United States v. Bennett

Background

The United States sued to recover a tax assessed under Section 37 of the Tariff Act of August 5, 1909, on a foreign-built yacht owned by a U.S. citizen. The collector assessed $13,601, and the owner answered that the yacht had its permanent situs in France and had been used entirely outside U.S. territory. The lower court rejected the Government’s claim and the case reached this Court on seven certified questions about the scope and validity of the tax.

Reasoning

The central question was whether the statute’s unqualified word “use” covers yachts owned by U.S. citizens when those yachts were used wholly abroad. The Court concluded it does. The opinion explains that Congress’s taxing power over its citizens is wide enough to reach this conduct, and that the statute’s plain language supports taxing such use. The Court answered the other certified questions by holding the tax applied for the year ended September 1, 1909 (retroactively), the whole tax was due, the classification of foreign-built yachts was valid, the tax did not violate the Fifth Amendment’s due process requirement, and interest could be recovered.

Real world impact

The ruling means U.S. citizens who own foreign-built yachts used outside U.S. waters can be required to pay the full, retroactive tax and interest assessed under the 1909 law. The Court also noted the lower court may take steps to avoid injustice if a factual mistake would make enforcement unfair. The decision clarifies Congress’s authority to tax this class of property and use by its citizens.