A-55117, A-67978, FEBRUARY 3, 1936, 15 COMP. GEN. 681

A-55117,A-67978: Feb 3, 1936

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IS UNAFFECTED BY THE DECISION OF THE SUPREME COURT OF THE UNITED STATES HOLDING UNCONSTITUTIONAL THE EXACTION OF PROCESSING TAXES UNDER SAID ACT. MONEYS PAID AND PAYABLE THEREUNDER ARE FOR DEPOSITING IN THE TREASURY WITHOUT FURTHER DIMINUTION BECAUSE OF RENTAL OR BENEFIT PAYMENTS. THE MARKETING AGREEMENT WAS MADE EFFECTIVE AT 12:01 A.M. THIS TERMINATION WAS MADE PURSUANT TO REQUEST IN WRITING OF 75 PERCENT OF THE CONTRACTING DISTILLERS. A COPY OF THE MARKETING AGREEMENT IS ATTACHED HERETO. IS LESS THAN THE FAIR EXCHANGE VALUE FOR SUCH GRAIN OR PRODUCT. ARE REQUIRED TO BE USED IN MAKING RENTAL OR BENEFIT PAYMENTS OR OTHER DISBURSEMENTS UNDER THE ACT. A COPY OF THE AUDIT REPORT IS ENCLOSED HEREWITH.

A-55117, A-67978, FEBRUARY 3, 1936, 15 COMP. GEN. 681

GRAIN PARITY PAYMENTS - VOLUNTARY MARKETING AGREEMENT - AGRICULTURAL ADJUSTMENT ACT THE LIABILITY OF DISTILLERS FOR PARITY PAYMENTS ON GRAIN USED UNDER A VOLUNTARY MARKETING AGREEMENT FOR THE DISTILLED SPIRITS INDUSTRY, ENTERED INTO BETWEEN THE SECRETARY OF AGRICULTURE AND REPRESENTATIVES OF THAT INDUSTRY UNDER AUTHORITY OF THE AGRICULTURAL ADJUSTMENT ACT, 48 STAT. 34, FOR THE MAKING OF RENTAL OR BENEFIT PAYMENTS, ETC., WITH RESPECT TO GRAIN, IS UNAFFECTED BY THE DECISION OF THE SUPREME COURT OF THE UNITED STATES HOLDING UNCONSTITUTIONAL THE EXACTION OF PROCESSING TAXES UNDER SAID ACT. MONEYS PAID AND PAYABLE THEREUNDER ARE FOR DEPOSITING IN THE TREASURY WITHOUT FURTHER DIMINUTION BECAUSE OF RENTAL OR BENEFIT PAYMENTS.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, FEBRUARY 3, 1936:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF NOVEMBER 21, 1935, AS FOLLOWS:

PURSUANT TO AUTHORITY CONFERRED ON HIM BY SECTION 8 (2) OF AGRICULTURAL ADJUSTMENT ACT (PUBLIC, NO. 10, 73RD CONGRESS, APPROVED MAY 12, 1933),THE SECRETARY OF AGRICULTURE, ON DECEMBER 9, 1933, ENTERED INTO A VOLUNTARY MARKETING AGREEMENT FOR THE DISTILLED SPIRITS INDUSTRY WITH MEMBERS OF THAT INDUSTRY REPRESENTING A LARGE PROPORTION OF THE VOLUME OF THE BUSINESS. BY ITS TERMS, THE MARKETING AGREEMENT WAS MADE EFFECTIVE AT 12:01 A.M., DECEMBER 10, 1933. ON APRIL 17, 1934, THE SECRETARY, BY PROCLAMATION, TERMINATED THE MARKETING AGREEMENT, THE TERMINATION TO BE EFFECTIVE AT 12:01 A.M., APRIL 18, 1934. THIS TERMINATION WAS MADE PURSUANT TO REQUEST IN WRITING OF 75 PERCENT OF THE CONTRACTING DISTILLERS, SUCH PERCENTAGE BEING MEASURED BY THE VOLUME OF DISTILLED SPIRITS, AS PROVIDED IN ARTICLE IX, SECTION 1, SUBSECTION (C) OF THE SAID AGREEMENT. A COPY OF THE MARKETING AGREEMENT IS ATTACHED HERETO.

ARTICLE IV OF SAID MARKETING AGREEMENT PROVIDED:

"SECTION 1. EACH CONTRACTING DISTILLER AGREES TO PAY FOR ALL CEREAL GRAIN OR PRODUCTS THEREOF, USED BY HIM AFTER THE EFFECTIVE DATE OF THIS AGREEMENT, IN THE MANUFACTURE OF DISTILLED SPIRITS, A TOTAL AMOUNT PER UNIT NOT LESS THAN THE FAIR EXCHANGE VALUE THEREFOR. THE FAIR EXCHANGE VALUE SHALL BE PROMULGATED HEREUNDER BY THE SECRETARY FROM TIME TO TIME. THE FAIR EXCHANGE VALUE FOR CEREAL GRAINS SHALL BE AS DEFINED IN THE ACT; AND THE FAIR EXCHANGE VALUE FOR PRODUCTS THEREOF SHALL BE DETERMINED IN ACCORDANCE WITH CONVERSION FACTORS TO BE ESTABLISHED BY THE SECRETARY.

"SEC. 2. FOR THE PURPOSES OF THIS AGREEMENT THE SECRETARY SHALL PROMULGATE HEREUNDER FROM TIME TO TIME A CURRENT AVERAGE FARM PRICE FOR CEREAL GRAINS AND THEIR PRODUCTS. THE CURRENT AVERAGE FARM PRICE FOR CEREAL GRAINS SHALL BE DETERMINED AS PROVIDED IN THE ACT; AND A CURRENT AVERAGE FARM PRICE FOR THEIR PRODUCTS SHALL BE DETERMINED IN ACCORDANCE WITH CONVERSION FACTORS TO BE ESTABLISHED BY THE SECRETARY.

"SEC. 3. WHENEVER THE SUM OF (1) THE CURRENT AVERAGE FARM PRICE FOR ANY CEREAL GRAIN OR PRODUCT THEREOF USED BY CONTRACTING DISTILLERS, PLUS (2) THE PROCESSING OR OTHER TAX UNDER THE ACT, IF ANY, PAID WITH RESPECT THERETO OR WITH RESPECT TO A COMMODITY FROM WHICH PROCESSED OR DERIVED DIRECTLY OR INDIRECTLY, IS LESS THAN THE FAIR EXCHANGE VALUE FOR SUCH GRAIN OR PRODUCT, THE CONTRACTING DISTILLERS SHALL PAY THE AMOUNT OF SUCH DIFFERENCE (HEREINAFTER KNOWN AS THE PARITY PAYMENT) INTO THE TREASURY OF THE UNITED STATES OR SUCH OTHER DEPOSITORY AS MAY BE DESIGNATED BY REGULATIONS OF THE SECRETARY.

"SEC. 4. PAYMENTS UNDER THIS SECTION SHALL BE MADE AT SUCH TIMES AND IN SUCH MANNER, AND SHALL BE COMPUTED IN ACCORDANCE WITH SUCH REQUIREMENTS AS MAY BE PRESCRIBED BY REGULATIONS OF THE SECRETARY. SUCH AMOUNTS SHALL BE UTILIZED FOR RENTAL OR BENEFIT PAYMENTS OR OTHER DISBURSEMENTS UNDER THE ACT MADE WITH RESPECT TO GRAIN.

"SEC. 5. THIS ARTICLE SHALL NOT APPLY TO BARLEY MALT.'

PURSUANT TO THE FOREGOING ARTICLE, DISTILLERS OF WHISKEY PAID $939,424.55 TO THE SECRETARY AND DISTILLERS OF ALCOHOL FOR BEVERAGE PURPOSES PAID $137,519.20. THESE FUNDS, PURSUANT TO THE TERMS OF ARTICLE IV, SECTION 4 OF THE MARKETING AGREEMENT, ARE REQUIRED TO BE USED IN MAKING RENTAL OR BENEFIT PAYMENTS OR OTHER DISBURSEMENTS UNDER THE ACT, WITH RESPECT TO GRAIN.

SINCE THE TERMINATION OF THE MARKETING AGREEMENT, THE FIELD INVESTIGATION SECTION HAS BEEN MAKING AN AUDIT OF THE BOOKS OF EACH OF THE SIGNERS OF THE MARKETING AGREEMENT, TO RECONCILE THE TAX RETURNS. A COPY OF THE AUDIT REPORT IS ENCLOSED HEREWITH. PENDING FINAL DECISION AS TO THE EXACT STATUS OF THE FUND, ALL COLLECTIONS UNDER THE MARKETING AGREEMENT HAVE BEEN DEPOSITED IN A SPECIAL ACCOUNT IN THE TREASURY, DESIGNATED AS "8055, COLLECTIONS, DISTILLED SPIRITS INDUSTRY, PARITY PAYMENTS, TRUST FUND.'

IT SHOULD BE NOTED THAT WHEN THE FIRST OF THE PARITY PAYMENTS WAS RECEIVED BY THE SECRETARY OF AGRICULTURE, AND DEPOSITED IN THE SPECIAL ACCOUNT, YOU REQUESTED, ON MARCH 27, 1934, A STATEMENT AS TO WHY THE MONEYS SO RECEIVED SHOULD NOT BE TREATED AS TAXES, AND HANDLED AS SUCH IN ACCORDANCE WITH SECTION 12 (B) OF THE ACT. UNDER DATE OF APRIL 19, 1934, THE DEPARTMENT REPLIED, STATING IN EFFECT THAT THE FUNDS SO DEPOSITED WERE THE PROCEEDS OF A VOLUNTARY AGREEMENT ENTERED INTO BETWEEN THE SECRETARY OF AGRICULTURE AND THE DISTILLERS, PURSUANT TO SECTION 8 (2) OF THE ACT, AND HAD NO RELATION TO THE TAXES PROVIDED FOR IN SECTION 12 (B). THEREAFTER, YOUR OFFICE DID NOT FURTHER QUESTION THE DEPOSIT OF THE FUNDS IN THE SPECIAL ACCOUNT.

THE AUDIT BEING MADE SHOWS THAT CERTAIN DISTILLERS HAVE MADE PARITY PAYMENTS IN EXCESS OF THE AMOUNT DUE ON THE AMOUNT OF GRAIN ACTUALLY USED, AND THAT THEY ARE PREPARING TO FILE, OR HAVE FILED, CLAIMS FOR REFUNDS. IT IS ESTIMATED THAT, AFTER ALL REFUNDS ARE MADE, THERE WILL BE $1,056,543.34 ON DEPOSIT IN THE SPECIAL ACCOUNT AND $89,131.17 STILL OWING, TO COLLECT WHICH ACTIONS ARE BEING STARTED.

IN VIEW OF THE FOREGOING FACTS, YOUR OPINION IS RESPECTFULLY REQUESTED AS TO (1) WHETHER OR NOT THE FUNDS COLLECTED PURSUANT TO ARTICLE 4 OF THE MARKETING AGREEMENT ARE TO BE CONSIDERED GOVERNMENT FUNDS, OR ARE THEY TO BE CONSIDERED AS SPECIAL FUNDS IN THE CUSTODY OF THE SECRETARY OF AGRICULTURE FOR PARTICULAR PURPOSES, (2) WHETHER THOSE DISTILLERS WHO HAVE MADE PAYMENTS IN EXCESS OF THE AMOUNTS ACTUALLY DUE MAY BE SO ADVISED, NOTWITHSTANDING THE PROVISIONS OF SECTION 198, TITLE 18, U.S.C. (R.S. 5498; CRIMINAL CODE 109), IN ORDER THAT THEY MAY FILE CLAIMS, AND (3) WHETHER SUCH CLAIMS, WHEN AND IF FILED, SHOULD BE CONSIDERED BY THE SECRETARY OF AGRICULTURE, OR HANDLED DIRECTLY BY THE COMPTROLLER GENERAL.

WHILE THE AGREEMENT BETWEEN THE SECRETARY OF AGRICULTURE AND THE DISTILLERS, PARTIES THERETO, WHICH WAS OPERATIVE FROM DECEMBER 10, 1933, TO APRIL 18, 1934, WAS PREDICATED UPON SECTION 8 (2) OF THE AGRICULTURAL ADJUSTMENT ACT OF MAY 12, 1933 (48 STAT. 34), THERE WAS INVOLVED, ALSO, THE UNSATISFACTORY CONDITION THEN EXISTING AND THAT ANTICIPATED FOLLOWING REPEAL OF THE EIGHTEENTH AMENDMENT OF THE CONSTITUTION OF THE UNITED STATES, OF CONCERN TO THE DISTILLING INDUSTRY, AND A PLAN OF CORRECTION OR CONTROL BASED UPON THE ISSUANCE BY THE GOVERNMENT OF PERMITS TO OPERATE LIMITED TO THOSE DISTILLERS PARTICIPATING IN THE AGREEMENT. THE ARRANGEMENT WAS VOLUNTARY AND THE VALIDITY THEREOF WITH RESPECT TO THE LIABILITY OF THE DISTILLERS THEREUNDER APPEARS UNAFFECTED BY THE DECISION OF JANUARY 6, 1936, OF THE SUPREME COURT OF THE UNITED STATES IN THE BUTLER CASE, NOTWITHSTANDING IT WAS STATED IN SECTION 4 OF ARTICLE IV OF THE AGREEMENT THAT THE MONEYS PAID TO THE UNITED STATES WOULD BE UTILIZED FOR RENTAL AND BENEFIT PAYMENTS OR OTHER DISBURSEMENTS UNDER THE AGRICULTURAL ADJUSTMENT ACT WITH RESPECT TO GRAIN, AND RENTAL AND BENEFIT PAYMENTS UNDER THE ACT ARE NOW PROHIBITED BY THE DECISION, SUPRA.

THE AGREEMENT WAS CONSIDERED BY THE PARTIES TO BE MUTUALLY BENEFICIAL, AN AID TO AGRICULTURE THROUGH REGULATION OF PRICES FOR AGRICULTURAL COMMODITIES USED BY THE DISTILLERS, AND OF ADVANTAGE TO THE DISTILLERS BECAUSE OF THE OPERATING PERMIT FEATURE. IT APPARENTLY SERVED ITS PURPOSE AND IS ENDED AND THE MONEYS PAID AND PAYABLE TO THE UNITED STATES THEREUNDER ARE PROPER FOR DEPOSITING IN THE TREASURY. WHILE THE AGREEMENT CONTEMPLATED USES OF THE MONEYS PAID TO THE UNITED STATES FOR CERTAIN PAYMENTS SINCE DETERMINED BY THE SUPREME COURT OF THE UNITED STATES TO BE IN CONTRAVENTION OF THE CONSTITUTION, THE APPLICABLE LAWS DISCLOSE NO AUTHORITY IN THE CONTRACTING PARTIES TO DETERMINE FOR THE GOVERNMENT TO WHAT USES THE MONEYS DERIVED BY THE GOVERNMENT IN SUCH CIRCUMSTANCES SHOULD BE DEVOTED, AND WHILE ANY SUCH USES PRIOR TO JANUARY 6, 1936, IF OTHERWISE CORRECT, NEED NOT NOW BE DISTURBED, CREDIT MAY NOT BE ALLOWED FOR FURTHER SIMILAR DISBURSEMENTS.

WITH RESPECT TO THE CONDITION OF UNDERPAYMENTS AND OVERPAYMENTS FOR THE PERIOD OF THE AGREEMENT, IT WOULD APPEAR THAT ADJUSTMENTS ARE JUSTIFIED AS REQUIRED BY THE FACTS, THAT IS, COLLECTION SHOULD BE MADE OF ANY BALANCES DUE AND, IN THE EVENT OF FAILURE OR REFUSAL TO REMIT BALANCES DUE, THERE SHOULD BE FOLLOWED THE PROCEDURE PRESCRIBED IN 7 COMP. GEN. 193 FOR COLLECTION THEREOF, AND REFUNDS MAY BE MADE IF CLAIMS THEREFOR ARE DULY FILED AND SUPPORTED--- SUCH CLAIMS TO BE SUBMITTED TO THIS OFFICE FOR PREAUDIT ACTION THEREON. THERE WOULD APPEAR TO BE NO DUTY ON YOUR DEPARTMENT TO ADVISE DISTILLERS WHO HAVE MADE PAYMENTS IN EXCESS OF THE AMOUNTS ACTUALLY DUE, AND IN THIS CONNECTION THERE ARE FOR CONSIDERATION THE PROVISIONS OF SECTION 109 OF THE ACT OF MARCH 4, 1909 (35 STAT. 1107).

FOR A REASONABLE PERIOD IN WHICH TO MAKE SUCH ADJUSTMENTS, UNLESS OTHERWISE DIRECTED BY LEGISLATIVE ACTION, THE MONEYS MAY REMAIN IN THE FUND, 8055,"COLLECTIONS, DISTILLED SPIRITS INDUSTRY, PARITY PAYMENTS, TRUST FUND.'