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U.S. Supreme Court

Automobile Club of Michigan v. Commissioner, 353 U.S. 180 (1957)

Automobile Club of Michigan v. Commissioner of Internal Revenue

No. 89

Argued March 6-7, 1957

Decided April 22, 1957

353 U.S. 180


The Commissioner of Internal Revenue, by rulings in 1934 and 1938, exempted petitioner automobile club from income taxes as a "club" within the meaning of provisions corresponding to § 101(9) of the Internal Revenue Code of 1939. In 1945, the Commissioner revoked his 1934 and 1938 rulings, which were based upon a mistake of law, and directed petitioner to file returns for 1943 and subsequent years. The Commissioner also determined that prepaid membership dues received by petitioner should be treated as income in the year received. The Tax Court sustained the Commissioner's determinations, and the Court of Appeals affirmed.

Held: the judgment is affirmed. Pp. 353 U. S. 181-190.

1. The Commissioner had power to apply the revocation retroactively to 1943 and 1944. Pp. 353 U. S. 183-185.

(a) The doctrine of equitable estoppel does not bar correction by the Commissioner of a mistake of law. P. 353 U. S. 183.

2. In the circumstances of this case, the Commissioner did not abuse the discretion vested in him by § 3791(b) of the 1939 Code. Pp. 353 U. S. 184-186.

(a) It is clear from the language and legislative history of § 3791(b) that it confirmed the authority of the Commissioner to correct any ruling, regulation or Treasury decision retroactively, and empowered him, in his discretion, to limit retroactive application to the extent necessary to avoid inequitable results. P. 353 U. S. 184.

(b) Helvering v. Reynolds Co., 306 U. S. 110, distinguished. Pp. 184-185.

(c) Having dealt with petitioner upon the same basis as other automobile clubs, the Commissioner did not abuse his discretion. Pp. 353 U. S. 185-186.

(d) The 2-year delay in proceeding with petitioner's case did not, in the circumstances, vitiate the Commissioner's action. P. 353 U. S. 186.

3. In the circumstances of this case, assessment of tax deficiencies against petitioner for 1943 and 1944 was not barred by limitations under §§ 275(a) and 276(b) of the 1939 Code. Pp. 353 U. S. 186-187. chanroblesvirtualawlibrary

Page 353 U. S. 181

(a) The express condition prescribed by Congress was that the statute was to run against the United States from the date of the actual filing of the return, and no action of the Commissioner can change or modify the conditions under which the United States consents to the running of the statute of limitations against it. P. 353 U. S. 187.

(b) Form 990 returns are not tax returns within the contemplation of § 275(a) of the 1939 Code. Pp. 353 U. S. 187-188.

4. The Commissioner's determination that the entire amount of prepaid dues received in each year by petitioner should be reported as income for that year (instead of being allocated over the following 12 months) did not exceed the permissible limits of the Commissioner's discretion under § 41 of the 1939 Code. Pp. 353 U. S. 188-190.

230 F.2d 585, affirmed.

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