Blair v. Oesterlein MacHine Co.

Background

A corporation paid excess-profits taxes for 1918, 1919, and 1920. The Commissioner treated the three years together, reduced the 1918 tax by a special assessment under §§327–328, increased the 1919 tax, and found an overall deficiency. The taxpayer appealed, arguing the 1918 comparison standard was wrong and that the 1919 tax should also have been assessed under the special method. The Board of Tax Appeals issued a subpoena seeking information from twelve corporations’ returns relevant to those claims. The Commissioner refused to obey, arguing his special-assessment decisions could not be appealed.

Reasoning

The Court addressed whether determinations made under §§327 and 328 can be reviewed by the Board of Tax Appeals and whether the Board may require return information by subpoena. It explained the Board was created to hear and decide appeals, to administer oaths, compel witnesses and documents, and to affirm, set aside, or modify the Commissioner’s decisions. The Court found the special-assessment rules are made from prescribed data and statutory standards and are therefore susceptible to judicial review. Concerns about the confidentiality of returns did not prevent compelled disclosure in a lawful judicial or quasi-judicial proceeding, and the Treasury had recognized that returns may be used as evidence.

Real world impact

The decision means taxpayers can challenge the Commissioner’s use of the special-assessment method and the Board can obtain relevant corporate return information by subpoena in such appeals. The decree was affirmed but modified to leave open other jurisdictional questions about the 1918 appeal and the admissibility of certain information in the 1919 hearing.