B-159778, SEP. 8, 1967

B-159778, SEP. 8, 1967

RAILROAD RETIREMENT - CONTRIBUTION INDEBTEDNESS DECISION TO CHICAGO AND NORTH WESTERN RAILWAY COMPANY RE INDEBTEDNESS FOR CONTRIBUTIONS AND INTEREST UNDER RAILROAD RETIREMENT ACT, 45 U.S.C. 355 (C). DEBT FOR CONTRIBUTIONS AND INTEREST REFERRED BY RAILROAD RETIREMENT BOARD TO GAO WAS PROPER AND UNDER THE LAW AND REGULATIONS AN ASSESSMENT OF CONTRIBUTIONS WITH NOTICE AND REFUSAL TO PAY ARE NOT NECESSARY BEFORE DEBT IS REFERRED TO GAO. DECISION OF MAY 17, 1967, AFFIRMED.

TO CHICAGO AND NORTH WESTERN RAILWAY COMPANY:

WE REFER AGAIN TO YOUR LETTER OF JUNE 20, 1967, RELATIVE TO OUR ACTION IN EFFECTING COLLECTION OF YOUR COMPANY'S INDEBTEDNESS TO THE UNITED STATES FOR $33,776.37, PLUS INTEREST OF $7,457.48. THE DEBT WAS SENT HERE FOR COLLECTION BY THE RAILROAD RETIREMENT BOARD.

YOU CONTEND THAT AN INDEBTEDNESS WHICH OUR OFFICE COULD COLLECT COULD ONLY ARISE AFTER AN ASSESSMENT BY THE RAILROAD RETIREMENT BOARD WITH NOTICE TO YOUR COMPANY AND REFUSAL TO PAY. ALSO, YOU CONTEND THAT ANY INTEREST COULD ONLY COMMENCE TO ACCRUE AFTER SUCH AN ASSESSMENT AND NOTICE. IN SUPPORT OF YOUR CONTENTION YOU CITE 20 C.F.R. 345.20, WHICH AUTHORIZES THE DIRECTOR OF BUDGET AND FISCAL OPERATIONS OF THE BOARD TO ISSUE ASSESSMENTS OF CONTRIBUTIONS, INTEREST, AND PENALTIES, AND NOTICES AND DEMANDS FOR PAYMENT. YOU ALSO CITE 45 U.S.C. 355 (C) WHICH, IN PART, PROVIDES THAT:

"* * * THE BOARD MAY ALSO DESIGNATE ONE OF ITS OFFICERS OR EMPLOYEES TO RECEIVE EVIDENCE AND REPORT TO THE BOARD WHETHER OR NOT ANY * * * COMPANY * * * SHOULD BE REQUIRED TO PAY CONTRIBUTIONS * * * AND SHALL FOLLOW SUCH PROCEDURE IF CONTRIBUTIONS ARE ASSESSED AND PAYMENT IS REFUSED * * "

IT SHOULD BE NOTED THAT BOTH THE REGULATION AND STATUTE CITED AS SUPPORTING YOUR CONTENTION THAT AN ASSESSMENT BY THE BOARD IS NECESSARY BEFORE AN INDEBTEDNESS COLLECTIBLE BY OUR OFFICE ARISES ARE PERMISSIVE IN NATURE. NEITHER 45 U.S.C. 355 (C) NOR 20 C.F.R. 345.20 PROVIDE THAT THE BOARD MUST "ASSESS" CONTRIBUTIONS AND CERTAINLY NOT AMOUNTS OF REMUNERATION RECOVERABLE PURSUANT TO 45 U.S.C. 352 (F). THE PROVISIONS IN THE CITED STATUTE AND REGULATION RECOGNIZE THE BOARD'S POWER TO ASSESS CONTRIBUTIONS, APPARENTLY AN ESSENTIAL STEP IN CONNECTION WITH CERTAIN SPECIAL REMEDIES SUCH AS IMPOSING LIENS OR PROCEEDING WITH DISTRAINT AND SALE, BUT THEY DO NOT REQUIRE THE BOARD TO ASSESS CONTRIBUTIONS IN ANY INSTANCE. CF. 20 C.F.R. 345.14 (B). AS A MATTER OF FACT, THE PART OF 45 U.S.C. 355 (C) QUOTED IN PARAGRAPH THREE OF YOUR LETTER SHOWS THAT THE BOARD COULD NOT PROCEED TO ENFORCE COLLECTION OF A CLAIM FOR CONTRIBUTIONS, WITH OR WITHOUT ASSESSMENT, UNTIL AFTER MAKING A DETERMINATION OF LIABILITY PURSUANT TO 45 U.S.C. 355 (C). ANY POSSIBILITY OF COURT ACTION WITHOUT SUCH A DETERMINATION IS ELIMINATED BY THE REQUIREMENT OF THE LAST PARAGRAPH OF 45 U.S.C. 355 (C) THAT ANY ISSUE DETERMINABLE THEREUNDER SHALL NOT BE DETERMINED IN ANY OTHER WAY. SEE, IN THIS CONNECTION, WESTERN PACIFIC RAILROAD COMPANY, ET AL. V. HABERMEYER, ET AL., UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT, NOS. 20,785 AND 21,377, DECIDED AUGUST 23, 1967.

YOU STATE THAT SINCE THE LAST WAIVER REQUESTED BY THE BOARD AND EXECUTED BY YOUR COMPANY EXPIRED PRIOR TO THE BOARD'S DECISION THE STATUTE OF LIMITATIONS HAS RUN ON THE BOARD'S RIGHT TO ASSESS. WE HAVE BEEN ADVISED BY MYLES F. GIBBONS, GENERAL COUNSEL, RAILROAD RETIREMENT BOARD, THAT THE "WAIVERS" WERE AGREEMENTS FOR EXTENSIONS OF TIME IN WHICH TO MAKE AN ASSESSMENT, AND THAT THEY WERE PRECAUTIONARY ARRANGEMENTS INTENDED TO EXTEND A PERIOD OF LIMITATION IF THERE WAS A LIMITATION WHICH WOULD OTHERWISE RUN OUT. SINCE, IN OUR VIEW, NO LIMITATION WAS APPLICABLE THE AGREEMENT WAS OF NO EFFECT AND ITS LAPSE ALSO HAD NO EFFECT.

YOU ALSO URGE THAT THE TIME LIMITATION IN SECTION 6501 OF THE INTERNAL REVENUE CODE (26 U.S.C. 6501), MAKES OUR DEDUCTIONS IMPROPER AS TO THE PRINCIPAL AND INTEREST SINCE NO ASSESSMENT HAS BEEN MADE. HOWEVER, THE APPLICABILITY OF THE LIMITATION EXPRESSED IN 26 U.S.C. 6501 IS DOUBTFUL AND EVEN IF THE SECTION DOES APPLY ITS THREE-YEAR LIMITATION SHOULD RUN FROM THE DATE OF THE BOARD'S DECISION AND ANY EXTENSION OF TIME AGREEMENT (WAIVER) WAS AT BEST PREMATURE AND OF NO EFFECT, AND ITS LAPSE ALSO HAD NO EFFECT. SEE THE CASES CITED IN OUR DECISION OF MAY 17, 1967, B-159778.

EVEN ASSUMING THE APPLICABILITY OF 26 U.S.C. 6501 TO THE TIME AFTER THE BOARD'S DECISION, WITH RESPECT TO REMUNERATION RECOVERIES UNDER 45 U.S.C. 352 (F), AS WELL AS TO CONTRIBUTIONS UNDER 45 U.S.C. 355 (C), THE TERMS OF THE SECTION ITSELF SHOW CLEARLY THAT THE BOARD NEED NOT MAKE AN ASSESSMENT OF CONTRIBUTIONS OR REMUNERATION RECOVERIES IN ORDER TO TAKE LEGAL ACTION (WITHIN THREE YEARS OF THE DECISION) TO COLLECT THE AMOUNTS IT HAS DETERMINED TO BE DUE, SINCE THE LIMITATION PROVIDES THAT "NO PROCEEDING IN COURT WITHOUT ASSESSMENT" SHALL BE BEGUN AFTER THE EXPIRATION OF THE THREE -YEAR ASSESSMENT PERIOD.

FINALLY, YOU STATE THAT "MOST CERTAINLY INTEREST COULD ONLY COMMENCE TO ACCRUE AFTER SUCH AN ASSESSMENT AND NOTICE.' INTEREST ON CONTRIBUTIONS RUNS FROM THE DUE DATE (45 U.S.C. 358 (G) ( AND MAY BE ASSESSED AS PROVIDED IN 20 C.F.R. 345.20, CITED IN YOUR LETTER. THE BOARD DID NOT FIND THAT ANY INTEREST HAD ACCRUED UP TO THE DATE OF ITS DECISION BUT THERE APPEARS TO BE NO REASON WHY INTEREST SHOULD NOT ACCRUE THEREAFTER.

ACCORDINGLY, AND SINCE YOUR LETTER OF JUNE 20, 1967, CONTAINS NOTHING TO WARRANT A REVERSAL OR MODIFICATION OF OUR DECISION OF MAY 17, 1967, IT IS AFFIRMED.