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BIDDLE V. COMMISSIONER, 302 U. S. 573 (1938)

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U.S. Supreme Court

Biddle v. Commissioner, 302 U.S. 573 (1938)

Biddle v. Commissioner of Internal Revenue

No. 55

Argued December 9, 10, 1937

Decided January 10, 1938*

302 U.S. 573


1. The Revenue Act of 1928 provides that, in the case of a citizen of the United States, the income tax imposed by the Act shall be credited (up to a specified limit) with the amount of any "income taxes paid" during the taxable year to any foreign country. Held that the meaning of the phrase "income taxes paid" is to be found in our own revenue laws, rather than in the statutes and decisions of the foreign country to which deductible tax payments are said to have been made. P. 302 U. S. 578.

2. Under the British law, as found in this case, a corporation pays the "standard" (normal) income tax on its profits, computed at the rate in force when it received them. When the profits are divided, the shareholder is not liable to any tax in respect of his dividend unless his income is such as to subject him to a surtax. In paying a dividend, the corporation has express permission to deduct "the tax appropriate thereto," and is directed to certify to the shareholder the gross amount of the dividend, the rate and amount of the income tax "appropriate" to the gross amount, and the net amount actually paid the shareholder. The tax "appropriate" to the dividend is computed by applying the standard rate for the year of distribution to the value of the money or property distributed, and will equal the tax at the standard rate paid by the corporation if, and only if, that rate was the same for the year in which the profits were earned as in the year when they are distributed. The shareholder's surtax is computed upon the gross dividend -- the dividend that he actually receives plus the tax deducted by the corporation. If his income is exempt, or less than the minimum subject to surtax, refund is made accordingly. The purpose of the certificate is to aid him in computing his surtax and in securing the benefit of any refund.

Held: chanroblesvirtualawlibrary

Page 302 U. S. 574

(1) That (aside from any question of surtax) the amount so certified as the tax "appropriate" to a dividend is not a tax paid by the shareholder, and cannot be credited against his United States income tax under Rev. Act 1928, § 131(a), as a tax paid to a foreign country. P. 302 U. S. 579.

(2) It is not deductible from his gross income under § 23(c)(2) of that Act, which allows deduction of income taxes imposed by the authority of any foreign country. P. 302 U. S. 583.

3. Departmental tax rulings not promulgated by the Secretary of the Treasury are of little aid in interpreting a tax statute. P. 302 U. S. 582.

4. Where the meaning of a statute is plain, subsequent reenactment does not adopt contrary administrative construction. Id.

5. The presumption that Congress, in reenacting a statute, can ascertain the course of administrative interpretation and, knowing its own intent, will correct the administrative ruling if mistaken cannot apply to rulings upon the intent of other legislative bodies. Rulings of our taxing authorities upon the force and effect of a tax law of a foreign country cannot have any more binding effect on courts than in the case of any determination of fact which calls into operation the taxing statutes. P. 302 U. S. 582.

86 F.2d 718 affirmed.

91 F.2d 973 reversed.

Certiorari, post, pp. 664, 677, to review judgments of two Circuit Courts of Appeals, one of which reversed, while the other affirmed, a decision of the Board of Tax Appeals, 33 B.T.A. 127, upholding deficiency assessments on income taxes. chanroblesvirtualawlibrary

Page 302 U. S. 575

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