71 F. Supp. 944 | D.D.C. | 1947
Plaintiff is a manufacturer of a graphite product known as “graphitar.” It is used particularly in the manufacture of marine and aircraft engines. In 1943 the demand for graphitar began to exceed the capacity of plaintiff’s plant. Accordingly, plans were made for a factory addition and for the necessary machinery and equipment therein required. On June 27, 1943, plaintiff filed an application for a certificate of necessity under Section 124 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev. Code, § 124, in order that it might secure a deduction for amortization of the entire cost of the factory addition upon its Federal income and excess profit tax returns, and on October 28, 1943, á necessity certificate was issued therefor.
On May 29, 1944, plaintiff filed an application for a necessity certificate covering facilities (machinery, etc.) for use in the factory, which had then been constructed. Thereafter plaintiff received a communication dated July 17, 1944, and entitled “letter of predetermination,” stating that these facilities were eligible for tax amortization on a 35% basis, provided the date of acquisition was subsequent to the date of such letter. On July 27, 1944, plaintiff filed an affidavit showing that a portion of such facilities had been acquired prior to the date of the letter of predetermination and that the balance had been acquired thereafter; whereupon there was issued to the plaintiff a necessity certificate for that part of the facilities listed as being received after the date .of the letter of predetermination, up to 35% of their cost. Thereafter plaintiff demanded the issuance of a certificate which would include the entire cost of all the facilities, irrespective of the date
Defendant first moved to dismiss the complaint, and subsequently moved for a summary judgment. The action is before me for decision on these motions.
The issuance of this certificate of necessity is authorized by Section 124 of the Internal Revenue Code, 26 U.S.C.A. Int. Rev. Code, § 124. Designed to stimulate the investment of private capital in defense facilities, this statute authorized the amortization of their cost as a tax deduction over a period of five years or less.
Plaintiff contends that defendant’s predecessor, the War Production Board,
The applicable provisions of this statute are contained in Section 124(f) of the Internal Revenue Code, reading, so far as material, as follows: “(f) * * * In determining * * * the adjusted basis of an emergency facility—
“(1) There shall be included only so much of the amount otherwise constituting such adjusted basis as is properly attributable to such * * * acquisition after December 31, 1939, as either the Secretary of War or the Secretary of the Navy has certified as necessary in the interest of national defense during the emergency period, which certification shall be under such regulations as may be prescribed from time to time by the Secretary of War and the Secretary of the Navy, with the approval of the President. * * *
“(3) The certificate provided for in paragraph (1) shall have no effect unless an application therefor is filed before the expiration of six months after the beginning of such construction, reconstruction, erection, or installation or the date of such acquisition * * A”
The applicable provisions of the Regulations
“(3) (c) (vi) Government and privately financed facilities. Necessity Certificates will be issued only where it is to the advantage of the government that the facilities in question be privately financed.
“(4) Application must be filed before construction is begun or date of acqusition. The construction, reconstruction, erection, installation or acquisition of a facility will not be deemed necessary within the terms of these regulations unless a determination of necessity is made by the certifying authority prior to the beginning of the construction, reconstruction, erection, installation or date of acquisition.”
It will be noted that Section 4 of the Regulations, above quoted, provides that the acquisition of a facility will not be deemed necessary unless a determination of necessity is made prior to the date of acquisition. Defendant’s action in limiting the certificate of necessity to the facilities acquired after the letter of predetermination appears to be authorized by this regulation, and plaintiff does not contend to the contrary. Instead, it places its reliance upon the claim that the regulation contravenes the statute. The question, therefore, is whether the six-month period may be shortened by regulation, the effect of which was to apply a brake on over-
In respect of the second contention of plaintiff, that the statute does not authorize defendant to limit the amortization deduction to 35% of the cost, it should be pointed out that the statute requires that there shall be included only so much of the amount as is properly attributable to acquisition after December 31, 1939, as either the Secretary of War or the Secretary of the Navy [later Chairman, War Production Board] has certified as necessary in the interest of national defense, which certification shall be under such regulations as may be prescribed from time to time by the executive officials with the approval of the President. Among the regulations prescribed is Section (3) (c) (vi), supra, which provides that necessity certificates will be issued only where it is to the advantage of the government that the facilities be privately financed. Certification under this statute, as implemented by this regulation, clearly involved an exercise of discretion, which will not be set aside unless unreasonable, arbitrary or capricious.
Defendant’s immediate predecessor was the Temporary Controls Administrator, whose predecessors were, in the order named, Civilian Production Administrator and the War Production Board, the Chairman of which was vested with the functions of the Secretary of War and the Secretary of the Navy under Section 324 of the Internal Revenue Code. Executive Order No. 9841, 50 U.S.C.A. Appendix, § 601 note, April 23, 1947; Executive Order No. 9809, 50 U.S.C.A, Appendix, § 601 note, December 12,1946; Executive Order No. 8638, 50 U.S.O.A. Appendix, § 601 note, October 4, 1935; Executive Order No. 9400, 50 U.S.O.A. Appendix, § 601 note, December 17, 1943.
Regulations governing tbe issuance of necessity certificates under Section 124 (f) of the Internal Revenue Code prescribed by the Chairman of tbe War Production Board with the approval of the President, dated December 17, 1943. 8 F.R. 16964.
Adams v. Nagle, 303 U.S. 532, 542, 58 S.Ct. 687, 82 L.Ed. 999; Wilbur v. United States ex rel Kadrie, 281 U.S. 206, 219, 50 S.Ct. 320, 74 L.Ed. 809; Work v. United States ex rel Rives, 267 U.S. 175, 182, 183, 45 S.Ct. 252, 69 L. Ed. 561; United States ex rel Riverside Oil Co. v. Hitchcock, 190 U.S. 316, 323, 23 S.Ct. 698, 47 L.Ed. 1074; Miomas v. Vinson, 80 U.S.App.D.C. 346, 349, 153 F.2d 636; Red Canyon Sheep Co. v. Ickes, 69 App.D.C. 27, 41, 98 F.2d 308; United States ex rel Corbin v. Doyle, 68 App.D.C. 100, 104, 93 F.2d 646; United States ex rel White v. Coe, 68 App.D.C. 218, 220, 95 F.2d 347; Ickes v. Pattison, 65 App.D.C. 116, 119, 80 F.2d 708; Reichelderfer v. Johnson, 63 App.D.C. 334, 72 F.2d 552; Stockey v. Wilbur, 61 App.D.C. 117, 118, 58 F.2d 522.
Wilbur v. United States ex rel Kadrie, supra; Work v. United States ex rel Rives, supra; United States ex rel Riverside Oil Co. v. Hitchcock, supra; Calf Leather Tanners Ass’n v. Morgenthau, 65 App.D.C. 93, 98, 99, 80 F.2d 536; United States ex rel Bowling-v. Hines, 60 App.D.C. 180, 181, 50 F.2d 330; Mc-Carl v. Rogers, 60 App.D.C. 111, 48 F. 2d 1023; McCarl v. Walters, 59 App. D.C. 237, 238, 38 F.2d 942.