B-153789, SEPTEMBER 18, 1964, 44 COMP. GEN. 154

B-153789: Sep 18, 1964

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SOCIAL SECURITY - CIVILIAN EMPLOYEES - WITHHOLDING ERRORS - NOTICE REQUIREMENT THE ERRONEOUS WITHHOLDING OF SOCIAL SECURITY TAXES BY A GOVERNMENT AGENCY FROM THE SALARY OF A POSTAL EMPLOYEE COVERED UNDER THE CIVIL SERVICE RETIREMENT ACT THAT WAS NOT DISCOVERED UNTIL AFTER THE EXPIRATION OF THE STATUTORY TIME FOR ADJUSTMENTS MUST BE TREATED IN THE SAME WAY AS AN ERROR. A REFUND OF AN ERRONEOUSLY WITHHELD SOCIAL SECURITY TAX FROM THE SALARY OF A POSTAL EMPLOYEE COVERED BY THE CIVIL SERVICE RETIREMENT ACT THAT WAS NOT MADE UNTIL AFTER THE EXPIRATION OF THE STATUTORY PERIOD PRESCRIBED FOR THE ADJUSTMENT OF SUCH TAXES IS NOT A PROPER REFUND. ALTHOUGH AN ACCOUNTABLE OFFICER OF THE POST OFFICE DEPARTMENT WHO REFUNDED AN ERRONEOUSLY WITHHELD SOCIAL SECURITY TAX TO THE WIDOW OF A DECEASED POSTAL EMPLOYEE PURSUANT TO A DIRECTIVE FROM THE CIVIL SERVICE COMMISSION WHEN THE ERROR WAS DISCOVERED AFTER THE EXPIRATION OF THE STATUTORY PERIOD PRESCRIBED FOR SUCH TAX ADJUSTMENTS MAY NOT BE AFFORDED RELIEF ON THE MERE FACT THAT THE REFUND WAS MADE AT THE DIRECTION OF THE CIVIL SERVICE COMMISSION.

B-153789, SEPTEMBER 18, 1964, 44 COMP. GEN. 154

SOCIAL SECURITY - CIVILIAN EMPLOYEES - WITHHOLDING ERRORS - STATUTES OF LIMITATIONS APPLICABILITY. SOCIAL SECURITY - CIVILIAN EMPLOYEES - WITHHOLDING ERRORS - REFUND PROPRIETY. POST OFFICE DEPARTMENT - EMPLOYEES - LIABILITY RELIEF - ERRONEOUS SOCIAL SECURITY TAX WITHHOLDING. SOCIAL SECURITY - CIVILIAN EMPLOYEES - WITHHOLDING ERRORS - NOTICE REQUIREMENT THE ERRONEOUS WITHHOLDING OF SOCIAL SECURITY TAXES BY A GOVERNMENT AGENCY FROM THE SALARY OF A POSTAL EMPLOYEE COVERED UNDER THE CIVIL SERVICE RETIREMENT ACT THAT WAS NOT DISCOVERED UNTIL AFTER THE EXPIRATION OF THE STATUTORY TIME FOR ADJUSTMENTS MUST BE TREATED IN THE SAME WAY AS AN ERROR, WHETHER IN LAW OR FACT, MADE BY A PRIVATE EMPLOYER FOR PURPOSES OF THE STATUTES OF LIMITATION, AND, THEREFORE, SUCH STATUTES OF LIMITATION PRECLUDE A GOVERNMENT AGENCY FROM MAKING AN ADJUSTMENT FOR THE ERRONEOUS WITHHOLDING ACTION AFTER THE EXPIRATION OF THE PRESCRIBED PERIOD. A REFUND OF AN ERRONEOUSLY WITHHELD SOCIAL SECURITY TAX FROM THE SALARY OF A POSTAL EMPLOYEE COVERED BY THE CIVIL SERVICE RETIREMENT ACT THAT WAS NOT MADE UNTIL AFTER THE EXPIRATION OF THE STATUTORY PERIOD PRESCRIBED FOR THE ADJUSTMENT OF SUCH TAXES IS NOT A PROPER REFUND. ALTHOUGH AN ACCOUNTABLE OFFICER OF THE POST OFFICE DEPARTMENT WHO REFUNDED AN ERRONEOUSLY WITHHELD SOCIAL SECURITY TAX TO THE WIDOW OF A DECEASED POSTAL EMPLOYEE PURSUANT TO A DIRECTIVE FROM THE CIVIL SERVICE COMMISSION WHEN THE ERROR WAS DISCOVERED AFTER THE EXPIRATION OF THE STATUTORY PERIOD PRESCRIBED FOR SUCH TAX ADJUSTMENTS MAY NOT BE AFFORDED RELIEF ON THE MERE FACT THAT THE REFUND WAS MADE AT THE DIRECTION OF THE CIVIL SERVICE COMMISSION, WHICH AGENCY DOES NOT HAVE JURISDICTION OVER SOCIAL SECURITY TAXES, IF, UNDER 39 U.S.C. 2401, THE POSTMASTER GENERAL DETERMINES THAT RELIEF IS WARRANTED AND FURNISHES THE BASIS FOR THE DETERMINATION, TOGETHER WITH THE DETAILS OF THE TRANSACTION, THE REQUEST FOR RELIEF WILL BE GIVEN CONSIDERATION. A REQUIREMENT THAT A DEPARTMENT NOTIFY THE SOCIAL SECURITY ADMINISTRATION WHEN IT DISCOVERS AN ERROR IN WITHHOLDING SOCIAL SECURITY TAXES FROM THE SALARY OF AN EMPLOYEE COVERED UNDER THE CIVIL SERVICE RETIREMENT ACT AFTER THE EXPIRATION OF THE STATUTORY PERIOD PRESCRIBED IN THE INTERNAL REVENUE CODE FOR ADJUSTMENTS WOULD SERVE NO USEFUL PURPOSE FOR THE REASON THAT THE SOCIAL SECURITY ADMINISTRATION IS SUBJECT TO A SIMILAR STATUTORY RESTRICTION ON THE MODIFICATION OF ITS RECORDS.

TO THE POSTMASTER GENERAL, SEPTEMBER 18, 1964:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 19, 1964, SUBMITTING FOR OUR CONSIDERATION FOUR QUESTIONS ARISING IN THE ADJUSTMENT OF AGENCY ERROR IN TAX RETURNS UNDER THE FEDERAL INSURANCE CONTRIBUTIONS ACT, 26 U.S.C. 3101.

FEDERAL INSURANCE CONTRIBUTIONS ACT (SOCIAL SECURITY) TAXES WERE WITHHELD DURING THE CALENDAR YEAR 1955 FROM THE COMPENSATION OF MR. FREDERICK D. BURNEY, A DECEASED EMPLOYEE OF THE CLEVELAND POST OFFICE. AS MR. BURNEY HAD RETAINED COVERAGE UNDER THE CIVIL SERVICE RETIREMENT ACT, 5 U.S.C. 2251, ON HIS APPOINTMENT IN THE CLEVELAND POST OFFICE, THE WITHHOLDING OF SOCIAL SECURITY TAXES FROM HIS SALARY DURING 1955 WAS IN ERROR. SEE INTERNAL REVENUE CODE OF 1954, SECTION 3121 (B) (6) (A), TITLE 26, UNITED STATES CODE. SEE, ALSO, SOCIAL SECURITY ACT, SECTION 210 (A) (6) (A), 42 U.S.C. 410 (A) (6) (A). THE IMPROPER WITHHOLDING CAME TO LIGHT ON SEPTEMBER 20, 1962, WHEN THE BUREAU OF RETIREMENT AND INSURANCE OF THE CIVIL SERVICE COMMISSION SENT A TELEGRAM TO THE REGIONAL CONTROLLER, POST OFFICE DEPARTMENT, CINCINNATI, OHIO, DIRECTING THAT "IF F.I.C.A. WAS WITHHELD BEGINNING 1/1/55 AMOUNT SHOULD BE REFUNDED.'

PURSUANT TO THE DIRECTIVE OF THE CIVIL SERVICE COMMISSION A REFUND OF $88.92 WAS MADE TO MR. BURNEY'S WIDOW, AND THE REGIONAL CONTROLLER, POST OFFICE DEPARTMENT, CLAIMED AN ADJUSTMENT IN A SUBSEQUENT RETURN TO THE INTERNAL REVENUE DISTRICT DIRECTOR AT CINCINNATI, OHIO. THE DISTRICT DIRECTOR DISALLOWED THE ADJUSTMENT IN VIEW OF THE THREE-YEAR LIMITATION PRESCRIBED BY SECTION 6511, INTERNAL REVENUE CODE, TITLE 26, UNITED STATES CODE, FOR THE ALLOWANCE OF CREDITS OR REFUNDS.

IN THE PRESENT SITUATION, AND TO ESTABLISH A BASIS FOR FUTURE ACTION, THE FOLLOWING QUESTIONS WERE SUBMITTED:

1. ARE THE STATUTES OF LIMITATIONS EMBODIED IN THE INTERNAL REVENUE CODE STRICTLY ENFORCEABLE AGAINST ANOTHER AGENCY OF THE FEDERAL GOVERNMENT IF THE REQUIRED ADJUSTMENT WAS CAUSED BY AN ERRONEOUS ACTION ON THE PART OF A GOVERNMENTAL AGENCY?

2. ARE REFUNDS, DIRECTED BY THE CIVIL SERVICE COMMISSION AND CONSUMMATED BY THE POST OFFICE REGIONAL CONTROLLER AS IN THE CASE OF FREDERICK D. BURNEY, PROPER?

3. IF NOT, MAY RELIEF BE OBTAINED ON BEHALF OF THE ACCOUNTABLE OFFICERS IN THIS INSTANCE IN WHICH REFUND WAS MADE IN GOOD FAITH IN RELIANCE UPON A DIRECTION RECEIVED FROM THE CIVIL SERVICE COMMISSION?

4.IF ADJUSTMENTS ARE PRECLUDED AFTER THREE YEARS, BY THE STATUTE OF LIMITATIONS, DO WE HAVE A RESPONSIBILITY TO ADVISE THE SOCIAL SECURITY ADMINISTRATION THAT THE PERIOD COVERED BY THAT WITHHOLDING IS NOT PROPERLY CREDITABLE FOR THE RECEIPT OF BENEFITS FROM THE SOCIAL SECURITY ADMINISTRATION? IF SO, IN WHAT MANNER?

IN OUR CONSIDERATION OF THE ABOVE QUESTIONS WE REQUESTED, AS YOU WERE PREVIOUSLY ADVISED, THE VIEWS AND COMMENTS OF THE CIVIL SERVICE COMMISSION, THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, AND THE TREASURY DEPARTMENT.

OF PARTICULAR SIGNIFICANCE WITH REFERENCE TO THE FIRST TWO QUESTIONS ARE THE COMMENTS OF THE GENERAL COUNSEL OF THE TREASURY. AFTER REFERRING TO SECTIONS 6511 (A), 6511 (B), 6513 (C) AND 6514 OF THE INTERNAL REVENUE CODE, TITLE 26, U.S.C. HE STATED:

WE HAVE EXPLORED ALL THE POSSIBILITIES AND WE REGRET THAT WE HAVE BEEN UNABLE TO FIND ANY LEGAL BASIS FOR A WAIVER OF THE STATUTE OF LIMITATIONS ON BEHALF OF THE POST OFFICE DEPARTMENT. PURSUANT TO THE STATUTORY PROVISIONS, IN THE EVENT THE RETURNS ON FORM 941 FOR THE CALENDAR YEAR 1955, REFERRED TO ABOVE, WERE TIMELY FILED BY THE DEPARTMENT, WE MUST CONCLUDE THAT THE STATUTORY PERIOD OF LIMITATION FOR THE FILING OF A CLAIM FOR REFUND OR CREDIT OF FEDERAL INSURANCE CONTRIBUTIONS ACT TAXES ERRONEOUSLY REPORTED THEREON EXPIRED ON APRIL 15, 1959. ACCORDINGLY, DISALLOWANCE BY THE DISTRICT DIRECTOR OF INTERNAL REVENUE, CINCINNATI, OF THE CREDITS WHICH WERE NOT CLAIMED WITHIN THE PRESCRIBED STATUTORY PERIOD IS REQUIRED BY THE APPLICABLE LAW AND REGULATIONS.

WE REGRET THAT WE ARE UNABLE TO BE OF ASSISTANCE TO THE POST OFFICE DEPARTMENT IN THIS CASE, BUT, AS YOU UNDOUBTEDLY REALIZE, THE INTERNAL REVENUE SERVICE HAS NO AUTHORITY TO WAIVE THE BAR OF THE STATUTE OF LIMITATIONS, EVEN FOR FEDERAL GOVERNMENT AGENCIES.

WE NEED NOT BE CONCERNED HEREIN WITH THE APPLICABILITY OF SECTION 6406, INTERNAL REVENUE CODE, LIMITING REVIEW OF TREASURY DECISIONS ON CLAIMS UNDER THE INTERNAL REVENUE LAWS, AS WE ARE PERSUADED OF THE CORRECTNESS OF THE POSITION OF THE GENERAL COUNSEL OF THE TREASURY. IN THE CONTEXT OF THE LEGISLATIVE SCHEME OF THE FEDERAL INSURANCE CONTRIBUTIONS ACT COVERING GOVERNMENT AGENCIES AS WELL AS PRIVATE EMPLOYERS, WE PERCEIVE NO VALID BASIS FOR DISTINGUISHING AN ERROR, WHETHER IN LAW OR FACT, OF A GOVERNMENT AGENCY FROM THAT OF A PRIVATE EMPLOYER FOR THE PURPOSE OF THE STATUTORY RESTRICTIONS ON ADJUSTMENTS. ACCORDINGLY, YOU ARE ADVISED WE HOLD THE OPINION THAT THE FIRST QUESTION, WITH REFERENCE TO SOCIAL SECURITY TAXES, IS ANSWERABLE IN THE AFFIRMATIVE.

AND WHERE, AS IN THE CASE OF FREDERICK D. BURNEY, A CLAIM FOR ERRONEOUSLY WITHHELD SOCIAL SECURITY TAXES IS BARRED BY STATUTE, A REFUND BY THE EMPLOYING GOVERNMENT AGENCY WOULD NOT BE PROPER. SEE SECTIONS 3102, 3123, INTERNAL REVENUE CODE. THE SECOND QUESTION IS THEREFORE ANSWERED IN THE NEGATIVE. WE MAY ADD THAT THE CIVIL SERVICE COMMISSION HAS INFORMED US THAT IN THE FUTURE, ITS NOTICE TO AGENCIES OF ERROR IN THE COLLECTION OF FEDERAL INSURANCE CONTRIBUTIONS ACT TAXES FROM EMPLOYEES COVERED BY THE CIVIL SERVICE RETIREMENT SYSTEM WILL NO LONGER DIRECT THAT REFUND BE MADE.

THE THIRD QUESTION INQUIRES WHETHER RELIEF MAY BE OBTAINED ON BEHALF OF THE ACCOUNTABLE OFFICERS WHO EFFECTED THE REFUND IN THE BURNEY CASE.

WE ASSUME THAT YOU ARE REFERRING TO RELIEF UNDER THE PROVISIONS OF 39 U.S.C. 2401. THOSE PROVISIONS AUTHORIZE US TO GRANT RELIEF ONLY AFTER A DETERMINATION HAS BEEN MADE BY YOU THAT THE INTERESTS OF YOUR DEPARTMENT REQUIRE THE EXERCISE OF YOUR POWERS OVER THE LIABILITY OF THE ACCOUNTABLE OFFICER. IN THE ABSENCE OF SUCH A DETERMINATION, NO RELIEF MAY BE OBTAINED. WE ARE NOT AWARE OF THE BASIS UPON WHICH YOU WOULD MAKE SUCH A DETERMINATION IN THIS CASE BUT WE ARE NOT CONVINCED THAT THE MERE FACT THAT THE REFUND OF THE F.I.C.A. TAXES WAS MADE AT THE DIRECTION OF THE CIVIL SERVICE COMMISSION IS SUFFICIENT SINCE THAT COMMISSION HAS NO JURISDICTION IN THE MATTER. IF YOU MAKE SUCH A DETERMINATION, HOWEVER, WE WOULD NOT OBJECT TO ENTERTAINING A SPECIFIC REQUEST FOR RELIEF ACCOMPANIED BY A MORE DETAILED ACCOUNT OF THE TRANSACTION, INCLUDING A DESIGNATION OF THE ACCOUNTABLE OFFICERS INVOLVED, A REFERENCE TO THE VOUCHER ON WHICH PAYMENT WAS MADE, AND THE BASIS UPON WHICH YOUR DETERMINATION WAS MADE.

THE FOURTH QUESTION INQUIRES, IF TAX ADJUSTMENTS ARE PRECLUDED BY THE 3- YEAR STATUTE OF LIMITATIONS OF THE INTERNAL REVENUE CODE, DOES THE POST OFFICE DEPARTMENT HAVE A RESPONSIBILITY TO ADVISE THE SOCIAL SECURITY ADMINISTRATION THAT THE PERIOD COVERED BY THE WITHHOLDING IS NOT PROPERLY CREDITABLE FOR THE RECEIPT OF BENEFITS FROM THE SOCIAL SECURITY ADMINISTRATION. IN THE COMMENTS RECEIVED FROM THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE THERE WERE THOSE OF THE COMMISSIONER OF SOCIAL SECURITY WHICH WERE SPECIFICALLY DIRECTED TO THIS PROBLEM. THE COMMISSIONER STATED:

THE SOCIAL SECURITY ACT AS AMENDED AND THE INTERNAL REVENUE CODE BOTH CONTAIN A STATUTE OF LIMITATIONS APPLICABLE IN LIKE MANNER TO FEDERAL AS WELL AS PRIVATE EMPLOYERS CHARGED WITH THE RESPONSIBILITY OF KEEPING RECORDS, FILING RETURNS AND MAKING TAX CONTRIBUTIONS FOR FEDERAL INSURANCE CONTRIBUTIONS ACT PURPOSES. IN GENERAL, THE TWO STATUTES HAVE THE SAME TIME LIMITATIONS. THERE ARE EXCEPTIONS, HOWEVER, TO BE BOTH STATUTES AND UNDER CERTAIN CIRCUMSTANCES, THEREFORE, CHANGES MAY BE PERMITTED UNDER ONE STATUTE AND NOT UNDER THE OTHER.

SECTION 205 (C) (1) (B) OF THE SOCIAL SECURITY ACT AS AMENDED DEFINES THE TIME LIMITATION IN WHICH A CHANGE MAY BE MADE IN THE RECORD OF THE EARNINGS OF AN INDIVIDUAL FOR ANY YEAR AS THREE YEARS, THREE MONTHS AND FIFTEEN DAYS AFTER THE YEAR IN WHICH THE "WAGES" WERE PAID. AFTER EXPIRATION OF SUCH PERIOD FOLLOWING ANY YEAR, THE RECORD IS NO LONGER OPEN TO CORRECTION EXCEPT AS PROVIDED BY SECTION 205 (C) (5).

AS INDICATED, THE LAW PROVIDES THAT UNDER SPECIFIC CIRCUMSTANCES AN INDIVIDUAL'S RECORD MAY BE CHANGED AFTER THE EXPIRATION OF THE TIME LIMITATION. ONE OF THESE EXCEPTIONS (SECTION 205 (C) (5) (F) ( PROVIDES THAT THE ADMINISTRATION MAY CONFORM ITS RECORDS TO TAX RETURNS OF WAGES (INCLUDING INFORMATIONAL AND OTHER WRITTEN STATEMENTS) FILED WITH THE COMMISSIONER OF INTERNAL REVENUE UNDER SPECIFICALLY IDENTIFIED SECTIONS OF THE INTERNAL REVENUE CODE. THE OFFICE OF GENERAL COUNSEL OF THIS DEPARTMENT HAS STATED THAT PURSUANT TO THIS SECTION A TAX RETURN CAN HAVE PROBATIVE VALUE AS A BASIS FOR CORRECTING BUREAU (NOW ADMINISTRATION) EARNINGS RECORDS ONLY IF IT IS ACCEPTED AS VALID BY THE INTERNAL REVENUE SERVICE.

IF THE CORRECTIONAL RETURN, INCLUDING AN INFORMATIONAL OR OTHER WRITTEN STATEMENT, IS NOT ACCEPTABLE UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE FOR INTERNAL REVENUE PURPOSES, IT MAY NOT BE USED BY THIS ADMINISTRATION AS A BASIS FOR CHANGING ITS RECORDS.

WHILE THERE REMAINS THE POSSIBILITY THAT OTHER EXCEPTIONS OUTLINED IN SECTION 205 (C) OF THE SOCIAL SECURITY ACT WOULD PERMIT THE ADMINISTRATION TO CORRECT AN INDIVIDUAL'S EARNINGS RECORD, THESE NORMALLY COME INTO PLAY UPON THE FILING OF A CLAIM OR THE RAISING OF A QUESTION BY A COVERED WORKER AS TO THE CORRECTNESS OF AN ADMINISTRATION STATEMENT OF HIS EARNINGS. IF, AT THAT TIME, IT APPEARS THAT CORRECTIONS MAY BE REQUIRED AND MAY BE MADE UNDER THE LAW, INFORMATION IS REQUESTED OF THE EMPLOYER. IN VIEW OF THIS AND SINCE THE TIME REQUIREMENTS OF THE STATUTES OF LIMITATIONS OF THE TWO AGENCIES ARE IN ACCORD, WE WOULD NOT ADVOCATE THE PRACTICE OF FURNISHING ADJUSTMENT REPORTS DIRECTLY TO THIS ADMINISTRATION.

AS WE MUST AGREE WITH THE BASIC ADMINISTRATIVE PREMISE THAT THE STATUTORY RESTRICTIONS ON THE MODIFICATION OF SOCIAL SECURITY RECORDS EMBODY AN OVERRIDING LEGISLATIVE POLICY APPLICABLE EVEN IN THE CASE OF EXCLUDED FEDERAL EMPLOYMENT, AND THERE WOULD APPEAR TO BE LITTLE POINT IN ADVISING THE SOCIAL SECURITY ADMINISTRATION OF PERIODS OF ERRONEOUS WITHHOLDINGS BARRED FROM ADJUSTMENT BY THE INTERNAL REVENUE CODE, THE FOURTH QUESTION IS ANSWERED IN THE NEGATIVE.