Bowers, Collector of Internal Revenue v. New York & Albany Lighterage Co. Same v. Seaman. Same v. Fuller

Background

Three taxpayers filed and paid income or excess-profits tax returns for 1916 and 1917. Additional taxes were later assessed, and in several cases the tax collector, more than five years after the return dates, distrained and sold personal property to satisfy the claimed taxes. Those taxpayers sued in federal court to recover the amounts taken and to stop collection, and the Courts of Appeals affirmed judgments for the taxpayers before the cases came to the Supreme Court.

Reasoning

The central question was whether the five-year time limit in § 250(d) of the Revenue Act of 1921 forbids not only lawsuits but also distraint seizures begun after that period. The Court held that the word "proceeding" in the statute includes steps to distrain and sell property. The opinion relied on the statute’s purpose to give taxpayers repose, the common use of distraint to collect taxes, related provisions in the Internal Revenue statutes, and later Revenue Acts that plainly treated distraints as covered. The Court rejected the Government’s argument that any ambiguity must be resolved for the United States and instead applied the limitation to distraints.

Real world impact

The decision prevents collectors from initiating distraint seizures to enforce tax claims more than five years after a return was filed, when the statute requires assessment and collection within that period. Taxpayers are therefore protected from late, surprise property seizures for old income or excess-profits tax claims. Judgments for the taxpayers were affirmed by the Court.