U.S. Supreme Court Corn Products Refining Co. v.
Commissioner, 350 U.S.
46 (1955) Corn Products Refining Co.
v. Commissioner of Internal
Revenue No. 20 Argued October 18,
1955 Decided November 7,
1955 350 U.S.
46 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND
CIRCUIT Syllabus Petitioner's purchases and sales of corn futures in 1940 and
1942, which, though not "true hedges," were an integral part of its
manufacturing business, held not capital asset
transactions under § 117(a) of the Internal Revenue Code of 1939,
and gains and losses therefrom gave rise to ordinary income and
ordinary deductions. Pp. 350 U. S.
47 -54.

															(a) The finding by both the Tax Court and the Court of Appeals
that petitioner's purchases constitute "an integral part of its
manufacturing business" is here sustained. Pp. 350 U. S.
50 -51.

															(b) Through its purchases of commodity futures, petitioner
obtained partial insurance against its principal risk -- the
possibility of a price rise. P. 350 U. S.
51 .

															(c) The capital asset provision of § 117 is to be narrowly
construed. P. 350 U. S.
52 .

															(d) Congress intended that profits and losses arising from the
everyday operation of a business be considered as ordinary income
or loss, rather than capital gain or loss. P. 350 U. S.
52 .

															(e) The Treasury ruling, G.C.M. 17322, that hedging transactions
were essentially to be regarded as insurance, rather than dealings
in capital assets, and that gains and losses therefrom were
ordinary business gains and losses, has been consistently followed
by the courts as well as by the Commissioner, and has had the tacit
approval of Congress. Pp. 350 U. S.
52 -53.

															(f) The conclusion here reached is supported by practical
considerations, as well as by the statute. Pp. 350 U. S.
53 -54.

															215 F.2d 513, affirmed. Page 350 U. S. 47 MR. JUSTICE CLARK delivered the opinion of the Court.

															This case concerns the tax treatment to be accorded certain
transactions in commodity futures. [ Footnote 1 ] In the Tax Court, petitioner Corn Products
Refining Company contended that its purchases and sales of corn
futures in 1940 and 1942 were capital asset transactions under §
117(a) of the Internal Revenue Code of 1939. It further contended
that its futures transactions came within the "wash sales"
provisions of § 118. The 1940 claim was disposed of on the ground
that § 118 did not apply, but, for the year 1942, both the Tax
Court and the Court of Appeals for the Second Circuit, 215 F.2d
513, held that the futures were not capital assets under § 117. We
granted certiorari, 348 U.S. 911, [ Footnote 2 ] because of an asserted conflict with holdings
in the Courts of Appeals for the Third, Fifth, and Sixth Circuits.
[ Footnote 3 ] Since we hold that
these futures do not constitute capital assets in petitioner's
hands, we do not reach the issue of whether the transactions were
"wash sales." Page 350 U. S. 48 Petitioner is a nationally known manufacturer of products made
from grain corn. It manufactures starch, syrup, sugar, and their
byproducts, feeds, and oil. Its average yearly grind of raw corn
during the period 1937 through 1942 varied from thirty-five to
sixty million bushels. Most of its products were sold under
contracts requiring shipment in thirty days at a set price or at
market price on the date of delivery, whichever was lower. It
permitted cancellation of such contracts, but, from experience, it
could calculate with some accuracy future orders that would remain
firm. While it also sold to a few customers on long-term contracts
involving substantial orders, these had little effect on the
transactions here involved. [ Footnote 4 ]

															In 1934 and again in 1936, droughts in the corn belt caused a
sharp increase in the price of spot corn. With a storage capacity
of only 2,300,000 bushels of corn, a bare three weeks' supply, Corn
Products found itself unable to buy at a price which would permit
its refined corn sugar, cerealose, to compete successfully with
cane and beet sugar. To avoid a recurrence of this situation,
petitioner, in 1937, began to establish a long position in corn
futures "as a part of its corn buying program" and "as the most
economical method of obtaining an adequate supply of raw corn"
without entailing the expenditure of large sums for additional
storage facilities. At harvest time each year, it would buy futures
when the price appeared favorable. It would take delivery on such
contracts as it found necessary to its manufacturing operations,
and sell the remainder in early summer if no shortage was
imminent. Page 350 U. S. 49 If shortages appeared, however, it sold futures only as it
bought spot corn for grinding. [ Footnote 5 ] In this manner, it reached a balanced position
with reference to any increase in spot corn prices. It made no
effort to protect itself against a decline in prices.

															In 1940, it netted a profit of $680,587.39 in corn futures, but,
in 1942, it suffered a loss of $109,969.38. In computing its tax
liability, Corn Products reported these figures as ordinary profit
and loss from its manufacturing operations for the respective
years. It now contends that its futures were "capital assets" under
§ 117, and that gains and losses therefrom should have been treated
as arising from the sale of a capital asset. [ Footnote 6 ] In support of this position, it claims
that its futures trading was separate and apart from its
manufacturing operations, and that, in its futures transactions, it
was acting as a "legitimate capitalist." United States v. New
York Coffee & Sugar Exchange, 263 U.
S. 611 , 263 U. S. 619 .
It denies that its futures transactions were "hedges" or
"speculative" dealings as Page 350 U. S. 50 covered by the ruling of General Counsel's Memorandum 17322,
XV-2 Cum.Bull. 151, and claims that it is in truth "the forgotten
man" of that administrative interpretation.

															Both the Tax Court and the Court of Appeals found petitioner's
futures transactions to be an integral part of its business
designed to protect its manufacturing operations against a price
increase in its principal raw material and to assure a ready supply
for future manufacturing requirements. Corn Products does not level
a direct attack on these two court findings, but insists that its
futures were "property" entitled to capital asset treatment under §
117, and, as such, were distinct from its manufacturing business.
We cannot agree.

															We find nothing in this record to support the contention that
Corn Products' futures activity was separate and apart from its
manufacturing operation. On the contrary, it appears that the
transactions were vitally important to the company's business as a
form of insurance against increases in the price of raw corn. Not
only were the purchases initiated for just this reason, but the
petitioner's sales policy, selling in the future at a fixed price
or less, continued to leave it exceedingly vulnerable to rises in
the price of corn. Further, the purchase of corn futures assured
the company a source of supply which was admittedly cheaper than
constructing additional storage facilities for raw corn. Under
these facts, it is difficult to imagine a program more closely
geared to a company's manufacturing enterprise or more important to
its successful operation.

															Likewise, the claim of Corn Products that it was dealing in the
market as a "legitimate capitalist" lacks support in the record.
There can be no quarrel with a manufacturer's desire to protect
itself against increasing costs of raw materials. Transactions
which provide such protection are considered a legitimate form of
insurance. United States v. New York Coffee & Sugar
Exchange, 263 Page 350 U. S. 51 U.S. at 263 U. S. 619 ; Browne v. Thorn, 260 U. S. 137 , 260 U. S.
139 -140. However, in labeling its activity as that of a
"legitimate capitalist" exercising "good judgment" in the futures
market, petitioner ignores the testimony of its own officers that,
in entering that market, the company was "trying to protect a part
of [its] manufacturing costs;" that its entry was not for the
purpose of "speculating and buying and selling corn futures," but
to fill an actual

															"need for the quantity of corn [bought] . . . in order to cover
. . . what [products] we expected to market over a period of
fifteen or eighteen months."

															It matters not whether the label be that of "legitimate
capitalist" or "speculator;" this is not the talk of the capital
investor, but of the far-sighted manufacturer. For tax purposes,
petitioner's purchases have been found to "constitute an integral
part of its manufacturing business" by both the Tax Court and the
Court of Appeals, and, on essentially factual questions, the
findings of two courts should not ordinarily be disturbed. Comstock v. Group of Institutional Investors, 335 U.
S. 211 , 335 U. S.
214 .

															Petitioner also makes much of the conclusion by both the Tax
Court and the Court of Appeals that its transactions did not
constitute "true hedging." It is true that Corn Products did not
secure complete protection from its market operations. Under its
sales policy, petitioner could not guard against a fall in prices.
It is clear, however, that petitioner feared the possibility of a
price rise more than that of a price decline. It therefore
purchased partial insurance against its principal risk, and hoped
to retain sufficient flexibility to avoid serious losses on a
declining market.

															Nor can we find support for petitioner's contention that hedging
is not within the exclusions of § 117(a). Admittedly, petitioner's
corn futures do not come within the literal language of the
exclusions set out in that section. They were not stock in trade,
actual inventory, Page 350 U. S. 52 property held for sale to customers, or depreciable property
used in a trade or business. But the capital asset provision of §
117 must not be so broadly applied as to defeat, rather than
further, the purpose of Congress. Burnet v. Harmel, 287 U. S. 103 , 287 U. S. 108 .
Congress intended that profits and losses arising from the everyday
operation of a business be considered as ordinary income or loss,
rather than capital gain or loss. The preferential treatment
provided by § 117 applies to transactions in property which are not
the normal source of business income. It was intended

															"to relieve the taxpayer from . . . excessive tax burdens on
gains resulting from a conversion of capital investments, and to
remove the deterrent effect of those burdens on such
conversions." Burnet v. Harmel, 287 U.S. at 287 U. S. 106 .
Since this section is an exception from the normal tax requirements
of the Internal Revenue Code, the definition of a capital asset
must be narrowly applied, and its exclusions interpreted broadly.
This is necessary to effectuate the basic congressional purpose.
This Court has always construed narrowly the term "capital assets"
in § 117. See Hort v. Commissioner, 313 U. S.
28 , 313 U. S. 31 ; Kieselbach v. Commissioner, 317 U.
S. 399 , 317 U. S.
403 .

															The problem of the appropriate tax treatment of hedging
transactions first arose under the 1934 Tax Code revision.
[ Footnote 7 ] Thereafter, the
Treasury issued G.C.M. 17322, supra, distinguishing
speculative transactions in commodity futures from hedging
transactions. It held that hedging transactions were essentially to
be regarded as insurance, rather than a dealing in capital assets,
and that Page 350 U. S. 53 gains and losses therefrom were ordinary business gains and
losses. The interpretation outlined in this memorandum has been
consistently followed by the courts as well as by the Commissioner.
[ Footnote 8 ] While it is true
that this Court has not passed on its validity, it has been well
recognized for 20 years, and Congress has made no change in it
though the Code has been reenacted on three subsequent occasions.
This bespeaks congressional approval. Helvering v.
Winmill, 305 U. S. 79 , 305 U. S. 83 .
Furthermore, Congress has since specifically recognized the hedging
exception here under consideration in the short-sale rule of §
1233(a) of the 1954 Code. [ Footnote
9 ]

															We believe that the statute clearly refutes the contention of
Corn Products. Moreover, it is significant to note that practical
considerations lead to the same conclusion. To hold otherwise would
permit those engaged in hedging transactions to transmute ordinary
income into capital Page 350 U. S. 54 gain at will. The hedger may either sell the future and purchase
in the spot market or take delivery under the future contract
itself. But if a sale of the future created a capital transaction,
while delivery of the commodity under the same future did not, a
loophole in the statute would be created, and the purpose of
Congress frustrated.

															The judgment is Affirmed. MR. JUSTICE HARLAN took no part in the consideration or decision
of this case.

															[ Footnote 1 ]

															A commodity future is a contract to purchase some fixed amount
of a commodity at a future date for a fixed price. Corn futures,
involved in the present case, are in terms of some multiple of five
thousand bushels to be delivered eleven months or less after the
contract. Cf. Hoffman, Future Trading (1932) 118.

															[ Footnote 2 ]

															The grant was limited to the following two questions:

															"1. Are transactions in commodity futures which are not 'true
hedges' capital asset transactions, and thus subject to the
limitations of Section 117 of the Internal Revenue Code of 1939, or
do the resulting gains and losses from such transactions give rise
to ordinary income and ordinary deductions?"

															"2. Are commodity futures contracts 'securities,' and thus
subject to the 'wash sales' provisions of Section 118 of the
Internal Revenue Code of 1939?"

															[ Footnote 3 ] Makransky's Estate v. Commissioner, 154 F.2d 59; Commissioner v. Farmers & Ginners Cotton Oil Co., 120
F.2d 772; Trenton Cotton Oil Co. v. Commissioner, 147 F.2d
33.

															[ Footnote 4 ]

															Petitioner had contracts with three consumers to furnish, for a
period of ten years or more, large quantities of starch or feed. In
January, 1940, petitioner had sold 2,000,000 bags of corn sugar,
delivery to be made several months in the future. Also, members of
the canning industry in the Pacific Coast had contracts to purchase
corn sugar for delivery in more than thirty days.

															[ Footnote 5 ]

															The dispositions of the corn futures during the period in
dispute were as follows: Sales of Delivery under futures thousand futures thousand bushels bushels

															1938 17,400 4,975

															1939 14,180 2,865

															1940 14,595 250

															1941 2,545 2,175

															1942 5,695 4,460

															[ Footnote 6 ]

															"(1) CAPITAL ASSETS. The term 'capital assets' means property
held by the taxpayer (whether or not connected with his trade or
business), but does not include stock in trade of the taxpayer or
other property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the taxable
year, or property held by the taxpayer primarily for sale to
customers in the ordinary course of his trade or business, or
property, used in the trade or business, of a character which is
subject to the allowance for depreciation provided in section
23(1); . . ."

															[ Footnote 7 ]

															Section 208(8) of the Revenue Act of 1924 limited "capital
assets" to property held more than two years. This definition was
retained until the Act of 1934. Since the rules of the various
commodity exchanges required that futures contracts be closed out
in periods shorter than two years, these contracts could not
qualify as capital assets.

															[ Footnote 8 ] Stewart Silk Corp. v. Commissioner, 9 T.C. 174; Battelle v. Commissioner, 47 B.T.A. 117; Grote v.
Commissioner, 41 B.T.A. 247. See Estate of Makransky v.
Commissioner, 5 T.C. 397, 412, aff'd per curiam, 154
F.2d 59; Trenton Cotton Oil Co. v. Commissioner, 147 F.2d
33, 35; Commissioner v. Farmers & Ginners Cotton Oil
Co., 120 F.2d 772, 774; Tennessee Egg Co. v.
Commissioner, 47 B.T.A. 558, 560; G.C.M. 18383, 1937-2
Cum.Bull. 244, 245; I.T. 3137, 1937-2 Cum.Bull. 164, 166. Cf.
Commissioner v. Banfield, 122 F.2d 1017, 1019-1020; G.C.M.
18658, 1937-2 Cum.Bull. 77.

															[ Footnote 9 ]

															Section 1233(a) provides that gain or loss from "the short sale
of property, other than a hedging transaction in commodity
futures," shall be treated as gain or loss from the sale of a
capital asset to the extent "that the property, including a
commodity future, used to close the short sale constitutes a
capital asset in the hands of a taxpayer." The legislative history
recognizes explicitly the hedging exception. H.R.Rep. No. 1337, 83d
Cong., 2d Sess., p. A278; S.Rep. No. 1622, 83d Cong., 2d Sess., p.
437:

															"Under existing law, bona fide hedging transactions do
not result in capital gains or losses. This result is based upon
case law and regulations. To continue this result, hedging
transactions in commodity futures have been specifically excepted
from the operation of this subsection."


U.S. Supreme Court Flora v. United States, 357 U.S.
63 (1958) Flora v. United
States No. 492 Argued May 20, 1958 Decided June 16, 1958 357 U.S.
63 CERTIORARI TO THE UNITED STATES
COURT OF APEALS FOR THE TENTH
CIRCUIT Syllabus A taxpayer must pay the full amount of an income tax deficiency
assessed by the Commissioner of Internal Revenue before he may
challenge its correctness by a suit in a federal district court for
refund under 28 U.S.C. § 1346(a)(1). Pp. 357 U. S.
63 -76.

															246 F.2d 929, affirmed.

															MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

															The issue in this case is whether a taxpayer must pay the full
amount of an income tax deficiency before he may challenge its
correctness by a suit for refund under 28 U.S.C. § 1346(a)(1).

															During 1950, petitioner suffered losses on the sale of certain
commodities and futures. He reported them as ordinary losses, but
the Commissioner of Internal Revenue characterized them as capital
losses. A deficiency assessment was levied in the amount of
$28,908.60, including interest. Petitioner made two payments that
totaled $5,058.54, and then submitted a claim for refund of that
amount. The claim was disallowed. On Aug. 3, 1956, petitioner
brought this action under 28 U.S.C. § 1346(a)(1) for refund. The
United States moved to Page 357 U. S. 64 dismiss for want of jurisdiction and for failure to state a
claim upon which relief could be granted. The district judge held
that, because petitioner had not paid the full amount of the
deficiency, he "should not maintain" the action. Because the
question had not been resolved by the Court of Appeals, however, he
deemed it advisable to pass upon the merits, and, upon doing so,
entered judgment for defendant United States. 142 F.
Supp. 602 , 604. The Court of Appeals for the Tenth Circuit
vacated the judgment and remanded with instructions to dismiss,
holding that the complaint "failed to state a claim" because
petitioner had not paid the entire assessment for the period in
question. 246 F.2d 929, 931. [ Footnote 1 ] We granted certiorari, 355 U.S. 881, to
resolve the conflict between that decision and Bushmiaer v.
United States, 230 F.2d 146. [ Footnote 2 ]

															The pertinent jurisdictional statute, 28 U.S.C. § 1346(a)(1),
reads as follows:

															"(a) The district courts shall have original jurisdiction,
concurrent with the Court of Claims, of:"

															"(1) Any civil action against the United States for the recovery
of any internal revenue tax alleged to have been erroneously or
illegally assessed or collected, or any penalty claimed to
have been collected without authority or any sum alleged
to have been excessive or in any manner wrongfully collected under
the internal revenue laws. . . ."

															(Emphasis supplied.) Page 357 U. S. 65 In matters of statutory construction, the duty of this Court is
to give effect to the intent of Congress, and, in doing so, our
first reference is, of course, to the literal meaning of words
employed. The principle of strict construction of waivers of
sovereign immunity, United States v. Michel, 282 U.
S. 656 , and the sharp division of opinion among the
lower courts on the meaning of the pertinent statutory language
suggest the presence of ambiguity in what might otherwise be termed
a clear authorization to sue for the refund of "any sum."
Consequently, a thorough consideration of the relevant legislative
history is required.

															Section 1346 was originally enacted as Section 1310(c) of the
Revenue Act of 1921. [ Footnote
3 ] Its essential language seems to have been copied from R.S. §
3226, the predecessor of the present claim for refund statute, 26
U.S.C. (Supp. V) § 7422(a). Those statutes use language identical
to that appearing above to provide that no suit for the refund of a
"tax," "penalty," or "sum" shall be maintained until similar relief
has been sought from the Secretary or his delegate. [ Footnote 4 ] The meaning that has been
ascribed to this language in the claim for refund statute provides
the key to what Congress intended when it used that language in the
jurisdictional provision. Page 357 U. S. 66 The original claim for refund statute, Section 19 of the Revenue
Act of July 13, 1866, provided that no suit should be maintained in
any court for the recovery of

															"any tax alleged to have been erroneously or illegally assessed
or collected, until appeal shall have been duly made to the
commissioner of internal revenue. . . . [ Footnote 5 ]"

															On this "appeal," the Commissioner was empowered to "remit,
refund, and pay back" all taxes or penalties improperly assessed or
collected. [ Footnote 6 ] When
the appeal requirement was restated in Section 3226 of the Revised
Statutes, [ Footnote 7 ] Congress
added the "penalty" and "sum" clauses, bringing together for the
first time the three-way division that survives in 26 U.S.C. (Supp.
V) § 7422(a) and 28 U.S.C. § 1346(a)(1). The revisers left no
indication of what significance, if any, was to be attached to this
addition.

															During the period of this formative legislation, refund suits
could not be brought against the United States, because of its
sovereign immunity. Tax litigation took the form of an action of
assumpsit against the collector. Page 357 U. S. 67 See Philadelphia v.
Diehl , 5 Wall. 720. [ Footnote 8 ] Such suits were, of course, subject to the
provision in Section 19 of the 1866 Act that they must be preceded
by "appeal" to the Commissioner. The meaning of that command, which
later became R.S. § 3226 and eventually, as amended, 26 U.S.C.
(Supp. V) § 7422(a), was considered in Cheatham v. United
States, 92 U. S. 85 . There,
in response to an appeal, the Commissioner of Internal Revenue had
set aside the first assessment of taxpayer's 1864 income taxes and
directed the local assessor to make a second one. The taxpayer paid
the second assessment and sued the collector for refund. The Court
held that, by failing to appeal from the second assessment, the
taxpayer failed to comply with Section 19, and hence had no right
of action. In the course of its opinion, the Court made this
careful statement of the remedies then available to taxpayers who
sought to contest the correctness of their tax:

															"So also, in the Internal Revenue Department, the statute which
we have copied allows appeals from the assessor to the Commissioner
of Internal Revenue, and, if dissatisfied with his decision, on
paying the tax, the party can sue the collector; and, if the money
was wrongfully exacted, the courts will give him relief by a
judgment, which the United States pledges herself to pay."

															" * * * * Page 357 U. S.
68 " ". . . While a free course of remonstrance and appeal is allowed
within the departments before the money is finally exacted, the
General Government has wisely made the payment of the tax
claimed, whether of customs or of internal revenue, a
condition precedent to a resort to the courts by the party against
whom the tax is assessed. . . . If the compliance with this
condition [that suit must be brought within six months of the
Commissioner's decision] requires the party aggrieved to pay the
money, he must do it. He cannot, after the decision is rendered
against him, protract the time within which he can contest that
decision in the courts by his own delay in paying the money. It is
essential to the honor and orderly conduct of the Government that
its taxes should be promptly paid, and drawbacks speedily adjusted,
and the rule prescribed in this class of cases is neither arbitrary
nor unreasonable. . . ."

															"The objecting party can take his appeal. He can, if the
decision is delayed beyond twelve months, rest his case on that
decision, or he can pay the amount claimed and commence
his suit at any time within that period. So, after the decision, he
can pay at once, and commence suit within the six months. . . .
[ Footnote 9 ]"

															(Emphasis added.)

															From this carefully considered dictum, it is unmistakably clear
that the Court understood the statutes of that time to require full
payment of an assessed tax as a condition precedent to the right to
sue the collector for a refund. This understanding of the statutory
scheme appears to have prevailed for the succeeding fifty or sixty
years. It was never suggested that the addition in R.S. § 3226 of
the clause beginning "any sum" effected any change. The Cheatham case was decided after that Page 357 U. S. 69 addition was made, and it gave no indication that the "condition
precedent" of which it spoke had already been abrogated by
Congress. Consistent with that understanding, there does not appear
to be a single case before 1940 in which a taxpayer attempted a
suit for refund of income taxes without paying the full amount the
Government alleged to be due. Court opinions that took occasion to
comment on the extent of payment are consistent with the Cheatham declaration, [ Footnote 10 ] and that case has continued to be cited with
approval to the present day. [ Footnote 11 ] Such was the understanding of the necessity
for full payment in the suit against the collector.

															Since the statute now under consideration, 28 U.S.C. §
1346(a)(1), employs language identical to that in the statute under
which the full payment understanding developed, R.S. § 3226, a
construction requiring full payment would appear to be more
consistent with the established meaning of the statutory language.
Furthermore, the situation with respect to tax suits against the
United States at the time 28 U.S.C. § 1346(a)(1) was enacted, the
express purpose of its enactment, and subsequent Page 357 U. S. 70 expressions of congressional intent all suggest that the
principle of full payment was to be preserved.

															The jurisdictional provision that is now 28 U.S.C. § 1346(a)(1)
was first enacted in Section 1310(c) of the Revenue Act of 1921.
[ Footnote 12 ] At that time,
the United States was already suable in the District Courts. Since
1887, the Tucker Act had allowed suit against the United States for
claims less than $10,000 "founded upon . . . any law of Congress .
. . ," [ Footnote 13 ] and
that language included suits to obtain refund of income taxes. United States v. Emery, Bird, Thayer Realty Co., 237 U. S. 28 . Since
R.S. § 3226 was cast in the broadest of terms, its requirement that
refund suits be preceded by an "appeal" to the Commissioner clearly
applied to the Tucker Act cases, United States v. Michel, 282 U. S. 656 , and
the related requirement that full payment must be made prior to
suit seems to have been assumed to be equally applicable. For
amounts in excess of the $10,000 Tucker Act limitation, the
taxpayer could invoke his old remedy against the Collector.

															The complementary nature of the two District Court remedies was
impaired when this Court reemphasized the rule requiring the

															Collector to be sued personally. A suit against the office or
the successor in office of a deceased collector could not be
maintained. Smietanka v. Indiana Steel Co., 257 U. S.
1 (1921). Senator Jones of New Mexico interrupted floor
debate on the Revenue Act of 1921 to call attention to this
decision. In his view, it meant that, when the particular collector
was dead, a taxpayer suing for more than $10,000 had to bring suit
in the Court of Claims. In addition to the extra expense and
inconvenience of litigating in Washington, a Court of Claims Page 357 U. S. 71 judgment carried no interest. The Senator proposed an amendment,
stating:

															"What is here proposed is that we shall remedy that situation by
providing that, where the collector to whom the revenue was paid
has died, then the claimant may sue the United States. It simply
brings about an equitable situation, and prevents the taxpayer from
having to suffer the hardships which would be brought upon him
simply through the accident of the death of the collector to whom
he paid the money. I offer the amendment for the purpose of
remedying that situation. [ Footnote 14 ]"

															The amendment, which was accepted without further comment,
conferred jurisdiction on the District Court,

															"Concurrent with the Court of Claims, of any suit or proceeding,
commenced after the passage of the revenue act of 1921, for the
recovery of any internal revenue tax alleged to have been
erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority or any sum alleged
to have been excessive or in any manner wrongfully collected under
the internal revenue laws, even if the claim exceeds $10,000, if
the Collector of Internal Revenue by whom such tax, penalty, or
such was collected is dead at the time such suit or proceeding is
commenced. [ Footnote
15 ]"

															The amendment's narrow-stated purpose refutes any suggestion
that Congress intended further to expand or even Page 357 U. S. 72 to restate the jurisdiction of the District Court in refund
suits brought against the United States. As we have seen, the
District Courts already had such jurisdiction under the Tucker Act,
and there is no indication that Congress intended any change in the
terms on which that action was made available other than the change
that was clearly set forth. The statute that is now 28 U.S.C. §
1346(a) (1) was enacted merely to remove the jurisdictional amount
limitation of the Tucker Act in the special situation where the
Collector could not be sued. See Lowe Bros. Co. v. United
States, 304 U. S. 302 , 304 U. S. 305 .
The House Conference Report and a contemporary Treasury Department
declaration confirm this view of the statute's effect. [ Footnote 16 ]

															The similarity of essential language leaves no doubt that the
terms of the jurisdictional provision were copied from the claim
for refund statute, R.S. § 3226, as amended by Section 1318 of the
Revenue Act of 1921. [ Footnote
17 ] The fact that this language had for many years been
considered to require full payment before suing the Collector, and
the fact that the avowed purpose of the 1921 amendment was merely
to cure an inadequacy in the suit against the Collector, combine as
persuasive indications that no change was intended in the full
payment principle declared in Cheatham v. United States,
supra. When Congress created the Board of Tax Appeals in 1924,
[ Footnote 18 ] it
demonstrated a clear understanding that refund suits could only be
maintained upon full payment of the Page 357 U. S. 73 tax alleged to be due. The House Committee proposing the bill
explained its purpose as follows:

															"The committee recommends the establishment of a Board of Tax
Appeals to which a taxpayer may appeal prior to the payment of an
additional assessment of income, excess profits, war profits, or
estate taxes. Although a taxpayer may, after payment of his tax,
bring suit for the recovery thereof, and thus secure a judicial
determination of the questions involved, he cannot, in view of
Section 3224 of the Revised Statutes, which prohibits suits to
enjoin the collection of taxes, secure such a determination prior
to the payment of the tax. The right of appeal after payment of the
tax is an incomplete remedy, and does little to remove the hardship
occasioned by an incorrect assessment. The payment of a large
additional tax on income received several years previous and which
may have, since its receipt, been either wiped out by subsequent
losses, invested in nonliquid assets, or spent, sometimes forces
taxpayers into bankruptcy, and often causes great financial
hardship and sacrifice. These results are not remedied by
permitting the taxpayer to sue for the recovery of the tax after
this payment. He is entitled to an appeal and to a determination of
his liability for the tax prior to its payment. [ Footnote 19 ]"

															Petitioner argues that the "hardship" the Board of Tax Appeals
was created to alleviate was not the taxpayer's inability to sue
without paying the whole tax -- for petitioner erroneously
concludes that the 1921 amendment conferred that right -- but the
Government's power to Page 357 U. S. 74 collect the balance due while a refund suit was in progress. But
the Committee Report quoted above clearly demonstrates that the
hardship about which the Congress was concerned was the hardship of
prelitigation payment, not post-litigation collection. Old
Colony Trust Co. v. Commissioner, 279 U.
S. 716 , 279 U. S. 721 .
[ Footnote 20 ]

															The final step in the evolvement of 28 U.S.C. § 1346(a)(1) took
place in the Act of July 30, 1954, [ Footnote 21 ] which removed the $10,000 jurisdictional
limitation and eliminated the condition about the Collector's being
dead or out of office. Far from indicating an intent to allow suit
without full payment of the tax due, the legislative history of
that amendment shows a clear understanding of the Cheatham requirement, and demonstrates a narrow purpose in no way
inconsistent with that requirement. The House Report states:

															"The purpose of this bill is to permit taxpayers a greater
opportunity to sue the United States in the district court of their
own residence to recover taxes which they feel have been wrongfully
collected. This is done by removing the jurisdictional limitation
of $10,000 now imposed on such suits. [ Footnote 22 ]"

															In explaining the present state of the law, the Report goes on
to point out that a taxpayer may contest a deficiency assessment by
a petition in the Tax Court. "The taxpayer Page 357 U. S. 75 may, however," the Report continues, "elect to pay his tax, and
thereafter bring suit to recover the amount claimed to have been
illegally exacted." [ Footnote
23 ]

															The foregoing study of the legislative history of 28 U.S.C. §
1346(a)(1) and related statutes leaves no room for contention that
their broad terms were intended to alter in any way the Cheatham principle of "pay first and litigate later."
[ Footnote 24 ] For many
years, that principle has been reinforced by the rule that no suit
can be maintained for the purpose of restraining the assessment or
collection of any tax. [ Footnote
25 ] More recently, Congress took care to except from the
operation of the Federal Declaratory Judgments Act any
controversies "with respect to Federal taxes." [ Footnote 26 ] To ameliorate the hardship
produced by these requirements, Congress created a special court
where tax questions could be adjudicated in advance of any payment.
But there is no indication of any intent to create the hybrid
remedy for which petitioner contends.

															It is suggested that a part-payment remedy is necessary for the
benefit of a taxpayer too poor to pay the full amount of the tax.
Such an individual is free to litigate in the Tax Court without any
advance payment. Where the time to petition that court has expired,
or where for some other reason a suit in the District Court seems
more desirable, the requirement of full payment may in some
instances work a hardship. But since any hardship would grow out of
an opinion whose effect Congress in successive Page 357 U. S. 76 statutory revisions has made no attempt to alter, if any
amelioration is required it is now a matter for Congress, not this
Court.

															The judgment of the Court of Appeals is Affirmed. MR. JUSTICE WHITTAKER, believing that Bushmiaer v. United
States, 230 F.2d 146; Sirian Lamp Co. v. Manning, 123
F.2d 776, and Coates v. United States, 111 F.2d 609,
properly apply the statutes involved and should be followed, would
reverse the judgment below.

															[ Footnote 1 ] See also Suhr v. United States, 18 F.2d 81. But cf.
Sirian Lamp Co. v. Manning, 123 F.2d 776.

															[ Footnote 2 ] See also Sirian Lamp Co. v. Manning, 123 F.2d 776; Coates v. United States, 111 F.2d 609. But cf.
Bendheim v. Commissioner, 214 F.2d 26, 28; Elbert v.
Johnson, 164 F.2d 421, 423-424.

															[ Footnote 3 ]

															42 Stat. 311.

															[ Footnote 4 ]

															26 U.S.C. (Supp. V) § 7422(a):

															"No suit or proceeding shall be maintained in any court for the
recovery of any internal revenue tax alleged to have been
erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum
alleged to have been excessive or in any manner wrongfully
collected, until a claim for refund or credit has been duly filed
with the Secretary or his delegate, according to the provisions of
law in that regard, and the regulations of the Secretary or his
delegate established in pursuance thereof."

															R.S. § 3226 is quoted in note
7 infra. [ Footnote 5 ]

															14 Stat. 152.

															[ Footnote 6 ]

															14 Stat. 111.

															[ Footnote 7 ]

															"No suit shall be maintained in any court for the recovery of
(1) any internal tax alleged to have been erroneously or illegally
assessed or collected, or of (2) any penalty claimed to have been
collected without authority, or of (3) any sum alleged to have been
excessive or in any manner wrongfully collected, until appeal shall
have been duly made to the Commissioner of Internal Revenue. . .
."

															R.S. § 3226.

															This language is practically identical to that used by the 1866
Act in giving the Commissioner his refunding powers. 14 Stat. 111,
restated in R.S. § 3220. The first category dates back to the 1863
Act. 12 Stat. 729. The third category was added in 1864. 13 Stat.
239. The 1866 Act rounded out the three categories by adding the
second. 14 Stat. 111. An examination of the legislative history
discloses no indication of the purpose of these successive
additions.

															[ Footnote 8 ]

															Initially, such suits depended upon diversity jurisdiction. Collector v.
Hubbard , 12 Wall. 1. Later, Congress created
jurisdiction for "all causes arising under any law providing
internal revenue. . . ." R.S. § 629(4). With slight modification,
that provision became Section 24(5) of the Judicial Code, 36 Stat.
1092, and is presently 28 U.S.C. § 1340. See Lowe Bros. Co. v.
United States, 304 U. S. 302 , 304 U. S.
305 .

															[ Footnote 9 ]

															92 U.S. at 92 U. S.
88 -89.

															[ Footnote 10 ] Kings County Savings Institution v. Blair, 116 U.
S. 200 , 116 U. S. 205 (1886) ("No claim for the refunding of taxes can be made according
to law and the regulations until after the taxes have been paid
[and] . . . no suit can be maintained for taxes illegally collected
unless a claim therefor has been made within the time prescribed by
the law."); Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 , 157 U. S. 609 (1895) (dissenting opinion) ("The same authorities [including the Cheatham case] have established the rule that the proper
course, in a case of illegal taxation, is to pay the tax under
protest or with notice of suit, and then bring an action against
the officer who collected it."); Dodge v. Osborn, 240 U. S. 118 , 240 U. S. 120 (1916) ("The remedy of a suit to recover back the tax after it is
paid is provided by statute. . . ."); see note 20 infra. [ Footnote 11 ] E.g., Phillips v. Commissioner, 283 U.
S. 589 , 283 U. S. 595 ; United States v. Jefferson Electric Mfg. Co., 291 U.
S. 386 , 291 U. S.
395 -396; Dobson v. Commissioner, 320 U.
S. 489 , 320 U. S.
496 .

															[ Footnote 12 ]

															42 Stat. 311.

															[ Footnote 13 ]

															24 Stat. 505, 28 U.S.C. § 1346(a)(2).

															[ Footnote 14 ]

															61 Cong.Rec. 7506-7507.

															[ Footnote 15 ]

															61 Cong.Rec. 7507. A second amendment provided that interest
should be allowed in any judgment against the United States in
these refund suits. Ibid. A special amendment in 1925
added the right to bring such refund suits when the collector "is
not in office." 43 Stat. 972.

															[ Footnote 16 ]

															H.R.Rep.No.486, 67th Cong., 1st Sess. 57; II-1 Cum.Bull. 224,
225.

															[ Footnote 17 ]

															42 Stat. 314. The 1921 Act substituted "claim for refund or
credit" where the statute formerly referred to an "appeal" to the
Commissioner.

															[ Footnote 18 ]

															43 Stat. 336.

															[ Footnote 19 ]

															H.R.Rep.No.179, 68th Cong., 1st Sess. 7. The Senate Committee on
Finance made a similar explanation. S.Rep.No.398, 68th Cong., 1st
Sess. 8.

															[ Footnote 20 ]

															"The Board of Tax Appeals . . . was created by Congress to
provide taxpayers an opportunity to secure an independent review of
the Commissioner of Internal Revenue's determination of additional
income and estate taxes by the Board in advance of their paying the
tax found by the Commissioner to be due. Before the act of 1924,
the taxpayer could only contest the Commissioner's determination of
the amount of the tax after its payment."

															[ Footnote 21 ]

															68 Stat. 589.

															[ Footnote 22 ]

															H.R.Rep.No.659, 83d Cong., 1st Sess. 1.

															[ Footnote 23 ] Id. at 2. And see S.Rep.No.115, 83d Cong., 1st
Sess.

															[ Footnote 24 ] Allen v. Regents of University System of Georgia, 304 U. S. 439 , 304 U. S. 456 (concurring opinion).

															[ Footnote 25 ]

															14 Stat. 475 (1867), reenacted in R.S. § 3224, presently in
force as 26 U.S.C. (Supp. V) § 7421.

															[ Footnote 26 ]

															49 Stat. 1027, 28 U.S.C. § 2201. See S.Rep.No.1240,
74th Cong., 1st Sess. 11.