Nevertheless, the opinion of this Court in Cheatham v. United States, 92 U.S. 85, prevents us from accepting the [154] analogy between the statutory action against the Collector and the common-law count. In this 1875 opinion, the Court described the remedies available to taxpayers as follows:

"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.

66

. . 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. predecent to a resort to the courts by the party against whom the tax is assessed. . . . If the compliance with this condition [that appeal must be made to the Commissioner and suit brought within six months of his 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, [155] 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 U.S., at 88-89. (Emphasis added.)

وو

92

Reargument has not changed our view that this language reflects an understanding that full payment of the tax was a prerequisite to suit. Of course, as stated in our prior opinion, the Cheatham statement is dictum; but we reiterate that it appears to us to be "carefully considered dictum." 357 U.S., at 68. Equally important is the fact that the Court was construing the claim-for-refund statute from which, as amended, the language of § 1346 (a) (1) was presumably taken. Thus it seems that in Cheatham the Supreme Court interpreted this language not only to specify which claims for refund must first be presented for administrative reconsideration, but also to constitute an additional qualification upon the statutory right to sue the Collector. It is true that the version of the provision involved in Cheatham contained only the phrase "any tax." But the phrases "any penalty" and "any sum" were added well before the decision in Cheatham: 15 the history of these amendments makes it quite clear that they were not designed to effect any change relevant to the

14 See note 16, infra.

15 Cheatham was decided in O.T. 1875, while the phrases in question were added to the statute on June 6, 1872. See note 16, infra, for a discussion of the statute involved in Cheatham and its amendment.

Cheatham rule; language in [156] opinions of this Court after Cheatham is consistent with the Cheatham statement; and in any event, as we have indicated, we can see nothing in these additional words which would negate the full-payment requirement.

[157] If this were all the material relevant to a construction of § 1346 (a) (1), determination of the issue at bar would be inordinately difficult. Favoring petitioner would be the theory that, in the early nineteenth century, a suit for recovery of part payment of an assessment could be maintained against the Collector, together with the absence of any conclusive evidence that Congress has ever intended to inaugurate a new rule; favoring respondent would be the Cheatham statement and the language of the 1921 statute. There are, however, additional factors which are dispositive.

We are not here concerned with a single sentence in an isolated statute, but rather with a jurisdictional provision which is a keystone in a carefully articulated and quite complicated structure of tax laws. From these related statutes, all of which were passed after 1921, it is apparent that Congress has several times acted upon the assumption that § 1346 (a) (1) requires full payment before suit. Of course, if the clear purpose of Congress at any time had been to permit suit to recover a part payment, this subsequent legislation would have to be disregarded. But, as we have stated, the evidence pertaining to this intent [158] is extremely weak, and we are convinced that it is entirely too insubstantial to justify destroying the existing harmony of the tax statutes. The laws which we consider especially pertinent are the statute establishing the Board of Tax Appeals (now the

18 Section 19 of the Act of July 13, 1866, c. 184, 14 Stat. 152, was involved in Cheatham. That section provided:

"SEC. 19. . [N]o suit shall 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

The phrases "any penalty" and "any sum" were first introduced into the statute in § 44 of the Act of June 6, 1872, c. 315, 17 Stat. 257-258, which read as follows:

"SEC. 44. That all suits and proceedings for the recovery of any internal tax alleged to have been erroneously assessed or collected, or any penalty claimed to have been collected without authority, or for any sum which it is alleged was excessive, or in any manner wrongfully collected, shall be brought within two years next after the cause of action accrued and not after; and all claims for the refunding of any internal tax or penalty shall be presented to the commissioner of internal revenue within two years next after the cause of action accrued and not after (Emphasis added.)

A careful reading of this statute discloses the absurd result which would flow from construing the addition of the "any sum" language to affect the full-payment rule, which, under this argument, would be based upon the “any tax" phrase in the 1866 statute. That is, since the "any sum" phrase occurs only in the statute of limitations portion of the 1872 statute, and not in the claim-for-refund provision, a person would be able to bring a suit for part payment without filing a claim for refund.

There were no material changes in R.S. § 3226, which provided:

"SEC. 3226. No suit shall be maintained in any court for the recovery of any internal 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 appeal shall have been duly made to the Commissioner of Internal Revenue .

It is no doubt true, as petitioner says, that these various amendments were designed to require submission of all litigable claims to the Commissioner; but, as we have explained, this indicates no more than an intent to cover taxes, penalties, and sums which might, strictly speaking, be neither taxes nor penalties.

17 Kings County Savings Institution v. Blair, 116 U.S. 200, 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. [N]o suit can be maintained for taxes illegally collected unless

a claim therefor has been made within the time prescribed by the law"); Pollack v. Farmers' Loan & Trust Co., 157 U.S. 429, 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"); Bailey v. George, 259 U.S. 16, 20 (1922) ("They might have paid the amount assessed under protest and then brought suit against the Collector ."). This view of Cheatham also corresponds to that of the Court of Appeals in this case. 246 F. 2d, at 930. See also Bushmiaer v. United States, 230 F. 2d 146, 152-155 (dissenting opinion).

Tax Court), the Declaratory Judgment Act, and § 7422 (e) of the Internal Revenue Code of 1954.

THE BOARD OF TAX APPEALS.

The Board of Tax Appeals was established by Congress in 1924 to permit taxpayers to secure a determination of tax liability before payment of the deficiency.18 The Government argues that the Congress which passed this 1924 legislation thought full payment of the tax assessed was a condition for bringing suit in a District Court; that Congress believed this sometimes caused hardship; and that Congress set up the Board to alleviate that hardship. Petitioner denies this, and contends that Congress' sole purpose was to enable taxpayers to prevent the Government from collecting taxes by exercise of its power of distraint.19

We believe that the legislative history surrounding both the creation of the Board and the subsequent revisions of the basic statute supports the Government. The House Committee Report, for example, explained the purpose of the bill 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, warprofits, or estate taxes. Although a taxpayer may, after payment of [159] his tax, bring suit for the recovery thereof and thus secure a judicial determination on the questions involved, he can not, 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." 20 (Emphasis added.)

Moreover, throughout the congressional debates are to be found frequent expressions of the principle that payment of the full tax was a precondition to suit: "pay his tax. . . then . . . file a claim for refund"; "pay the tax and then sue"; "a review in the courts after payment of the tax"; "he may still seek court review, but he must first pay the tax assessed"; "in order to go to court he must pay his assessment";

18 43 Stat. 336.

19 I.R.C. (1954), § 6331, 68A Stat. 783. The Government has possessed the power of distraint for almost 170 years. See Act of Mar. 3, 1791, c. 15, § 23, 1 Stat. 204.

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

The reference to R.S. § 3224 in the House Report clearly was meant simply to demonstrate that a determination prior to payment by way of an injunction suit was not possible because of the statutory bar to such a suit. This anti-injunction provision has been law for many decades. See Act of Mar. 2, 1867, c. 169, § 10, 14 Stat. 475. It is now 7421 of the Internal Revenue Code of 1954, 68A Stat. 876.

"he must pay it [his assess-[160]ment] before he can have a trial in court"; "pay the taxes adjudicated against him, and then commence a suit in a court"; "pay the tax . . . [t]hen . . sue to get it back"; paying his tax and bringing his suit"; "first pay his tax and then sue to get it back"; "take his case to the district court-conditioned, of course, upon his paying the assessment.” 21

Petitioner's argument falls under the weight of this evidence. It is true, of course, that the Board of Tax Appeals procedure has the effect of staying collection,22 and it may well be that Congress so provided in order to alleviate hardships caused by the long-standing bar against suits to enjoin the collection of taxes. But it is a considerable leap to the further conclusion that amelioration of the hardship of prelitigation payment as a jurisdictional requirement was not another important [161] motivation for Congress' action.23 To reconcile the legislative history with this conclusion seems to require the presumption that all the Congressmen who spoke of payment of the assessment before suit as a hardship understood-without sayingthat suit could be brought for whatever part of the assessment had been paid, but believed that, as a practical matter, hardship would nonetheless arise because the Government would require payment of the balance of the tax by exercising its power of distraint. But if this was in fact the view of these legislators, it is indeed extraordinary that they did not say so.24 [162] Moreover, if Congress' only concern was to prevent distraint, it is somewhat difficult to understand why Congress did not simply authorize injunction suits. It is interesting to note in this connection that bills to permit the same type of pre

21 See 65 Cong. Rec. 2621, 2684, 8110; 67 Cong. Rec. 525, 1144, 3529, 3755. As we have indicated, some of these remarks were made during debates over proposed changes in the Board of Tax Appeals legislation during the middle of the 1920's, but they all reflect Congress' understanding of the pre-1924 procedure and of the changes which were made by establishment of the Board. For example, shortly after the Board legislation was passed, Congress considered and rejected a proposal to make appeal to the Board and then to a Circuit Court of Appeals the taxpayer's sole remedy. In the course of the debate, a number of Senators discussed at length the taxpayer's right to bring a refund action in court. Some of the cited quotations are taken from that debate. The following remark of Senator Fletcher is also illuminating: is

"Mr. FLETCHER. . . . I think the most important right that is preserved here the right to go into the district court by the taxpayer upon the payment of the tax. I do not think that we ought to allow him to do that unless he does pay the tax; but when he pays the tax his right to go into the district court is preserved." 67 Cong. Rec. 3529. (Emphasis added.)

See also the materials quoted in note 24, infra.

22 See I.R.C. (1954), § 6213 (a), 68A Stat. 771. For the pertinent 1924 legislation, see Revenue Act of 1924, c. 234, § 274, 43 Stat. 297.

23 In Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 721, this Court expressed the view that the Board "was created by Congress to provide taxpayers an opportunity to secure an independent review 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."

.

24 There are a few interchanges among Senators which might be construed to indicate that they were thinking in terms of preventing distraint, but the same passages demonstrate even more clearly that these Senators also intended to eliminate the necessity of full payment as a prerequisite to suit. For example, the following debate occurred when Senator Reed, who was a member of the Committee on Finance, proposed an amendment which would have permitted a taxpayer to refuse to pay the deficiency even after the Board had ruled against him and which would have required the Government to sue in a District Court.

"Mr. REED of Missouri.

"The practice, as I understand it, has been to require the taxpayer to pay in the amount of the increased assessment, and then to allow him to get it back if he can. In addition to this, distraints frequently have been issued seizing the property of the citizen . .

"Mr. SWANSON. What are the processes by which a citizen who has overpaid can get back his money under the existing law?

"Mr. REED of Missouri. As I understand it, he pays his tax. Then he makes an application for a return of it. That is heard through the long, troublesome processes

payment litigation in the District Courts as is [163] possible in the Tax Court have been introduced several times, but none has ever been adopted.25

In sum, even assuming that one purpose of Congress in establishing the Board was to permit taxpayers to avoid distraint, it seems evident that another purpose was to furnish a forum where full payment of the assessment would not be a condition precedent to suit. The result is a system in which there is one tribunal for prepayment litigation and another for post-payment litigation, with no room contemplated for a hybrid of the type proposed by petitioner.

[164]

THE DECLARATORY JUDGMENT ACT.

The Federal Declaratory Judgment Act of 1934 26 was amended by § 405 of the Revenue Act of 1935 expressly to except disputes "with respect to Federal taxes." 27 The Senate Report explained the purpose of the amendment as follows:

"Your committee has added an amendment making it clear that the Federal Declaratory Judgments Act of June 14, 1934, has no application to Federal taxes. The application of the Declara

When the Treasury is satisfied

which exist. the taxpayer can go into court at that time. In the meantime, however, he has had to pay his money.

"Mr. SWANSON. Does the Senator mean that if there is a dispute, the tax is not assessed permanently against him until the board reaches its final decision?

"Mr. SMOOT. Until the board of appeals finally passes upon it, and after that if he wants to go to court he can do so, but in order to go to court he must pay his assessment. "Mr. REED of Missouri. He must pay it before he can have a trial in court.

"Mr. WALSH of Montana. Mr. President, the hardships in connection with the collection of these taxes is a very real one. . . . At least two or three instances have come under my notice, and my assistance has been asked in cases where the assessing officers have assessed against the [taxpayer] delinquent taxes of such an amount that he found it impossible to pay in advance and secure redress through the ordinary proceeding in a court of law, simply because it would bankrupt him to endeavor to raise the money. He was therefore obliged to suffer a distraint.

...

After the board of review determines the matter, it seems to me, that is as far as the Government ought to be interrupted in the matter of the collection of its revenues. Then the taxpayer would be obliged to pay the tax and take his ordinary action at law to recover whatever he claims was exacted of him illegally." 65 Cong. Rec. 8109-8114.

A somewhat similar exchange occurred during the 1926 debate over a proposal to prohibit refund suits where an appeal had been taken to the Board. "Mr. REED of Missouri.

Now just one further question :

"Why is it that a taxpayer can not be given his day in court by direct action, without first requiring him to pay the tax that is assessed? I know I shall be met with the statement that it would mean interminable delay to the Government; but it frequently happens that the tax that is assessed is ruinous, and that the taxpayer can not raise the money.

.

"In my own personal experience I have had two clients who were absolutely ruined by assessments that were unjust and that could not have stood up in a court of justice. [A]nd it was no protection to them to say, 'Pay your taxes and then go into court,' because they did not have the money to pay the taxes and could not raise the money to pay the taxes and be out of the money two or three years.

"... I think the bill needs just one more amendment in this particular, and that is a provision that any citizen can go into court without paying any tax and resist the payment. In the meantime I agree that the Government for its own protection ought to be allowed, perhaps, in such a case as that to issue a distraint. But the idea that a man must first pay his money and then sue to get it back is anomaly in the law." 67 Cong. Rec. 3530-3533. Senator Reed later proposed that the appeal from the Board be to the District Court instead of to the Circuit Court of Appeals, and Senator Wadsworth, a member of the Finance Committee, asked:

"Does the Senator not think that other provision in the bill which permits the taxpayer to take his case to the district court-conditioned, of course, upon his paying the assessment-meets the situation?" 67 Cong. Rec. 3755.

25 S. 1569, 81st Cong., 1st Sess.; S. 384, 82d Cong., 1st Sess.; H.R. 150 and H.R. 246, 83d Cong., 1st Sess.

26 48 Stat. 955, as amended, 28 U.S.C. §§ 2201, 2202.

27 49 Stat. 1027.