B-168211, DEC. 30, 1969

B-168211: Dec 30, 1969

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IS NOT MONEY JUDGMENT INVOLVING OVERPAYMENT OF INTERNAL REVENUE TAX. IS NOT CONTROLLING. LYLES: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 22. THE COURT OF APPEALS HELD THAT THE METHOD USED BY THE COMMISSIONER TO COMPUTE THE PLAINTIFF'S TAXES FOR THE YEARS IN QUESTION WAS UNREASONABLE UNDER THE CIRCUMSTANCES AND REVERSED THE TAX COURT AND REMANDED THE CASE FOR RECOMPUTATION OF THE TAXES IN ACCORDANCE WITH ITS (COURT OF APPEALS) DECISION. THERE WAS NO REFUND OF TAXES INVOLVED IN THE JUDGMENT AND. YOU STATE THAT YOUR PRESENT INTERPRETATION OF 28 U.S.C. 2414 AND 28 U.S.C. 2517 IS THAT PAYMENT OF THE TYPE OF JUDGMENT INVOLVED HERE CAN BE MADE ONLY ON SETTLEMENT BY THE GENERAL ACCOUNTING OFFICE AND ON PRESENTATION TO THE GENERAL ACCOUNTING OFFICE OF CERTIFICATION OF THE JUDGMENT.

B-168211, DEC. 30, 1969

COURTS--COSTS--TAX MATTERS SINCE JUDGMENT IN CUMMINGS V COMMISSIONER OF INTERNAL REVENUE, 410 F. 2D 675 (1969), IS NOT MONEY JUDGMENT INVOLVING OVERPAYMENT OF INTERNAL REVENUE TAX, BUT CONCERNS METHOD USED IN COMPUTING TAX DEFICIENCY, WITH COURT COSTS ASSESSED BY COURT AGAINST COMMISSIONER, DECISION IN A-97256, NOV. 3, 1938 -- TRADITIONALLY USED TO EXCLUDE INTERNAL REVENUE SERVICE FROM REQUIREMENT OF SETTLEMENT ACTION BY GAO IN MATTERS OF TAX ADMINISTRATION -- IS NOT CONTROLLING. SHOULD SUBJECT JUDGMENT BECOME FINAL, CLAIMS DIVISION WOULD PAY SAID COURT COSTS FROM PERMANENT APPROPRIATION ESTABLISHED BY 31 U.S.C. 724A, ON BASIS OF REASONING IN 40 COMP. GEN. 95, WHICH REGARDED DAMAGES ASSESSED AGAINST OFFICIALS IN PERFORMANCE OF OFFICIAL DUTIES UNDER TITLE 26, AS OBLIGATION OF U.S. UNDER 26 U.S.C. 7423(2).

TO MISS MARGUERITE U. LYLES:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 22, 1969 (YOUR REFERENCE D:O:A), REQUESTING OUR DECISION AS TO WHETHER YOU MAY CERTIFY FOR PAYMENT THE ENCLOSED VOUCHER IN THE AMOUNT OF $493.25 IN FAVOR OF OSWILL M. CUMMINGS, JR; COVERING COURT COSTS ORDERED TO BE PAID BY THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT, IN THE CASE OF CUMMINGS V. COMMISSIONER OF INTERNAL REVENUE, 410 F. 2D 675 (1969), AND IF SO THE APPROPRIATION TO BE CHARGED FOR SUCH DISBURSEMENT.

IT APPEARS FROM THE RECORD THAT THE PLAINTIFF BROUGHT AN ACTION IN THE UNITED STATES TAX COURT (TAX COURT) TAKING ISSUE WITH THE METHOD USED BY THE COMMISSIONER OF INTERNAL REVENUE (COMMISSIONER) TO COMPUTE HIS (THE PLAINTIFF'S) INCOME TAX FOR CERTAIN YEARS. THE TAX COURT, IN EFFECT, UPHELD THE COMMISSIONER AND ESTABLISHED THE PLAINTIFF'S INCOME TAX DEFICIENCY AND PENALTIES AT APPROXIMATELY $33,000 FOR THE YEARS INVOLVED. THE PLAINTIFF APPEALED THE DECISION OF THE TAX COURT TO THE UNITED STATES COURT OF APPEALS AS PROVIDED BY LAW (26 U.S.C. 7482 (A)). THE COURT OF APPEALS HELD THAT THE METHOD USED BY THE COMMISSIONER TO COMPUTE THE PLAINTIFF'S TAXES FOR THE YEARS IN QUESTION WAS UNREASONABLE UNDER THE CIRCUMSTANCES AND REVERSED THE TAX COURT AND REMANDED THE CASE FOR RECOMPUTATION OF THE TAXES IN ACCORDANCE WITH ITS (COURT OF APPEALS) DECISION. SINCE THE PLAINTIFF HAD NOT PAID TAXES FOR THE YEARS IN QUESTION, THERE WAS NO REFUND OF TAXES INVOLVED IN THE JUDGMENT AND, HENCE, THE CASE DID NOT INVOLVE A MONEY JUDGMENT. HOWEVER, THE COURT OF APPEALS ORDERED THAT THE COSTS OF THE APPEAL BE TAXED AGAINST THE COMMISSIONER OF INTERNAL REVENUE, TO BE PAID DIRECTLY TO THE PLAINTIFF.

YOU STATE THAT YOUR PRESENT INTERPRETATION OF 28 U.S.C. 2414 AND 28 U.S.C. 2517 IS THAT PAYMENT OF THE TYPE OF JUDGMENT INVOLVED HERE CAN BE MADE ONLY ON SETTLEMENT BY THE GENERAL ACCOUNTING OFFICE AND ON PRESENTATION TO THE GENERAL ACCOUNTING OFFICE OF CERTIFICATION OF THE JUDGMENT, RESPECTIVELY.

YOU UNDERSTAND, HOWEVER, THAT THERE IS A COMPTROLLER GENERAL'S DECISION DATED NOVEMBER 3, 1938, A-97256, WHICH HAS TRADITIONALLY BEEN USED TO EXCLUDE THE INTERNAL REVENUE SERVICE FROM THE REQUIREMENT OF SETTLEMENT ACTION BY THE GENERAL ACCOUNTING OFFICE IN MATTERS OF TAX ADMINISTRATION.

YOUR SECOND MATTER OF CONCERN IS THE PROPER APPROPRIATION TO BE CHARGED WHEN PAYMENT OF COURT COSTS IS MADE. YOU STATE WHILE YOU ARE NOT SURE OF EXACTLY WHICH APPROPRIATIONS CAN BE USED TO PAY THESE COSTS THE FOLLOWING POSSIBILITIES APPEAR TO EXIST:

"20 0911 - SALARIES AND EXPENSES

"20 0912 - REVENUE ACCOUNTING AND PROCESSING

"20 0913 - COMPLIANCE

"20X0903 - REFUNDING INTERNAL REVENUE COLLECTIONS

"20X0904 - REFUNDING INTERNAL REVENUE COLLECTIONS, INTEREST

"20X1751 - JUDGMENTS NOT IN EXCESS OF ONE HUNDRED THOUSAND

DOLLARS, COURT OF CLAIMS

"20X1752 - JUDGMENTS AND COMPROMISE SETTLEMENTS AGAINST THE

UNITED STATES, NOT IN EXCESS OF ONE HUNDRED

THOUSAND DOLLARS"

YOUR LETTER, REQUESTING OUR DECISION AS TO WHETHER THE VOUCHER MAY BE CERTIFIED FOR PAYMENT, PRESENTS THESE TWO QUESTIONS:

"1. THE NEED FOR PRIOR AND SPECIFIC APPROVAL BY GAO BEFORE COSTS, ORDERED TO BE PAID BY THE COURTS IN CONNECTION WITH TAX MATTERS, CAN BE DISBURSED BY THE INTERNAL REVENUE SERVICE.

"2. THE PROPER APPROPRIATION TO BE CHARGED FOR SUCH DISBURSEMENTS."

WHILE WE ARE NOT AUTHORIZED IN THIS INSTANCE TO ANSWER QUESTIONS GENERAL IN NATURE WE BELIEVE THAT CONSIDERATION OF THE FACTS AND CIRCUMSTANCES INVOLVED HERE AND OF THE APPLICABLE LAW WILL BE SUFFICIENTLY RESPONSIVE TO YOUR QUESTIONS TO SERVE AS A GUIDE. SEE 24 COMP. GEN. 546.

OUR DECISION OF NOVEMBER 3, 1938, A-97256, STANDS ONLY FOR THE PROPOSITION THAT COURT JUDGMENTS PAYABLE BY THE COMMISSIONER OF INTERNAL REVENUE FROM THE INTERNAL REVENUE SERVICE APPROPRIATION "REFUNDING INTERNAL REVENUE COLLECTION," MAY BE PAID BY THE INTERNAL REVENUE SERVICE, WITHOUT SUBMISSION OF THE PAPERS TO OUR OFFICE, EVEN THOUGH A CLAIM FOR PAYMENT OF THE JUDGMENT HAS NOT BEEN FILED. THE BASIS FOR THAT DECISION - - AS STATED THEREIN -- IS AS FOLLOWS:

"SINCE SAID SECTION 808 SPECIFICALLY AUTHORIZED THE COMMISSIONER OF INTERNAL REVENUE TO TENDER BY CHECK PAYMENT OF ANY JUDGMENT AS CONTEMPLATED THEREUNDER, 'WHETHER OR NOT A CLAIM FOR SUCH PAYMENT HAS BEEN DULY FILED', AND SINCE APPROPRIATED FUNDS ARE ADMINISTRATIVELY AVAILABLE FOR PAYMENT OF SUCH REFUNDS THIS OFFICE WILL NOT OBJECT TO THE FUTURE PAYMENT OF JUDGMENTS IN CASES CONTEMPLATED BY SAID SECTION WITHOUT SUBMISSION OF THE PAPERS TO THIS OFFICE FOR DIRECT SETTLEMENT AS A CLAIM." (EMPHASIS ADDED.) SINCE THE PRESENT JUDGMENT IS NOT A JUDGMENT FOR OVERPAYMENT OF AN INTERNAL REVENUE TAX BUT RATHER IS A JUDGMENT (IN FAVOR OF THE PLAINTIFF) INVOLVING THE METHOD USED BY THE INTERNAL REVENUE SERVICE IN COMPUTING A TAX DEFICIENCY, WITH COSTS BEING ASSESSED BY THE COURT AGAINST THE COMMISSIONER OF INTERNAL REVENUE, OUR DECISION OF NOVEMBER 3, 1938, WOULD NOT BE CONTROLLING IN THE INSTANT CASE. CF. 2 COMP. GEN. 501; 5 COMP. GEN. 122; AND A-12287, DECEMBER 31, 1925.

SECTION 7423 (2), OF TITLE 26, U.S.C. PROVIDES AS FOLLOWS:

"THE SECRETARY OR HIS DELEGATE, SUBJECT TO REGULATIONS PRESCRIBED BY THE SECRETARY OR HIS DELEGATE, IS AUTHORIZED TO REPAY --

"(2) DAMAGES AND COSTS. -- ALL DAMAGES AND COSTS RECOVERED AGAINST ANY OFFICER OR EMPLOYEE OF THE UNITED STATES IN ANY SUIT BROUGHT AGAINST HIM BY REASON OF ANYTHING DONE IN THE DUE PERFORMANCE OF HIS OFFICIAL DUTY UNDER THIS TITLE." (EMPHASIS ADDED.)

IN 40 COMP. GEN. 95, WE CONCLUDED THAT DAMAGES ASSESSED BY A FEDERAL COURT AGAINST TWO OFFICIALS OF THE UNITED STATES FOR THEIR ACTIONS IN THE DUE PERFORMANCE OF THEIR OFFICIAL DUTIES UNDER TITLE 26, U.S.C. COULD BE ASSUMED BY THE UNITED STATES UNDER THE PROVISIONS OF 26 U.S.C. 7423 (2). AFTER REACHING THAT CONCLUSION WE THEN CONSIDERED THE QUESTION AS TO WHAT APPROPRIATION WAS AVAILABLE TO PAY THAT JUDGMENT.

WE CONCLUDED THAT THE JUDGMENT FOR DAMAGES IN THAT CASE WAS PAYABLE FROM THE PERMANENT APPROPRIATION ESTABLISHED BY 31 U.S.C. 724A. THE BASIS FOR THIS CONCLUSION IS STATED IN THE DECISION AS FOLLOWS:

"WITH REFERENCE TO THE SOURCE OF JUNDS AVAILABLE FOR PAYMENT OF THE JUDGMENTS, IT IS WELL SETTLED THAT THE APPROPRIATIONS OR FUNDS PROVIDED FOR REGULAR GOVERNMENTAL OPERATIONS OR ACTIVITIES, OUT OF WHICH A CAUSE OF ACTION ARISES, ARE NOT AVAILABLE TO PAY JUDGMENTS OF COURTS IN THE ABSENCE OF SPECIFIC AUTHORITY THEREFOR. SEE 34 COMP. GEN. 221; 15 ID. 933; 2 ID. 821. THE APPROPRIATION 'SALARIES AND EXPENSES, INTERNAL REVENUE SERVICE' CONTAINS NO PROVISION FOR THE PAYMENT OF JUDGMENTS, AND WE ARE AWARE OF NO OTHER PROVISION OF LAW WHICH WOULD SO AUTHORIZE ITS USE. HENCE, THIS APPROPRIATION IS NOT PROPERLY CHARGEABLE WITH SUCH EXPENSES.

"HOWEVER, UNDER THE TERMS OF 31 U.S.C. 724A, THE CONGRESS HAS ESTABLISHED A PERMANENT APPROPRIATION FOR THE PAYMENT, NOT OTHERWISE PROVIDED FOR, OF JUDGMENTS (NOT IN EXCESS OF $100,000) RENDERED BY THE DISTRICT COURTS AND THE COURT OF CLAIMS AGAINST THE UNITED STATES WHICH HAVE BECOME FINAL. WHILE THE JUDGMENTS ENTERED AGAINST MESSRS. NELSON AND ROBERTS ARE NOT JUDGMENTS RENDERED AGAINST THE UNITED STATES, THE STATUTORY PROVISIONS QUOTED ABOVE FOR ASSUMPTION OF LIABILITY AND FOR PAYMENT BY THE UNITED STATES OF SUCH JUDGMENTS MAY, FOR PRACTICAL PURPOSES, BE CONSIDERED AS CONVERTING THE JUDGMENTS INTO A JUDGMENT OBLIGATION OF THE UNITED STATES PROPERLY PAYABLE FROM THE PERMANENT APPROPRIATION PROVIDED THEREFOR.

"ACCORDINGLY, AND IN ANSWER TO YOUR SECOND QUESTION YOU ARE ADVISED THAT IF AND WHEN IT BECOMES NECESSARY FOR THE UNITED STATES TO PAY THE JUDGMENTS ENTERED AGAINST MESSRS. NELSON AND ROBERTS, PAYMENT MAY BE MADE FROM THE APPROPRIATION PROVIDED BY 31 U.S.C. 724A. THIS LETTER SHOULD BE CITED IN ANY FUTURE CORRESPONDENCE WITH OUR OFFICE RELATIVE TO PAYMENT OF THE JUDGMENTS.

"REGARDING YOUR FINAL QUESTION, IT MAY BE STATED THAT IT IS IMMATERIAL, UNDER THE TERMS OF 26 U.S.C. 7423 (2), WHETHER PAYMENT OF THE JUDGMENTS BY THE UNITED STATES BE MADE DIRECTLY TO THE STEINERS OR AS A REIMBURSEMENT TO MESSRS. NELSON AND ROBERTS UPON DUE SATISFACTION OF THE JUDGMENTS BY THEM."

WHAT WAS STATED IN 40 COMP. GEN. 95 IN CONNECTION WITH THE PAYMENT OF DAMAGES ASSESSED BY A COURT AGAINST FEDERAL EMPLOYEES FOR THEIR ACTIONS IN THE DUE PERFORMANCE OF THEIR OFFICIAL DUTIES UNDER TITLE 26 OF THE U.S.C. AND THE APPROPRIATION AVAILABLE FOR SUCH PAYMENT WOULD BE EQUALLY APPLICABLE TO THE PAYMENT OF THE COSTS ASSESSED AGAINST THE COMMISSIONER IN THE INSTANT CASE. THAT IS TO SAY THE JUDGMENT FOR COSTS ASSESSED AGAINST THE COMMISSIONER IN THE PRESENT CASE IS FOR PAYMENT FROM THE APPROPRIATION PROVIDED BY 31 U.S.C. 724A. ACCORDINGLY, THE VOUCHER ENCLOSED WITH YOUR LETTER MAY NOT BE CERTIFIED FOR PAYMENT AND WILL BE RETAINED HERE. RATHER PAYMENT OF THE INSTANT JUDGMENT -- ASSUMING IT HAS BECOME FINAL -- WOULD BE BY THE CLAIMS DIVISION OF THIS OFFICE FROM THE APPROPRIATION PROVIDED BY 31 U.S.C. 724A UPON RECEIPT OF A CERTIFIED COPY OF THE JUDGMENT TOGETHER WITH A CERTIFIED COPY OF THE BILL OF COSTS. THIS LETTER SHOULD BE CITED IN ANY FUTURE CORRESPONDENCE WITH OUR OFFICE RELATIVE TO THE PAYMENT OF THIS JUDGMENT.