amount.
Sec. 233. (a) That in the case of a corporation subject to the tax imposed by section 230 the term ‘gross income’ means the gross income as defined in section 213, except that: * * *
(b) In the case of a foreign corporation gross income includes only the gross income from sources within the United States, including the interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, dividends from resident corporations, and including all amounts received (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States.
Sec. 301. (a) That in lieu of the tax imposed by title II of the Revenue Act of 1917 but in addition to the other taxes imposed by this act, there shall be levied, collected, and paid for the taxable year 1918 upon the net income of •every corporation a tax equal to the sum of the following: * * *
It may be noted in passing that under section 217 (e) of the Revenue Act of 1921 (42 Stat. 245), income from the sale of goods "produced in whole or in part within and sold without the United States is to be treated as derived partly from sources without the United States, but, that income derived from the purchase of goods within and their sale without the United States is to be treated as derived entirely from the country in. which sold.